Introduction
Since the establishment of the Islamic Development Bank in 1973, both Islamic and capitalist economies have increasingly spread to various countries in Southeast Asia. For example, in 1983 the first Islamic bank, Bank Islam Malaysia Berhad, was founded in Malaysia with strong government backing. This bank has introduced Islamic financial schemes based on Islamic jurisprudence by replacing the existing interest-based capitalistic financial schemes (Haneef Reference Haneef, Nathan and Kamali2005: 89). Malaysia is growing to be the world's Islamic finance centre with 20 per cent of bank assets in the country being held by Islamic banks in 2013. This figure is much higher than the other Islamic countries where the average asset share of Islamic banks is around 12 per cent (The Economist 2013). Following the international surge of interest in establishing Islamic finance, the largest Muslim population state, Indonesia, also established its first Islamic bank, Bank Muamalat Indonesia, in 1991; a relative late comer compared to other Muslim countries. The idea of Islamic finance was strongly supported and promoted by Muslim intellectuals (Hefner Reference Hefner and Woodword1996). In 1992 the state allowed other commercial banks to start Islamic banking services while at the same time providing a legal framework for non-Islamic banks (Effendy Reference Effendy, Nathan and Kamali2005: 76). To date, Indonesia has three types of Islamic banking: general Islamic (syariah) banks, syariah business units, and people's credit syariah banks. The total of these three forms of Islamic banking grew from 91 in 2002, to 182 in 2010 (Lindsey Reference Lindsey2012: 111). Islamic compliance has been monitored by key agencies including the National Syariah Board of the Ulama Council of Indonesia (MUI), and Syariah Supervisory Boards (DSN).
However, the assets of Islamic banks in Indonesia remain relatively small, and still under five per cent of the total bank assets in 2013 (Business News, 18 December 2013). On this point, a recent study by Pepinsky (Reference Pepinsky2013) has shown that Islamic piety among Indonesian Muslims does not systematically correlate to the use of Islamic banks. This raises the question whether the development of Islamic finance in Indonesia has any links to the Islamic resurgence taking place in Indonesia for the last 30 years. I argue that whilst the Indonesian Islamic banks' clients are not attracted to support Islamic finance solely based on their piety, there is a growing interest among Muslims to promote Islamic finance as part of Islamic propagation by deeds (dakwah bil hal). To demonstrate this, I will highlight a growing number of Islamic Savings and Credit Cooperatives known as Baitul Maal wat Tamwil (BMT) that have come into existence over the last three decades along with the Islamic resurgence in Indonesia. The estimated number of BMTs is approximately 4000 units in 2010, with estimated assets of three trillion Indonesian Rupiah (IDR) (Republika 2010).
While operating outside the formal Islamic banking institutions in Indonesia, BMTs offer financial services based on Islamic jurisprudence to small and medium enterprises. Apart from for-profit business transactions, a social mission wing, known as baitul maal attached to their parent BMT offers non-profit-making activities. BMTs should combine the mission of both for-profit and not-for-profit businesses in order to redistribute wealth in a more equitable way than conventional capitalism. Generally speaking, the majority of the BMTs are registered cooperatives, and had no direct connections with the banking sector in Indonesia until the recent change with the Law No. 21/2011 on Financial Service Authority (OJK) which became effective in 2013. Until recently BMTs enjoyed the relatively large flexibility of offering both for-profit and not-for-profit financial services. This article will show that reflecting this flexibility, and inspired by Islamic theological developments, the BMT movement has developed as part of new form of Islamic propagation by deeds (dakwah bil hal). Based on anthropological accounts on BMTs this paper will illustrate that ideas of Islamic propagation among the majority of the BMT employees are shaping the BMT business activities.
What do anthropological studies of BMT activities contribute to broader research development of the anthropology of Islam and Southeast Asian studies in general? First, this research aims to enhance our understanding of Islam and Islamic practices in contemporary Indonesia. After the September 11 terrorist attacks in the United States, mass media and government agencies have focused on militant aspects of Islam and Islamic organisations in Indonesia. However, the ‘grass-roots’ level of Islam – as a socially engaged religion including philanthropy and social activism – continues. Although Olivier Roy (Reference Roy1994: 36) states that “the economy and social relationships are no longer perceived as subordinate activities that grow out of pious actors or the sharia, but are considered key areas”, in reality, scholarly enquiry of socio-economic aspects of Islam in Indonesia remains relatively limited to date (c.f. Choiruzzad Reference Choiruzzad2013; Effendy Reference Effendy, Nathan and Kamali2005; Isbah Reference Isbah2012; Juoro Reference Juoro, Fealy and White2008; Lindsey Reference Lindsey2012; Lubis Reference Lubis, Hooker and Saikal2004; Pepinsky Reference Pepinsky2013; Rudnyckyj Reference Rudnyckyj2009a, Reference Rudnyckyj2009b; Sakai Reference Sakai, Fealy and White2008, Sakai Reference Sakai2010a; Sakai and Marijan Reference Sakai and Marijan2008; Seibel Reference Seibel2008). It is thus my intention with this article, by highlighting the socio-economic aspects of Islamic practices in Indonesia through the study of BMTs, to enrich our understanding of the role of Islam in contemporary Indonesia.
