A Visit to Baitul Mal wat Tamweel (BMT) Dana Ukhuwwa

In Indonesia, the Baitul Maal wat Tamweel (BMT) is an indigenous model of Islamic microfinance. Translated into English, the House of Funds and Financing is a financial cooperative. Conceptually, BMT is deemed to be inspired by the institution of Baitul Maal existing in early days of Islam. Its uniqueness is said to lie in the marriage of two distinct institutional models. The first is Baitul Maal or a pool of various kinds of Islamic charity funds, traditionally referred to as zakah-infaq-sadaqa-waqf funds (ziswaf). The second is Baitut Tamweel or a pool of funds directed at profit-seeking financing using Shariah-compliant modes. The latter comprises funds in the form of founder equity, micro-savings and investment deposits. A more recent avatar of this institution is Baitul Maal wat Tamweel wat Tamin (BMTT) with addition of micro insurance (tamin) as a third line of activity.

The development of Islamic Saving and Loan Cooperatives or BMTs in Indonesia has been impressive. According to latest estimates there were more than 3000 BMTs all over Indonesia with consolidated assets of more than USD100 million, employing more than 30,000 workers, more than 40% of whom are women. BMTs served 2 million depositors and distribute micro credit to more than 1.5 million micro entrepreneurs. A later study by the Centre of Business Incubation and Small Business (PINBUK) estimated that by end of 2007, the number of BMTs in Indonesia had grown to over 4000 with assets of about USD150 million (PINBUK, 2008). An indigenously developed model, the BMT is the brainchild of Prof Dr Ameen Aziz, Chairman of PINBUK. The PINBUK led by the Professor played a major role in mainstreaming the BMT model. A few years back when I visited Indonesia to study the Islamic microfinance system, I carried with me an urge to meet this man of wisdom.

I was fortunate enough to meet the learned Professor on the very first day of my arrival who invited me to visit a real-life BMT and offered to explain the functioning of this institution on the way. The BMT we were going to visit was BMT Dana Ukhuwa. Prof Aziz patiently explained to me the functioning of the BMT.

BMT Dana Ukhuwwah is in the eyes of law was a Koperasi Jasa Keuangan Syariah (KJKS) or Shariah Financial Services Cooperative. It was established under the the Decree of the Minister of Cooperative and Small Businesses, 1999.  It acquired the legal status from the Ministry through the Cooperative and Small Business Development Agency of West Java Province.

The People at BMT Dana Ukhuwa

BMT Dana Ukhuwwah was established in 1996, by twenty founders and when I visited the organization in 2009 its membership had increased to 1065.  Similar to a Board, the BMT had a Committee comprising three members with a full-time chairman. The Committee members were elected at the annual meeting of representatives of the BMT community (on average one participant representing about ten members of the community). I was told that in the latest annual meeting, 120 member representatives attended.

The committee recruited the management team, headed by an executive manager. The management staff were trained by PINBUK for two weeks in the basic BMT management inputs. I was welcome by a 13 member management team at the main office and was told that 5 more staff serve a branch office. The salary of the highest paid staff, the Executive Manager was approximately USD260 per month. The staff seemed to be satisfied with their jobs with the number of staff quitting the organization since its inception being just 5. One staff was fired on grounds of siphoning of funds.

Raising Funds

The capital of BMT Dana Ukhuwwah was raised through several sources:  special main savings, main savings, compulsory regular savings, reserve, hibah (grant) and accumulated profit. The special main saving (which is called SIMPOKSUS= Simpanan Pokok Khusus) is usually the prime source of capital for BMTs in general, because it could be vary from one member to another. The main savings and the compulsory regular savings, on the contrary involved equal contribution from all members. The Simpoksus being unequal contribution or investment by specific members rewarded them according to the ratio of their contributions. BMT Dana Ukhuwwah experienced a stready growth in its capital – from IDR 5.6 million in 1996 to IDR 111.5 million in 2001, to IDR 542.9 million in 2005 and to IDR 777 million in 2008 – primarily because of its membership and savings drive. The significant contributors to capital growth were main savings, compulsory regular savings, reserves, and hibah and not simpoksus or special main savings. This was because the contribution under the main savings and the compulsory regular savings was doubled through a resolution to that effect in 2007 annual meeting. The main saving was increased from IDR 25,000.00 to IDR  50,000.00, and the compulsory regular savings from IDR 2,500.00 to IDR 5,000.00 per month. In case of BMT Dana Ukhuwwah, the special main savings was not a prime mover of the BMT unlike others, as the founders of this BMT came from a similar economic background.  They came mostly from the poor youth in the community. The amount of the Simpoksus had a modest increase from IDR 2.37 million to 3.92 million during the period.

