SOCIO-DEMOGRAPHIC DETERMINANTS OF CREDIT RATIONING AT BAITUL MAAL WA TAMWIL IN INDONESIA

This study seeks to identify credit rationing socio-demographic determinants toIslamic microfinance to achieve welfare improving goals in three Bottom of theEconomic Pyramid (BOP) regions: Yogyakarta, East Lombok and Makassar, SouthSulawesi, Indonesia. Another primary focus of this study is to highlight the suggestedsolutions from Islamic microfinance practitioners to overcome the challenges in thepractice of credit rationing assessment. 2,650 borrowers at the BOP in 26 IslamicMicrofinance Institutions (MFIs) in Indonesia were selected based on cluster samplingand purposive sampling methods. A questionnaire is adapted from several previousstudies. Multinomial logistics regression is used in this paper. Results show that thedeterminant of credit rationing based on socio-demographic factors, reflecting certainsocio-demographic factors that include age, gender, account balance, dependents,salary, monthly income, formal education, access to financing facility in the previousyear, distance, and years of saving, has significant influence on the probability ofgetting financing. Thus, in order to reduce the credit-rationing problem, the majorimplications from this study are that Baitul Maal wa Tamwil (BMT) should enhancethe participation of women, using monthly income rather than salary determinants,provide credit plus financing and realize a one village one BMT program. The solutionswould enhance the participation of BOP borrowers at BMT.