A Systematic Review: Challenge of Islamic Microfinance Baitul Maal Wat Tamwil in Indonesia

Islamic microfinance institutions, particularly Baitul Maal Wat Tamwil (BMT), play a crucial role in addressing financial inclusion and poverty alleviation in Indonesia. This systematic review aims to investigate the challenges faced by BMTs in the Indonesian context. The review focuses on four key areas: financing sources for the poor, sustainability of BMT, screening process, and the impact of diverse regional conditions and regulatory frameworks. A comprehensive search strategy is employed to identify relevant empirical studies conducted in the past 10 years. After rigorous screening, 12 research articles are selected for detailed analysis. The findings reveal that financing sources for the poor pose a significant challenge for BMTs in Indonesia. Limited access to funding hinders their ability to reach a broader segment of the population in need of financial services. Additionally, the sustainability of BMTs is influenced by financial performance quality, which is crucial for their long-term viability. The screening process emerges as a critical aspect, with collateral requirements and group lending schemes impacting potential borrowers, especially those from vulnerable communities. Moreover, the review highlights the significance of diverse regional conditions and varying regulatory frameworks in shaping the operating environment of BMTs in Indonesia.