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Internal control system for Islamic micro financing An exploratory study of Baitul Maal wat Tamwil in the City of Yogyakarta Indonesia

Internal control system for Islamic micro financing An exploratory study of Baitul Maal wat... Purpose – This paper aims to contribute to literature on managing Islamic micro financing by formulating and evaluating the implementation of internal control system for Islamic micro financing. It also aims to investigate the implementation of an internal control system for financing activities practiced by Baitul Maal wat Tamwil (BMT), a special micro finance organization, in Indonesia. Design/methodology/approach – First, the paper introduces the concept of internal control system. Second, an internal control system for Islamic financing is formulated. Primary data that relate to the implementation of an internal control system for financing activities are obtained through a direct survey using questionnaires. The data are then analyzed using descriptive statistic and qualitative analysis to find the implementations of the internal control system. Findings – BMTs in Indonesia have implemented an internal control system for their financing activities. The rank of the implementation is: information and communication; monitoring; control environment; risk assessment; and control activities. This study also indicates that the implementation of authorization and consultation to the Shariah Supervisory Board was low. Research limitations/implications – The respondents of this study are small in number. However, the findings are valid and reliable. Originality/value – To the author's knowledge, there is a lack of scholars' attention on the implementation of internal control especially for Islamic micro financing. Therefore, this study will provide insight to the literature on how to manage Islamic micro financing efficiently and effectively. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Islamic and Middle Eastern Finance and Management Emerald Publishing

Internal control system for Islamic micro financing An exploratory study of Baitul Maal wat Tamwil in the City of Yogyakarta Indonesia

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Publisher
Emerald Publishing
Copyright
Copyright © 2012 Emerald Group Publishing Limited. All rights reserved.
ISSN
1753-8394
DOI
10.1108/17538391211282836
Publisher site
See Article on Publisher Site

Abstract

Purpose – This paper aims to contribute to literature on managing Islamic micro financing by formulating and evaluating the implementation of internal control system for Islamic micro financing. It also aims to investigate the implementation of an internal control system for financing activities practiced by Baitul Maal wat Tamwil (BMT), a special micro finance organization, in Indonesia. Design/methodology/approach – First, the paper introduces the concept of internal control system. Second, an internal control system for Islamic financing is formulated. Primary data that relate to the implementation of an internal control system for financing activities are obtained through a direct survey using questionnaires. The data are then analyzed using descriptive statistic and qualitative analysis to find the implementations of the internal control system. Findings – BMTs in Indonesia have implemented an internal control system for their financing activities. The rank of the implementation is: information and communication; monitoring; control environment; risk assessment; and control activities. This study also indicates that the implementation of authorization and consultation to the Shariah Supervisory Board was low. Research limitations/implications – The respondents of this study are small in number. However, the findings are valid and reliable. Originality/value – To the author's knowledge, there is a lack of scholars' attention on the implementation of internal control especially for Islamic micro financing. Therefore, this study will provide insight to the literature on how to manage Islamic micro financing efficiently and effectively.

Journal

International Journal of Islamic and Middle Eastern Finance and ManagementEmerald Publishing

Published: Nov 23, 2012

Keywords: Internal control system; Baitul Maal wat Tamwil; Islamic micro financing; Indonesia; Control systems; Islam; Financial control

References