Linked to this, a second point of significance in the study of BMTs is to regain insights into Islamisation currently taking place in Island Southeast Asia today, particularly in Indonesia. Islamisation, or “to convert or bring under the influence of or control of Islam” (Macquarie Dictionary 1991: 932), has long been the focus of scholarly investigation as Islam spread across the Malay archipelago through conversion, over centuries facilitated by pilgrims and Islamic scholars (Azra Reference Azra2006; Roff Reference Roff2009). Over the last two decades in particular, scholars have highlighted that “Islam is penetrating far more deeply into people's lives than ever before and Muslims are expressing their faith in a multitude of ways” (Fealy Reference Fealy, Fealy and White2008: 16), beyond political Islam. New areas include the use of media (Eickelman and Anderson Reference Eickelman and Jon1999; Hefner Reference Hefner1997), Muslim fashion, popular culture (Smith-Hefner Reference Smith-Hefner2007; Weintraube Reference Weintraube2011), and Islamic management and finance (Rudnyckyj Reference Rudnyckyj2009a, Reference Rudnyckyj2009b). Within these studies of the anthropology of Islam, the concept of piety has become a dominant analytical framework (Mahmood Reference Mahmood2005). Exclusive religious movements have increasingly been identified as topics of scholarly investigations in the Muslim world. However, as Osella and Soares (Reference Soares and Osella2009) have rightly criticised, the reality of Islamic practice is not clearly divided into Islamists and secular people. The findings of discussions with BMT workers discussed below show how ordinary Muslims, committed to solving immediate social problems through the use of Islam, have found a middle way to live a modern life in contemporary Indonesia. The focus of BMTs allows us to examine the ongoing Islamisation in Indonesia among the ordinary Muslims of the lower to middle classes. This is important because enquiries of everyday life of lower to middle class Indonesians remain limited (c.f. Rinaldo Reference Rinaldo2008; Sakai Reference Sakai, Morrell and Barr2010b; Sakai and Fauzia Reference Sakai and Fauzia2014), while the representation of Islam has increased in the public sphere (Fealy and White Reference Fealy, Fealy and White2008; Hasan Reference Hasan2009). An anthropological enquiry to BMTs thus enables us to look into the ongoing-Islamisation processes in Indonesia in a broader and more democratic sense.
A third point of significance in focusing on BMTs is to engage with the increasing scholarly enquiries of faith-based organisations (FBOs). Anthropologists have traditionally paid attention to rituals and religions as a belief system (c.f. Bowen Reference Bowen1989; Möller Reference Möller2005a, Möller Reference Möller2005b), and less on the study of FBOs, particularly those involved in socio-economic development. Neither have scholars working on development policy discourses paid much attention to FBOs as development policies have been unconsciously linked to secularism. FBOs have thus not been clearly identified as key agents in implanting development agenda (Clarke and Jennings Reference Clarke and Jennings2008). Responding to this shortage, Bornstein (Reference Bornstein2005) and Occhipinti (Reference Occhipinti2005) have published ethnographies of Christian and Catholic development organisations respectively. Understanding how religious values can shape the focus of the development policies and can give meanings to service providers and recipients alike, and how people at the ‘grass-roots’ level can engage effectively with development projects, is of great importance. This is particularly true when the solution to reducing poverty through sustainable business models is identified as the objective of such work. For example, social entrepreneurship and social businesses are emerging as key to poverty reduction (Yunus Reference Yunus2006, Reference Yunus2010). How religious values inform the aims of the businesses of BMTs, and what ‘success’ means to the users and operators of the BMTs will shed light on alternative perspectives on social development policy implementations in Indonesia.
In the following article the socio-political context which has encouraged the development of Islamic theology encouraging activism in Indonesia will first be analysed. Following this, an overview of what BMTs are and some historical development and regulatory frameworks in Indonesia is presented. The central part of this article forms an analysis of the BMT founders’ and workers views on their core business activities. I argue that BMT founders and managers connect their Islamic aims to their daily business activities as an important part of Islamic propagation by deeds (dakwah bil hal).
Islamic Theological Change in Contemporary Indonesia
During Suharto's centralistic governance, the government discouraged political activities and civil society development. One example is Law No. 5/1985 on social organisations, which stipulated that all the mass organisations had to be based on the state ideology, Pancasila. All meetings and organisations, except religious gatherings, were constantly monitored. Muslims have traditionally had difficulty in separating religion and state, but gradually some creative theological thinkers emerged to cope with the situation. Nurcholish Madjid advocated that Islam does not have to be the basis for politics by a well-known phrase, “Islam Yes, Political Party No!” (Hasan and Abubakar Reference Hasan and Abubakar2011: 11). Such theological changes, accompanied with a particular political context, have focused on teaching Islam as a way to become a better Muslim. As religious gatherings were not sanctioned or banned, but rather encouraged to combat against the risk of emergent communism in Indonesia, Islamic study groups flourished in the 1980s. Islam and Islamic symbols grew more visible in the public spheres (Hasan Reference Hasan2009). The national daily Islamic newspaper, Republika, started to circulate in 1993 to cater for the Muslim readers. It is beyond the current scope of this article to map out how these theological changes have resulted in various socio-religious movements in contemporary Indonesia, but it is suffice to say that religious study group meetings have become an important venue to discuss and share social concerns, and these meetings are mainly to teach Islam to Muslims, rather than trying to convert non-Muslims into Muslims.Footnote 1 Muslim university students started to look for solutions for social and economic disparity in Islam in the 1980s and joined a wide range of Islamic groups and organisations. Reducing the gap between the rich and the poor was one of the emergent concerns by Muslims. Views on how Muslims should respond to social disparity have varied among Muslims, yet they have shared a strong theological orientation that Muslims need to carry out good work for family members and community through propagation by deeds (dakwah bil hal) (Meuleman Reference Meuleman2011: 254). For example, through campus-based Islamic education (tarbiyah), some movements turned to political Islam, which later emerged as the formation of PKS party (Pringle Reference Pringle2010: 96). Others took action by joining an Islamic development organisation such as the Village Propagation Troops (Corps Dakwah Pedesaan) in Yogyakarta to assist the poor. Another example is Muhammadiyah, the largest Muslim modernist organisation, which has a strong commitment to conduct common good based on Islamic teaching, and has continued their social programs. Muhammadiyah actively uses Islamic study groups for their members as well as for the general Muslim community to learn how to become good Muslims (Sukaca Reference Sukaca2007). They emphasise that Muhammadiyah members are encouraged to take concrete action to assist the community members and achieve social justice as exemplified by various social and philanthropic activities by the Muhammadiyah and their women's organisation, Aisyiyah.Footnote 2 They have developed hospitals and orphanages, as well as programs to assist the poor. Similar to this response, Indonesian intellectuals Dawam Rahardjo and Adi Sasono turned to Islam as the solution for economic and social development (Hasan and Aubakar 2010: 10). They have strongly supported small industry and the cooperative movement as a way to achieve social justice. In addition to these responses, Islamic finance also received much interest as a possible solution to reduce social inequity.