BMT Dana Ukhuwwah also received hibah or grant funds from several sources. It started with an incentive grant from the West Java Province Regional  Government of IDR 3 million in 1996. It also received from various NGOs – IDR 95 million from Pemulihan Pemberdayaan Masyarakat Foundation, and IDR 364,24 million from Mercy Corps NGO – through their poverty eradication programs. It also received  IDR 30 million from  the Social Welfare Agency  of West  Java Province Government.

As a Baitul Maal, the BMT Dana Ukhuwwah mobilized zakah and charity funds. During 2009 alone, BMT Dana Ukhuwwah accumulated about IDR 40 million as charity funds.


BMT Dana Ukhuwwah had no forward linkage with any zakah and awqaf institutions. It distributed the zakah funds it had mobilized by itself among mustahiq in the form of qardhul hasan, student scholarships and healthcare services, assistance to gharimin and other asnaf. The BMT also did not have any backward linkage with institutions such as, Badan Amil Zakat Nasional (BAZNAS), the apex national zakat management entity or Lembaga Amil Zakat Nasional (LAZNAS), the national zakah Institutions, such as, Dompet Dhuafa, PKPI,  Rumah Zakat, and others.

BMT Dana Ukhuwwah Islamic Cooperative had working relationships for placement of funds with Islamic financial institutions or Syariah banks, such as Bank Syariah Mandiri (BSM), Bank Muamalat Indonesia (BMI), Bank Mega Syariah (BMS), BRI Syariah, and Inkopsyah BMT, a secondary cooperative of BMTs.  The largest placement of funds was by Inkopsyah BMT of IDR 1.5 billion with 3 years duration followed by Bank Syariah Mandiri, Bank Mega Syariah, and Bank Muamalat Indonesia.

Table. Placement of Funds with BMT Dana Ukhuwwah

No. Institutions Duration Contract IDR
1 Inkopsyah 3 years Mudharabah 1.500.000.000,00
2 Syariah Mandiri 3 years Mudharabah 500.000.000,00
3 Muamalat Ind. 3 years Mudharabah 100.000.000,00
4 Mega Syariah 5 years Murabahah 250.000.000,00
5 BRI Syariah 1 years Mudharabah 50.000.000,00
6 SUK Inkopsyah 5 years Mudharabah 500.000.000,00

It is expected that BMT Dana Ukhuwwah will place some funds with the farmer groups, which will be organized into a farmers’ cooperative. These farmer groups are now being served directly by BMT Dana Ukhuwwah, including the supervision on the production and marketing, in addition to saving and loan activities.


BMT Dana Ukhuwah offered several savings products.

SimpananKu: This is in the nature of saving of a member based on wadiah yad dhamanah contract (the saver gives full authority to BMT to manage and utilize the saving funds).

SImpanan QurbanKu: This is in the nature of saving for the purpose of buying cattle for sacrifice during Eidul Adha.

Loan Compulsory Saving: A member who receives a loan has to open a saving account at the BMT and uses that account for his transaction during the loan period and as a member of the BMT.

Simpanan BerjangkaKu: This is similar to investment account deposits that are based on the mudharabah muthlaqah contract. On the time bound deposits the member receives his/her profit share every month. The savings may be used as the collateral for his loan.

BMT Dana Ukhuwwah developed several financing products.

Pawning: This involves a qard contract or loan without any additional cost to the bearer plus custodial fee for the valuable materials offered as collateral.

Qardhul Hasan: Through this product called Payment Point, in cooperation with Sharia Bank, BMT provides loan service for the daily expenditure of farmer families.

