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Blockchain sukuk to assist financing challenges facing microfinance in Indonesia

In: Islamic Finance in Eurasia

Author

Listed:
  • Sherin Kunhibava
  • Zakariya Mustapha
  • Maryam Khalid
  • Aishath Muneeza

Abstract

Indonesia’s micro, small and medium enterprises (MSMEs) sector, with over 65 million businesses, is globally the largest. The sector accounts for more than 60 per cent of the country’s GDP and employs over 97 per cent of its workforce. Yet, lack of access to finance due to the nature of the business, has constrained development of the sector. This study aims to examine usage of blockchain to aid microfinance and expedite MSMEs’ access to finance in Indonesia. Employing qualitative research techniques, the study focuses on Baitul Maal Wa Tamwil’s use of blockchain in providing micro sukuk for financing MSMEs. The study finds that using blockchain to offer microfinance services facilitates greater transparency about MSMEs, enables efficiency and accountability in their access to finance. It bridges the gap to MSMEs’ access to finance, reduces cost of transactions and mitigates setbacks related to them. As blockchain drives the evolution of enterprises and microfinance institutions in Indonesia, regulatory bodies must stay abreast of these advancements to ensure that innovation progresses in tandem with appropriate regulations. As a learning experience, appropriate governance and legal framework needs to be phased in to accommodate blockchain, its peculiarities, and for it to foster financial access and deepen inclusion.

Suggested Citation

  • Sherin Kunhibava & Zakariya Mustapha & Maryam Khalid & Aishath Muneeza, 2024. "Blockchain sukuk to assist financing challenges facing microfinance in Indonesia," Chapters, in: M. K. Hassan & Paolo Biancone & Aishath Muneeza (ed.), Islamic Finance in Eurasia, chapter 15, pages 308-324, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:22161_15
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    File URL: https://www.elgaronline.com/doi/10.4337/9781035308705.00025
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