Along with this change, the 1980s saw the new development of Islamic economic institutions in Indonesia such as BMTs, and subsequently the beginning of Islamic banking by the establishment of the first Islamic bank, Bank Muamalat Indonesia (BMI) in 1991.Footnote 3 The establishment of BMI was pushed by the Indonesian Muslim Intellectual Association (ICMI) including Muslim thinkers such as Dawam Rahardjo and Amin Aziz as it was expected to strengthen economic interests of Muslims by offering credit to Muslim-owned small businesses (Hefner Reference Hefner and Woodword1996: 306). However, in reality the BMI was able to offer financial services predominantly to credit-worthy clients only because it had to operate as a financially sound business (Hefner Reference Hefner and Woodword1996: 309). Based on Islamic jurisprudence, this bank has received support from Muslim intellectuals and economists as they were keen to found an alternative financial institution to capitalism and support the growth of small and medium enterprises. However, the bank had to make profit and could not offer much assistance to small and medium enterprises (Lubis Reference Lubis, Hooker and Saikal2004). Following its establishment, other banks started offering Islamic banking divisions, but they did not and have not received unanimous support from the Indonesian Muslims. This is because Islamic banking is proposed to be based on the avoidance of an Arabic term, riba, mentioned in the Qur'an and commonly translated as ‘usury’, but there is no accepted interpretation on what exactly constitutes riba among Muslims (Lindsey Reference Lindsey2012: 108). The Ulama Council of Indonesia (MUI) issued a legal opinion (fatwa) in 2004 to state that riba refers to any “additional charges levied on the postponement of agreed payments” (Lindsey Reference Lindsey2012: 109) and is prohibited. Muhammadiyah also took the similar decision. However, the largest traditionalist Islamic organisation, Nahdlatul Ulama (NU), has a different Islamic interpretation as it does not consider banking interest from conventional banks riba; Nahdlatul Ulama established three conventional banks during the period between 1950 and 1960 (Effendy Reference Effendy, Nathan and Kamali2005: 66–7; Lubis Reference Lubis, Hooker and Saikal2004: 107). I would contend that the mixed theological response among Muslims to riba is one of the reasons that explains why the degree of Muslim piety does not correlate to types of customers of Islamic banks as presented by Pepinsky (Reference Pepinsky2013). However, this may be the case for middle-class customers of Islamic banks, but I further contend that the original Islamic aspirations among the Muslims to assist the small and medium Muslim businesses have not been forgotten. For example, Prof. Amin Azis, one of the strong advocators of the establishment of the Muamalat Bank, continued to support BMTs even after the establishment of the Muamalat Bank. It was because of the general realisation among the Muslim economists that the Islamic bank in reality was not fully capable to offer much needed credit to small businesses, that it was necessary to create financial institutions such as BMTs which would provide capital to small businesses in Indonesia to reduce the increasing gap between the rich and the poor (Amin Azis pers. comm. November 2007).
The Development of the BMTs
BMTs have developed in Indonesia since the late 1980s by providing financial services predominantly to micro, small, and medium enterprises (MSMEs). As more than 90 per cent of the workforce in Indonesia are employed in such enterprises (Tambunan Reference Tambunan2011: 26), supporting the growth of MSMEs to create employment is an effective way to combat poverty and to reduce economic gaps. The meaning of the Baitul Maal wat Tamwil is a ‘house of funds and finance’ and at the time of the Prophet Muhammad, this “institution was responsible for national budgeting, maintaining the stability of the money supply, and handling domestic and international payments” (Antonio Reference Antonio, Fealy and White2008: 256). Maal is a house to receive Islamic obligatory alms giving (zakat) and voluntary giving such as infak and sedekah while Tamwil is a place for growing asset. In Indonesia this term is used to refer to a financial institution operating on Islamic jurisprudence offering financial services (Aziz Reference Aziz2004: 1). This term derives from the time of the Prophet Muhammad and its use among the Muslims in Southeast Asia is rare, thus the concept of BMT as an Islamic financial institution was promoted by Indonesian Muslim NGO activists (Antonio Reference Antonio, Fealy and White2008: 256). Hence I would argue that BMT development is a unique grass-roots Islamic financial movement in Indonesia.
In terms of management, each BMT is expected to have a local Islamic law (shariah) advisory board. This board should advise the BMTs on their services and business directions to see whether they are in line with Islamic jurisprudence. The local shariah board is in theory informed by the decisions and advice by the national Islamic syariah council. Out of the twenty BMTs visited during this study, their employees were all Muslims. BMTs generally offer a variety of credit and saving services based on Islamic jurisprudence (Juoro Reference Juoro, Fealy and White2008; Sakai Reference Sakai, Fealy and White2008). However, this does not mean that all clients of BMTs are necessarily Muslims.
