![Cause-Effect Interactions Perspectives of the BSC model [15]](https://www.researchgate.net/profile/Dian_Masyita/publication/322447150/figure/fig1/AS:631633979920402@1527604684728/Cause-Effect-Interactions-Perspectives-of-the-BSC-model-15_Q320.jpg)
Content uploaded by Dian Masyita
Author content
All content in this area was uploaded by Dian Masyita on Jan 29, 2018
Content may be subject to copyright.
341
Int. J Sup. Chain. Mgt Vol. 6, No. 4, December 2017
Islamic Microfinance Institutions in Indonesia
and the Challenges in the Supply Chain
Perspectives
Dian Masyita
#1
#
Islamic Economics Study Program,
Faculty Economics and Business, University of Padjadjaran
Dipati Ukur 35 Bandung 40132 - INDONESIA
1
dian.masyita@unpad.ac.id
Abstract
—
The Indonesian economy has recently
been discouraging. There are more than forty
millions Indonesian people living under the poverty
line. With supply chains extending throughout
microfinance institution, it can be expected to be one
of the solution. Though microfinance institutions
(MFIs) have different organizational formats, they
have to deal with daily management issues. In order
to understand the operational structure of different
MFIs, this paper assesses their performance by using
the Balanced Scorecard (BSC) from four different
perspectives. The BSC provides the “balanced” and
“integrative” financial and non-financial perspectives
of a MFI such as internal business processes, growth
and learning, financial and customer perspectives
that are extremely important to create a sustainable
MFI. This paper reports the results from in-depth
interviews with 18 MFI managers in Bandung,
Indonesia. The Key Performance Indicators (KPI) of
a MFI from four perspectives is identified and the
relationships between the different components of
BSC are also learned. Overall scores of the BSC
reveals BRI to be the best MFI, BPRS as the second,
followed by BPR and BMT in the third and fourth
place respectively. The advantage of BRI is partly due
to robust government support that makes it difficult
for other smaller MFIs to compete. In contrast, BMT
showed a weak institutional structure in terms of
BSC’s elements. It seems that BMT is not well
managed according to BSC’s key performance
indicators. The results indicate that clients, mostly
Muslim, had chose the MFI based on the best
performance in daily operations and also those
affordable instead of choosing a religious/Shari’ah
compliant one.
Keywords
—
The Balanced Scorecard, Islamic MFIs,
Conventional MFIs
1. Introduction
Using supply chains networks of microfinance
institutions seemed to be an ideal solution to the
problem of high unemployment and poverty ([1];
[2];[3];[4];[5];[6];[7];[8];[9];[10],[11]) in Indonesia
but to make it happens, much work needs to be
done. It should be noted that unemployment rate in
Indonesia according to IMF Report in 2013 was
5.8% in 2013. A number of issues keep arising
particularly to bring the poor and needy people to
levels of non-poor.
Indonesia is the fourth largest country in the world
in terms of population with 237. 5 million people
whereas 88% of them are Muslims. It makes
Indonesia as the largest Muslim population country
but in the reality, the growth of Islamic MFIs has
been sluggish and far behind the conventional
MFIs. Micro-businesses themselves dominates
98.85% of total business with absorb 90.98% of the
total labor force and their contribution to GDP was
57.12% in 2013 [12]. In August 2013, there were
11 Islamic commercial banks with 1920 number of
offices, 24 Islamic business unit with 554 number
of offices and 160 Islamic rural banks with 398
numbers of offices. Indonesia has a diversity of
both conventional and Islamic MFIs and became a
big laboratory of microfinance models in the world.
The aim of this research is to explore and examine
the different structure of microfinance institution
related to management and structure of Islamic and
conventional MFIs.
The following research questions need to be
addressed:
I.What are the important factors in managing
Islamic MFIs institutions?
II.What are the differences management styles
between conventional and Islamic MFIs?
III.How do Islamic MFIs compete with their
conventional counterparts?
IV.Why do Islamic MFIs grow slowly in Indonesia
compared to conventional MFIs?
Islamic MFI is not solely for profit creation but it
should be in line with the Maqasid al-Shari’ah.
