Professor of IPB University: Sharia Microbanking Can Be a Strategic Partner of Merah Putih Cooperative
Professor of the Faculty of Economics and Management of IPB University, Prof Jaenal Effendi, stated that there is a big gap between the national banking system and micro and small enterprises (MSEs). To overcome this, he offers a sharia microbanking model as an inclusive and equitable financing solution.
In the Pre Scientific Oration Press Conference for Professor of IPB University held online (7/24), Prof Jaenal also explained that sharia microbanking could become a strategic partner of Koperasi Merah Putih.
“Sharia microbanking can be a strategic partner of the Merah Putih Cooperative initiated by the Prabowo-Gibran government, in reaching MSEs that have not been served by formal financial institutions,” said Prof Jaenal.
Furthermore, he explained that many MSEs still have difficulty accessing formal financial services due to high transaction costs, moral hazard risks, and inadequate digital infrastructure. As a result, business actors often turn to informal financing with high risks such as loan sharks.
His proposed sharia microbanking model is designed to be adaptive to the characteristics of MSEs and in accordance with the principles of maqashid sharia (sharia objectives). Besides being usury-free, this model is also expected to be a means of community empowerment by prioritizing justice, collaboration and sustainability.
As a strategy to strengthen Sharia microbanking, he emphasized the “Bridging the Gap” approach with three main pillars: (1) connectivity of MSEs and Islamic financial institutions such as Baitul Maal Wa Tamwil (BMT), Islamic People’s Financing Banks (BPRS), Islamic cooperatives, and Islamic boarding schools; (2) harmonization of regulations and technology; and (3) spiritual and social values as the basis of inclusive finance.
In an effort to expand the reach, Prof Jaenal encouraged the digitalization of Islamic financing, such as the implementation of branchless banking, integration with Islamic fintech, and community-based credit scoring. He also highlighted the importance of increasing the human resource capacity of Islamic microfinance institutions (MFIs) as partners of Islamic banks in channeling financing.
The government, financial authorities, zakat and waqf institutions, and the private sector are said to have an important role in creating an inclusive microfinance ecosystem. Fiscal and social incentives, including margin subsidies and integration of zakat and waqf funds, can strengthen the sustainability of Sharia microbanking.
“Sharia microbanking is not just a financial institution, but a catalyst for social and economic transformation that can drive growth from the grassroots,” said Prof Jaenal. (dh) (IAAS/RWA)