An overview of the BMT sector in Indonesia remains sketchy. This is because until 2013 there was no single supervisory institution for the BMTs. This situation makes data on BMTs fragmented, and estimating the number of operating BMTs difficult. To date there is no agreement as to when the first BMT was established in Indonesia. However, in 1988, 24 BMTs existed in Indonesia under the association of INKOPSYAH-BMT (Inkopsyah BMT 2006: 6). In 1995, B.J. Habibie, the then Vice President of Indonesia, and the chair of the Indonesian Muslim Intellectual Association, created a new foundation to support small businesses called PINBUK. PINBUK offered BMT training and supervision for BMTs. As part of the launch of PINBIK, President Suharto declared 1995 the year of the BMT movement. Muslim economists including Amin Aziz were central in the PINBUK operations and in early 2014 he was declared the ‘Father of BMTs’ by PINBUK.Footnote 4
Around that time the interest in using Islamic alms, known as zakat, for productive use and to reduce poverty also became widely promoted (Helmantita Reference Helmantita, Bamualim, Scott, van der Meij and Abubakar2006; Salim Reference Salim, Salim and Azra2003). One of the pioneers to promote this Islamic idea was the Dompet Dhuafa Foundation (the ‘Wallet of the Poor Foundation’), created by journalists working for the newly-created Islamic newspaper, Republika. Donating Islamic alms was not new to Muslims, but it was a social innovation to donate funds to an Islamic foundation specialised in assisting the poor. The Dompet Dhuafa Foundation promoted the concept that BMTs should conduct for-profit financial services through the tamwil business, while not-for-profit social empowerment programs should be carried out to assist the poor through the maal section. BMTs were seen as a way to redistribute the wealth in society in an equitable way to achieve social justice. Supported also by PINBUK, BMTs in Indonesia have grown significantly since the 1990s, and a variety of Muslims belonging to Islamic study groups, mosques, Islamic schools, and Muslim groups at workplaces – all sharing a concern for poverty among Muslims – started to establish BMTs (Rizky Reference Rizky2007: 5).
The common legal basis of a BMT is as a cooperative, regulated separately from the banking sector. Until 2013 it was permissible for small BMTs to operate without a legal basis or supervision until their assets had reached above the required amount to register as a cooperative. Thus, the establishment of a BMT was a relatively easy option to address economic disparity and received much support from a variety of Muslims sharing concerns for the widening economic disparity in Indonesia. However, the fact that until 2013, the BMT sector was relatively unregulated caused serious operational concerns and undermined public trust in the BMT sector as some mismanagement of funds could negatively affect the credibility of the emergent industry. In order to protect the potential failure of BMTs, the Indonesian government took two important measures. First, in 1999 and 2011 it regulated the zakat collection and management procedures. The 1999 law legalised private zakat collection thus assisting the growing private zakat collection agencies by aiding the flow of zakat funds into BMTs (Helmantita Reference Helmantita, Bamualim, Scott, van der Meij and Abubakar2006; Salim Reference Salim2008).Footnote 5 The activities of the BMTs which this article examines draw data mainly collected before the 2011 law revision. Second, the Indonesian government introduced a new law No.21/2011 concerning the Financial Service Authority, which became effective in 2013. This law regulates financial services offered by both banks and non-banks, including BMTs, in order to safeguard the funds managed by all financial institutions in Indonesia, as previously the Bank of Indonesia was only responsible for the supervision of banks.
As outlined above, the BMTs have grown at the grass-roots level, and consequently the majority of the BMTs’ networks in Indonesia have been formed to accommodate the origins, contacts and needs of each, separate BMT, rather than administrative needs imposed by the state agencies. In order to make the sector credible and professional, the leaders in the field have built multiple professional associations and networks, none of which is exclusive (e.g. the Association of BMTs, PINBUK, The BMT Center). As the political power of the Indonesian Muslim Intellectual Association has decreased (after Habibie's political demise in early 2000s), the Dompet Dhuafa Foundation and the BMTs with close links the Dompet Dhuafa Foundation have been BMT leaders to date. The national meetings have been also organised by BMTs with strong affiliations with the Dompet Dhuafa Foundation.
In 2012 the estimated number of the BMTs in Indonesia was around 3900, according to the general chairman of Pusat Perhimpunan BMT Indonesia, Joelarso. This association has 206 BMTs members, including those supported by PINBUK and The BMT Center. The financial size of the BMTs also varies, and those with larger financial assets have multiple branches. In view of recent awards by Karim Consulting Jakarta – a strong advocate for Islamic finance – BMTs with IDR 50 billion assets are considered as a large-sized BMT. The total assets of the 96 largest BMTs in 2011 were IDR 3,6 trillion.Footnote 6 (For comparison, in 2010, the assets of a leading BMT institution, Tamzis, exceeded IDR 80 billion). Because most BMTs started in early 1990s with limited funds of between IDR 1 and 10 million, the growth of this sector since that time is significant.