Debt is a last resort to fulfill an individual’s need
for either capital or consumption. Giving credit to a
___________________________
___________________________________
International Journal of Supply Chain Management
IJSCM, ISSN: 2050-7399 (Online), 2051-3771 (Print)
Copyright © ExcelingTech Pub, UK (http://excelingtech.co.uk/)
Int. J Sup. Chain. Mgt
productive man is better
than
sadaqah/charity. Though, “it is not
surprising
in religious matters people tend to
form
that correlate to their religious
convictions
possessing the theoretical
and/or
knowledge to justify their attitudes”
[13]
2. Research Methodology
In this research, both inductive
and
research approaches are inevitably
combined
order to answer the research
questions.
inductive elements including data
gathering
drawn from observation of
MFI
questionnaires and semi-structured
interviews.
deductive elements included variables
derived
previous research, study literature
and
theories such as the Balanced
Scorecard.
subjects of this study were MFIs
in
Indonesia, which gave small fund
to
SME entrepreneur.
2.1
Supply Chain and The
Scorecard
Maintain and monitor too many KPIs
performance management mistakes
made
chain operators. Most of them just
starting
the implementation of KPIs that can
easily
the condition known as analysis
paralysis.
supply they might consider utilizing
the
scorecard” methodology, developed
in
by Robert Kaplan and David Norton
[14]
was not specifically intended for
use
chain. However, this model of
measurement has proven to be of
value
industry.
3. The Balanced Scorecard
and
Relationships among
Perspectives
BSC
There are several ways or tools to
institution/firm’s performance one of
which
Balanced Scorecard (BSC)
developed
and Norton. The BSC is a part
of
strategy, which was initially
proposed
1980s and early 1990s and then
developed
modern performance management
specific characteristics of the
BSC
mixture of non-financial and
financial
(see Figure 1). Generally, there is a
chain that leads from the
capability
business processes through learning
and
customer perspectives, which
affect
financial performance.
Keeping a balance between the
financial
financial elements in the business
entity
Vol. 6,
No.
than
giving
surprising
that
form
attitudes
convictions
without
and/or
practical
[13]
.
and
deductive
combined
in
questions.
The
gathering
was
MFI
manager
interviews.
The
derived
from
and
particular
Scorecard.
The
in
Bandung,
to
micro and
Balanced
are common
made
by supply
starting
out with
easily
lead to
paralysis.
Hence,
the
“balanced
in
the 1990s
[14]
. The BSC
use
in supply
performance
value
in many
and
Perspectives
of
measure the
which
is the
developed
by Kaplan
of
corporate
proposed
in the late
developed
to be
tools. The
BSC
include a
financial
measures
causal-effect
capability
of internal
and
growth to
affect
the final
financial
and non-
entity
is very
important. Therefore, the
hypotheses
model are as follows:
H1: Internal Process’
Perspectives
related to Customers’ Persp
ectives
H2: Internal Process’
Perspectives
related to Financial
Perspectives
H3: Learning & Growth
Perspectives
related to Customers’
Perspectives
H4: Learning & Growth
Perspectives
related to Internal Process
Perspectives
H5: Financial Perspectives are
positively
Customers’ perspectives
H6: Financial Perspectives are
positively
Learning & Growth
Perspectives
Figure 1. Cause-Effect
Interactions
Perspectives of the BSC model
[15]
4. Islamic and
Conventional
Indonesia
Not all these people (i.e low
income
entrepreneurs and poor
inhabitants)
as bankable clients in Indonesia.
MFIs
the first two groups of people and
it
the extreme poor because
Indonesia’
‘financial system’ approach are
motivated
rather than social amelioration.
The
microfinance market is diverse and
in this research only investigated
the
types of microfinance
institutions;
BPRS and BMT.
1.1. Conventional
Institutions
BRI
(Bank
Indonesia) Microbanking
BRI, one the best known
institutions
MFI in the world, is a state bank
has been the best bank based on
credit
342
No.
4, December 2017
hypotheses
for the BSC’s
Perspectives
are positively
ectives
Perspectives
are positively
Perspectives
Perspectives
are positively
Perspectives
Perspectives
are positively
Perspectives
positively
related to
positively
related to
Perspectives
Interactions
between
[15]
.
Conventional
MFIs in
income
earners, micro
inhabitants)
can be served
MFIs
mostly serve
it
is rare to serve
Indonesia’
s larger
motivated
by profit
The
Indonesian
incorporates but
the
four biggest
institutions;
BRI, BPR,
Microfinance
(Bank
Rakyat
institutions
and the largest
and since 2008
credit
rating. BRI
Int. J Sup. Chain. Mgt
can be categorized as a commercial
bank
in the market with a small amount
of
transaction but has a large
volume
hundred million Indonesian people
living
areas. BRI is also based on
individual
loans that can be explained with
high
performance than social
networks
borrowers. A pre-existing
relationship
communities and the use of
testimony
respected community figure as social
the borrower’s loan are some of
BRI’s
ingredients [11].
