ABSTRACT
Enabling financial access to the poor through Islamic microfinance institutions has been effectively proven to reduce poverty and inequality. Current development of Islamic microfinance has witnessed various models and approaches in its application. This paper attempts to elaborate an integrated model of Islamic microfinance that can be used as a benchmark in the operation of Islamic microfinance institutions by taking the case of Indonesia. The paper analyzes the integration of Islamic microfinance with education institutions, which operates under the oldest Islamic education institution in Indonesia called pesantren. Two prominent pesantren-based Islamic microfinance institutions, namely BMT UGT Sidogiri and Kopontren Al-Ittifaq, have been taken as example. This study finds that integration of Islamic microfinance with education and economic empowerment of the local community has a significant impact on improving the conditions of society. A pesantren-based Islamic microfinance model has also been constructed in this chapter.