To explore the social dimensions of this diverse development and to overcome the lack of credible data on BMTs, I conducted anthropological fieldwork within 20 BMT operators in five locations in Indonesia. The majority of the 120 days fieldwork was conducted in 2007–2008, with follow-up research in 2010, 2011, and 2013. Data collection was conducted in stages by observations of BMT activities, focus group discussions with BMT managers, and BMT training institutions such as the Dompet Dhuafa Foundation, PINBUK, The BMT Center, Pusat Komunikasi Ekonomi Islam (PKES). The data used in this article derive from two leading BMT institutions: BMT Bina Dhuafa Beringharjo and Tamzis in Yogyakarta. I have chosen these two institutions for three reasons. First, both BMTs have been operating over two decades since the onset of the BMT movement in Indonesia. Second, the founders of both are active at the national level of the professional BMT associations, feeding their visions for the future directions of the BMTs, They also have close associations with zakat foundations such as the Dompet Dhuafa Foundation to actively conduct not-for-profit activities. And third, and most importantly, these BMTs generously supported this research and allowed access to their business activities, without which this study would not have been possible. As this field of study does not have much data based on ethnographic fieldwork, access to these institutions was crucial for my fieldwork on BMTs in Indonesia.
BMT Bina Dhuafa Beringharjo (BMT to Lead the Poor at Beringharjo) was established in 1994 in Yogyakarta with the funding of two million rupiah (equivalent to USD 1,000) as initial capital by two female Muslims including the current managing director, Mursida Rambe. Their main motivation was to combat illegal money lenders by offering transparent and fair loans to small business traders who did not have access to banks. By 2013, BMT Beringharjo had grown its assets to IDR 55 billion, and was employing 117 employees. Their business has expanded beyond Yogyakarta and now has 12 branches in Java and recently received an award as the Best Microfinance Institution Award by Karim Consulting in Jakarta in February 2014.Footnote 7 The BMT leader, Rambe has held a number of executive positions at the local and national levels of Islamic economic and BMT associations including the secretary of the BMT Association, BMT Center, Masyarakat Ekonomi Islam (‘Islamic Economy Society’), and has been known for her commitment to promote BMTs’ mission for both for-profit and not-for profit through the maal. In 2010, Rambe received the prestigious Kartini award, from the popular women's magazine of the same name, as an influential female leader.
Tamzis was established in 1992 in an agricultural town of Wonosobo in Central Java by Muslim activities with a background in Muhammadiyah. One of its co-founders was Saat Suharto, who later left Tamzis to run a mutual fund company Ventura for their member BMTs in Jakarta. The other original founders of Tamzis are still involved in the management of Tamzis. Tamzis has also received prestigious awards as one of the leading Islamic microfinance institutions in Indonesia. Tamzis runs a separate foundation called Tamaddun as a foundation based on its cooperate social responsibility funds, and Muslim alms. These funds are used to run social programs for the needy.
Founders’ Visions and Islam
How do the BMT founders see the business activities of BMTs differently from conventional business financial institutions? During my research since 2008, Mursida Rambe, the co-founder of BMT Bina Dhuafa Beringhajo, often told me that she never imagined that she would run financial businesses. She was born in Medan in North Sumatra and lived close to a market where she saw the first-hand impact of money lenders on their clients. Here she came to understand how inhumane it was to be in debt and to lose all one's assets for defaulting small payments. This later made her conscious of the need to reduce economic disparity in Indonesia and to establish social justice in line with Islamic teaching. Later she moved to Yogyakarta and was determined to propagate Islamic values and majored in Islamic propagation at the Muhammadiyah University in Yogyakarta. During her time at university, she became involved in a local community development program to provide sanitation and clean water to the poor in Yogyakarta with fellow activists of the Village Propagation Troops. She preached the importance of Islamic values through her oratory, but did not seem to get her messages heard in community development programs. She recounts that people were easy to lose their temper and did not change their way of life when they were short of daily needs. She realised that the people first need to come out of poverty before they can become better Muslims. She also analysed why some people had remained poor. They had debts to money lenders and she saw people losing their houses to money-lenders in the case of defaulted loans. She felt strongly that profit-driven attitude of money lenders represented speculative capitalism and looked for solutions in Islam. One day her brother showed an advertisement for a training program to use zakat funds for productive purposes. She was aware of the establishment of the Muamalat Bank – the first Islamic bank in Indonesia – and was curious to explore what this could entail. This was the beginning for her journey as a co-founder for BMT Bina Dhuafa Beringharjo. Together with her university friends, she had training from the Dompet Dhuafa Foundation on the productive use of Islamic alms. After her training she managed to raise IDR 1 million and asked for a grant of another IDR 1 million from the Dompet Dhuafa Foundation. This seed money has since grown to become one of the most successful BMTs in Indonesia. After nearly two decades, in addition to her position as the BMT director, she also leads a local BMT association in Yogyakarta, and directs BMT Center, a training institution for BMTs.
Using her oratory skills, in her regular training sessions Rambe emphasises the importance to fight against the lure of money. She also stresses the importance of people who live under the poverty line. As the director of BMT Bina Dhuafa Beringharjo, she usually leads BMT Beringharjo's business directions to assist the poor and trains her workers not to be controlled by solely material and financial desires. She firmly believes that being accountable in front of God allows people to be honest, caring, and compassionate, and thus to avoid being driven by speculative approaches to life. She has been frequently invited to train aspiring BMT and cooperative managers in Indonesia, and I attended several of her training sessions during fieldwork. One of her key messages in these sessions has been that money is a tool to assist the poor or the needy. In other words, accumulating wealth for itself cannot and should not be a goal, and will result in greediness. She links greed to the practice of maximising profit as promoted by capitalism, and highlights that greed will cause misery and suffering to fellow human beings. She thus advocates the importance of establishing social justice by fair business transactions based on Islamic jurisprudence. Thus when her BMT runs business training sessions for their clients, one of the key messages is to promote them to have compassion for others, and assist the needy when their business is growing. To implement this, BMT Beringharjo has a company motto that emphasises her philosophy of growing together (sama-sama tumbuh), which she sees as a just and fair business transaction in line with Islam.