Additionally, the BMT provides financing based on the contracts of murabaha,  mudharabah, and ijarah.

BMT Dana Ukhuwwah also provided group-based loans to farmer groups (Gapoktan). For members of farmer groups, the group leader would provide self-guarantee; the BMT undertakes the assessment of feasibility of micro-business and the group leader along with the group members decide how they would manage the default risk for the group. The compulsory saving tied with financing also helped mitigate default risk. It was required only in case of group financing.

For the individual financing up to IDR 1 Million, no collateral is required, as long as the business was feasible and analyzed by BMT staff. For the loan size more than IDR 1 Million,  BMT required collateral that could be in the form of car licence, motorcycle licence, land or house certificate,  valuable material, and others.


BMT Dana Ukhuwwah had implemented an IT and Accounting system since inception in 1996, first by implementing the rural bank information system purchased from a stand-alone rural bank.   Since 1999, BMT Ukhuwwah started using the MFI IT and Accounting systems developed by PT USSI PINBUK Prima  Software, a company owned by PINBUK Jakarta (Central PINBUK). This system provided for organization-wide accounting and administration, and operational procedures of BMT.

Capacity Building

BMT Dana Ukhuwwah created and accumulated ‘dana pendidikan’ an education fee reserve,  and regularly sent its staff for training programs conducted by PINBUK Jakarta, PINBUK West  Java, Citi Peka,  ILO,  Bisma,  Mercy Corps, and others.  In addition, BMT also provided scholarships to several staff for his/her formal study (postgraduate and undergraduate).  Where the reserve funds were not sufficient the Committee made the decision to expense the training costs as operational costs.

Distribution of Profits

The annual members’ meeting decides on the distribution of the annual profits among various stakeholders.  For the last several years, profits were distributed in the following manner.

  1. BMT Committee 10%
  2. BMT Management 20%
  3. Capital Reserve 40%
  4. Members 25%
  5. Community Welfare 5%
  6. Education Reserve 5%

A Few Critics

It was not that I did not meet with any critic of the BMT model during my visit. I was told that the share of the charity funds in the total capital of BMTs as a whole was miniscule and therefore, the twin-track model itself was fast becoming irrelevant. BMTs were, for all practical purpose, functioning as Baitut Tamweels (BTs). Some would point towards a “cultural incompatibility” factor between charity activities and for-profit financing as having contributed to this transformation.

Another area of discomfort was related to governance. In a BMT, not all members were directly participating in the members’ meetings. For instance, in case of our BMT, only about ten percent were actually participating and taking major decisions that would affect all members. Unlike the established good practice of “one-member-one-vote” in member-based organizations, mutual and cooperatives, the BMTs were apparently using a consensus-building approach. In effect, at least in some cases, there was always the possibility of more resourceful members (those who had contributed to SIMPOKSUS for instance or the Committee Members) imposing their will on others. But that would require further investigation and a more robust research methodology perhaps. It had to wait for another day.


Subsequent to my visit there were more exciting developments on the BMT front. A new variant of the original BMT model was fast becoming popular under the stewardship of Prof Aziz. A recent report quoted Prof Amin Aziz as Chairman of PINBUK that they had initiated the establishment of as many as 3,982  Baitul Maal wat Tamwil  (BMT) including 82 mosques-based BMTs. He highlighted the mosque-based BMT as the Center for Integrated Self-Effort that could make a permanent dent on poverty.

Note: Bank Indonesia, the central bank of Indonesia undertook several surveys in the past to provide a macro-view of the indigenously developed and often informal BMT experiment in Indonesia. For insights into the macro-level findings, readers may refer to Islamic Social Finance Report, 2014. ISFR, 2014 may be downloaded from the Islamic Finance Gateway portal of Thomson Reuters and Zawya


The Founding Father Prof Dr Amin M Aziz, The Power of Fatiha, June 29, 2013 (Bahasa Indonesia), Accessed from: http://thepowerfatihah.blogspot.com/2013/07/the-founding-father-dfq-prof-dr-m-amin.html

Mohammed Obaidullah | April 10, 2014

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