A similar tone is also found in a profile of one of the co-founders of Tamzis, Saat Suharto. In one of my interviews, he told me that in early 1990s he was curious to learn about the concept of banks without interest. He grew up as a child of a relatively large textile shop in Wonosobo, Central Java. In front of his shop he regularly saw money-lenders charging high-interest, and the life of the borrowers never seemed to get better. When he heard that it is a possible to run a bank without charging interest, he was intrigued and attended a training workshop on this. Afterwards, he started an Islamic credit and savings cooperatives with other fellow Muhammadiyah youth activists in Wonosobo. After some time, their financial institution was renamed as TAMZIS and has grown to be one of the largest BMTs in Indonesia with assets over IDR 80 billion in 2010. After leading Tamzis successfully, Saat has left Tamzis to start a new financial institution BMT Permodalan Ventura in 2006. The new company aims to assist in strengthening the institutional capacity of the BMTs as an alternative financial institution for the small and medium businesses in Indonesia. BMT Ventura is a company which provides money to affiliated BMTs. Located in the business district of Jakarta, BMT Ventura aims to attract funds from investors from Jakarta for investment in the peripheries of Indonesia through the businesses of affiliated BMT members. Saat takes pride in his task to change the flow of money from Jakarta to the marginalised and underdeveloped areas of Indonesia. He told me in one conversation that “I am changing the flow of money. In the past all the money was collected from the periphery to the centre, now I am here in Jakarta to collect funds from Jakarta to the peripheries, to change the situation a bit.”
These views of two key BMT figures echo the typical aspirations shared by many Indonesian Muslims in the 1990s. They tried to use Islam as a tool to solve widening economic gaps and perceived social injustice upon Muslims caused by Indonesia's economic development based on capitalism. Although the poverty rate between 1990 and 1993 fell from 15.1% to 13.5%, there was a growing perception in Indonesia that ethnic Chinese Indonesian businessmen, not indigenous Muslims, were benefiting from economic growth led by the then President Suharto in the early 1990s (Hill Reference Hill2000: 198–203).
It was possible for both leading figures of the BMT industry to pursue a political position to implement their aspirations. Both of them have tried once to become a local parliament representative, but they were not successfully elected. Both of them explained that they were asked to represent the interest of the people in the BMTs and BMT clients, but they did not particularly see their political role as necessary to achieve their goals. They rather prefer working to establish the BMT sector through their professional involvement and see most of the politics and politicians driven by popularity and electoral successes. They thus perceive their socio-economic roles much more effective than taking up a political role in achieving their commitment to the concept of ‘propagation by deeds’. They both share some connections with Muhammadiyah but the development of the BMT industry is not clearly linked to the organisational backing of Muhammadiyah. BMTs have not particularly thrived under the traditionalist Muslim organisation such as the Nahdlatul Ulama (Isbah Reference Isbah2012; Sakai and Marijan Reference Sakai and Marijan2008).
BMT Business Activities, Client Services and Responses
What then are the concrete examples that BMTs promote as social justice in Indonesia? First, BMTs emphasise the small-sized loans offered to their clients as a way to promote inclusive financial services as part of social justice. From the perspective of financial efficiency, lending a larger sum of funds to one particular client might be considered optimal and time-saving. However, because small loans are hard to obtain from the banks, Tamzis made the commitment to offer small loans up to IDR 5 million to clients. Whilst both conventional and Islamic banks have started to offer small-sized loans to small business owners, BMTs continue to offer loans between IDR 1 million and IDR 5 million. If their credit-worthy clients ask for a larger amount, in principle, BMTs will assist these clients in introducing them to Islamic banks through their connections. Offering credit to as many small businesses is still the core business principle for Tamzis. In reality, this view is not necessarily shared by all the BMTs, but Tamzis promotes this model as spreading risks and offering more services of much-needed credit for small businesses. To increase financial security, Tamzis also places a compulsory Islamic insurance policy against default to each loan. This insurance policy covers the clients who may suddenly lose their businesses by accidents such as fires and illnesses. The insurance is also used to give a small cash back payment if the borrower pays off the loan earlier than scheduled. Such a financial safety net is hardly offered by opportunistic money lenders.
BMT Beringharjo also places an emphasis on treating clients with respects at the time of default payments. Contrary to traditional ways of using threat and possible violence to receive repayments from defaulted clients as commonly employed by money lenders, BMT Beringharjo uses a legal officer who explains the consequences of defaults to their clients in crisis, and assists in finding a new schedule for repayment. Sometimes collaterals have to be sold to compensate the defaulted loans, but they are processed in accordance with the procedures without threat and physical abuse. Such transparency and fairness are presented as proof for establishing social justice in human relations in accordance with Islamic teaching.
The leaders of the BMTs advocate that by running innovative business schemes they assist the needy who have been neglected by other agencies. Although the BMTs are business entities and have to compete against each other to make profit, they need to have concerns to assist the needy in line with Islamic teaching. After the mid-2000s, when the Government and banking sectors started to offer small loans similar to those from BMTs, the BMTs started to look into new areas outside the small business sector to extend their market. One of the emergent areas where BMTs are extending out their financial products is the welfare of Indonesian migrant workers overseas. In 2008 the Indonesian government estimated that there were at that time more than six million migrant workers overseas sending vital remittances back to their families in Indonesia to the tune of USD 6.8 billion.Footnote 8 Most of them are unskilled women, and they work in countries such as Malaysia, Singapore, Taiwan, Hong Kong, Japan, and Saudi Arabia (Anggraeni Reference Anggraeni2006). They usually work overseas for five to ten years separated from their family members. During their overseas employment, abuse by employers and emotional disturbance of the migrant workers have been reported in mass media, and the hardship of female migrant workers in Hong Kong was portrayed in the 2010 Indonesian film, Minggu Pagi di Victoria Park (Sunday Morning at Victoria Park) directed by Lola Amaria. Because of the administrative complications and unfamiliarity of the foreign banking systems for the majority of unskilled migrant workers overseas, the remittance money is usually sent home and spent, leaving little for the workers’ future plans. In order to address the financial needs for saving and remittance, in 2008 the BMT Beringharjo started a BISA scheme which allows migrant workers to put aside their savings as investment-term deposits. The funds are matched with funding from the BMT Beringharjo to start a new BMT in an area where migrant workers originated from or are closely associated with (Sakai Reference Sakai2010a). In this way, the savings of the migrant workers can be invested in their home town, and they will have their savings when they return to Indonesia. In addition, BMT also offers a scheme called Musyarokah Investasi Buruh Migran Harjo (Misbah), which is a profit sharing credit scheme between IDR 1 million and IDR 9 million for venture capital for migrant workers (Tribune News 2011). According to my focus group discussions in November 2013 with former migrant workers in Madium, Hong Kong, where the migrant workers can have a Sunday off, they do not know what to do and often were tempted to spend their time shopping or buying snacks. Over the last two years, the Indonesian government has been making efforts to assist the migrant workers by providing them with easier access to financial services. As part of this scheme, BMTs are forming partnerships with the government agencies to offer financial services and planning in the destination countries of migrant workers. In 2011, IDR 1.5 billion was invested into BMTs by 350 migrant workers in Hongkong, which constituted approximately 6.2 per cent of the migrant workers in Hongkong (Tribune News 2011).
The BMTs also have the capacity to offer not-for-profit social programs through their maal section, different from other for-profit only financial institutions. However, in reality, the BMT leaders concede that in the majority of BMTs, the maal section has been ironically neglected. The majority of the BMTs visited during this study did not have a designated staff member to run social programs because it was not financially viable to allocate resources in a small BMT. Thus, their programs were, if offered at all, generally limited to not-for-profit credit scheme called Qurdul Hasan to a small number of clients in need. At BMT Beringharjo, arguably the most established maal as part of a BMT, between 2008–2013 they had two permanent staff members and two contract staff members and offered a variety of programs including scholarships, business capital credit and entrepreneurship training for small businesses, and health clinic services. It was decided that the program should not duplicate those already (and increasingly) offered by government agencies. In some regions, as part of their social activities, BMT Beringharjo funded the cost of circumcision for young boys – mandatory for Muslim men at puberty but the high costs often delay the procedure.
After the zakat law revision in 2011, the BMT Beringharjo Baitul Maal was registered as an affiliate with the Dompet Dhuafa Foundation to gain a legal status. The funds for the activities of the baitul maal came from donations from the BMT, Islamic alms received from Islamic groups and individuals. Some companies also donated their corporate social responsibility funds in recognition that BMT Beringharjo had become a credible zakat agency in the region. However, having not-for-profit operations within a BMT could create confusion among the clients. Consequently, TAMZIS has decided to abolish their maal section and hence does not use the word of BMT as part of its company name. Instead, TAMZIS runs an Islamic philanthropic organisation using a separate name as a necessary decision for running a sustainable business with a social mission. However, in order to promote the importance of baitul maal as part of the BMTs, the BMT Association has made a mandate for 2014 that all BMTs should have an active baitul maal as their core business (Rambe pers. comm. November 2013).
Moving onto the forth example of how BMT leaders view they work as promoting social justice, BMTs offer sessions to study Islam for employees and to some extent their clients. In addition to professional financial training required to run professional businesses, training sessions to deepen Islamic understanding are usually offered as part of the standard human resources training. For example, Islamic study sessions among employees are regularly held to motivate the employees and strengthen their commitment to social mission and professionalism in Tamzis and Beringharjo. As BMT employees deal with money every day, honesty and integrity are essential to run successful businesses. This is particularly challenging in Indonesia, as high-profile corruption cases have been common occurrences.
During fieldwork I observed regular Islamic study sessions at BMT Beringharjo and TAMZIS. BMT Beringharjo employs an Islamic cleric as an Islamic adviser for their shariah board. Every Saturday morning, employees of BMT Beringharjo spend between one and two hours studying Islamic teaching and its relevance to everyday life. The aim of such sessions is to stress the desire not to be driven by pure greed, and to build compassion with each other, and the clients. Muamalat, the Islamic concept of social and business relations, is thus interpreted not just as business relations, but for building general human relations to strengthen a brotherhood (ukhuwah). Thus marketing and client relations are seen as part of disseminating Islamic values. BMT employees see that they are fortunate to have opportunities to gain Islamic knowledge at work. They commented that they receive both financial gain and religious blessings at work, and have opportunities to become a better Muslim through their work, and are keen to work for a BMT for an extended period. In fact, the lure of better financial pay from other Islamic and conventional banks to BMT employees is becoming stronger and some BMT workers have been head-hunted by aggressive banks which are pursuing micro-credit as it has proved to be lucrative and more stable amid the global financial crisis in Indonesia. Some BMT workers, however comfortable they are with their colleagues, and however important Islamic values are, also need to meet their material and financial needs in contemporary Indonesia by taking up a job outside BMTs. The process of Islamisation and its location within society is not clear cut between the secular and pious, rather it is fragmented in a globalised way of life, as Schielke (Reference Schielke2009) has shown for the Muslim youth in the Middle East during the fasting month.
In order to promote Islamic values to clients, many BMTs organise Islamic study groups or preaching sessions with clients. In the case of BMT Beringharjo, they organise a monthly study group with the Islamic group located at the Beringharjo market and invite engaging speakers to talk about others in need and encourage people to pay alms to assist the poor in need. Running a business is inherently driven by profit-making. BMTs promote the view that taking some time to think about those in need is highly valued. Collected Islamic alms are often donated to orphanages or to assist the poor in their neighbourhood, as an act of earning merit. In addition, the BMTs organise series of Islamic propagation sessions in relatively impoverished areas in partnership with their own maal and gradually roll out their social programs to motivate people to improve their spiritual life and well-being.
Compared with the strong missionary visions and Islamic values of the BMTs founders and managers, not all BMTs workers share such missionary views. I spoke with eight new recruits of TAMZIS in Yogyakarta in February 2010. Half of them chose to work for a BMT as they were committed to promote Islamic ideas and value through their work. Contrary to these committed Islamic economic activists, some new graduates were not so keen to stay in the BMT sector as their social standing is low, and they were keen to work in the Islamic banking sector in the near future. However, their interest in the Islamic financial institutions was reasonably strong in our conversations. At the same time, as the BMT sector has gained some recognition, the interest to apply for vacancies within a BMT has skyrocketed. In 2010, it was common to receive 1000 applications for a position within BMT Beringharjo and the Director herself usually tries to see the applicants in the final interviews (Rambe pers. comm. February 2010). As Islamic values are fundamental to BMT operations, the recruitment and HR development are central to nourishing and growing the spirit of Islamic development of the institutions.
Interestingly, contrary to the internalisation of Islamic values among the employees, approximately 50 clients I met in 2008 in Yogyakarta did not cite Islamic financial transactions as a main reason to use BMTs. They normally have conventional financial services and see BMTs as an alternative source of funding and savings. Some BMT clients are non-Muslims and they do not seem to worry about the Islamic jurisprudence, rather view it as a financial product. But they generally value the personalised services offered by a BMT and the attention paid to individuals and their needs. Some clients appreciate networking opportunities provided by BMTs. Some clients see BMTs important as they teach Islamic values and to care for each other; such views were expressed by organisers of a female Islamic study group at the Beringharjo market in Yogyakarta. Most of the participants run businesses in the nearby market and some work as manual labourers. As markets are driven by desire to generate money, taking time off to learn about care and empathy for others through Islamic study group meetings is highly valued. Particularly, most of the participants only have limited education and Islamic study groups are one of the few opportunities for self-improvement. Different from the Islamic bank users who are middle class income earners, BMT clients in Yogyakarta do not seem to be concerned about theoretical debates regarding the Islamic compliance of financial transactions by the BMTs. Rather, they are looking for business partners who understand their business needs and offer credit.
Conclusions
This article has highlighted perceptions of BMT founders and workers towards Islamic financial activities in Indonesia. With the desire to reduce economic disparity and to offer inclusive financial services to small businesses the BMTs have developed new Islamic financial schemes over the last two decades. The findings in this article demonstrate that BMT founders and employees are committed to deepen their knowledge about Islam and to use Islamic knowledge to solve social problems in their everyday life. ‘Propagation by deeds’ is a dominant shared concept among the BMT founders and employees as BMTs offer ample opportunities to deepen their knowledge about Islam in everyday life. This situation is suitable for Indonesian Muslims who are seeking opportunities to become good Muslims in their daily life within the broader context of the ongoing Islamisation taking place in the country in general (Sakai Reference Sakai2012a).
However, in reality, the BMTs core activities are modern financial transactions based on Islamic jurisprudence and their clients do not have to agree with the BMTs perceptions. In fact, BMTs are open and used by non-Muslim clients who see BMTs as a handy business partner in addition to other sources of business capital. In view of these facts it would be appropriate to state that BMTs are growing as a convenient middle way to accommodate Muslims aspirations to propagate Islam and for people to become good Muslims, whilst small business partners are seeing BMTs as one of their business partners to supply much-needed capital. The current Islamisation in Indonesia among ordinary Muslims is that they are embracing Islam in varying degrees and advocating Islam in their own deeds (Kailani Reference Kailani2012; Sakai Reference Sakai2012b).
I would like to suggest that more research is needed to understand Islamisation in Indonesia to complement existing studies on political Islam. As recent studies have shown (Ismail Reference Ismail2007; Sakai and Fauzia Reference Sakai and Fauzia2014), the interest in political Islamic movements is not necessarily the only indicator for Islamisation in Muslim countries, but rather Muslims are increasingly more concerned with cultural and social articulations of Islamic values in the public sphere. In this light, building upon the preliminary study outlined in this article, Islamic propagation by deeds among the Muslims outside formal politics requires further exploration. An equally important development is that Muslim women are actively participating in Islamic study groups in Indonesia. Women are also dominant players in growing small businesses (Tambunan Reference Tambunan2011). Recently, female Muslim entrepreneurs are frequently meeting through Islamic study groups to gain Islamic knowledge and to run successful businesses. A future study exploring the link between Islamic piety and business development among Muslim women would constitute an interesting topic which would shed light on how Muslims are embracing Islamic values to respond to an increasingly globalised Indonesia.
Acknowledgements
This research was generously supported by research grants from UNSW and the Australia-Indonesia Governance Research Partnership (2008). The author acknowledges the kindness and support from participating BMTs to support this research, particularly the Dompet Dhuafa Foundation, BMT Center, Tamzis, and BMT Beringharjo.