BPR (Badan Perkreditan Rakyat)/
Rural
Banks
During the nineteenth century and
Dutch
in Indonesia, rural credit banks were
namely Lumbung Desa/Bank
Desa,
objective of these banks was to help
workers
fall into the trap of high interest
moneylenders. The target markets
of
mostly rural and suburban people
who
served by big commercial
banks.
characterized by easy access
and
administrative procedure for simple
villagers
4.2 Islamic Microfinance
Institutions
BPRS (Bank Pembiayaan
Rakyat
/Islamic Rural Bank
BPRS is regulated by National
Act
amended into National Act
No.10/1998.
rural banks (BPRS) established in
order
the need of Muslim for Islamic
microfinance
these are supervised by the central
bank.
BMT (Baitul Maal wa Tamwil)
BMT is a fast growing microfinance
reaching more than 5,000 units that
gains
politically and is socio-religiously
accepted.
serves the Muslim-grassroots
segment
implementing Sharia’h compliant
financing.
Islamic microfinance cooperatives
suffer
supervisory neglect by the
Ministry
Cooperatives and in the practice they
are
difference than the conventional one. “
At
fifth of Islamic cooperatives are in
reas
health. The majority is dormant or non
-
most of the remaining ones exist for
the
receiving funds from the government”
[16]
Based on Seibel’s findings below, the
gap
2 highlights the cause of problems.
BRI
in the graph below because the size
incomparably
high.
Vol. 6,
No.
bank
operates
of
money per
volume
with one
living
in rural
individual
-liability
high
repayment
networks
among
relationship
within
testimony
from
collateral on
BRI’s
success
Rural
Credit
Dutch
colonies
established,
Desa,
The main
workers
not to
rates from
of
BPR are
who
are not
banks.
BPR is
and
simple
villagers
.
Institutions
Rakyat
Syariah)
Act
No.7/1992,
No.10/1998.
Islamic
order
to response
microfinance
and
bank.
cooperative
gains
support
accepted.
BMT
segment
by
financing.
suffer
from the
Ministry
of
are
not much
At
most one-
reas
onably good
-
performing;
the
purpose of
[16]
.
gap
in Figure
BRI
is excluded
incomparably
Sources: Author’s modification from
data (2005)
Figure 2. The Growth of BPR,
BPRS
Maal wa Tamwil
(BMT)
5. Findings
The linkages between the four
perspectives
well-designed and balanced
strategy
MFI’s performance. The
results
findings on 18 MFIs based on
the
BSC are the following unique
elements;
1.
Twelve elements of
internal
Human Resources, (2)
Structure
(3) MFI's Vision
Determiner,
operation controller, (5)
Staff'
(6) Loan Officer's
Compensation,
Comparison of salary, (8)
Staff'
(9) Line of Authority,
Duplication, (11)
Performance
(12) Transparency and
Accountability.
2.
Eight elements of learning
and
HR Department, (2)
Clear
Advertised Job opportunity,
Staff Criteria, (5) Min Staff
Training for Staff, (7)
Annual
Budgets and (8) Average
NPL.
3.
Ten elements of
customer’s
choosing a MFI: (1) Sharia’h
Easiness, (3) Application
Process,
interest/cost of capital, (5)
Low Collateral, (7)
Payment
Loan’s Officers, (9)
Preference
Overall performance.
4.
Six elements of financial
performance:
ROA, (2) ROE, (3) OSS,
Breadth, (5) Outreach-Worth
to
Outreach-Depth.
5.1 The BSC Measurement
1.1.1. Internal Process
Perspectives
There are at least three dimensions
vertical dimension between
management, a horizontal
dimension
MFI and its customers, and an
external
dimension [17]. In this study,
three
were included in MFI daily
operations.
process perspectives for
microfinance
related to variables are contained
in
Why BPRS is far less than
others
(yellow)?
343
No.
4, December 2017
Seibel & Agung
BPRS
and Baitul
(BMT)
perspectives
create a
strategy
to improve a
results
of empirical
the
concept of the
elements;
internal
process: (1)
Structure
Organization,
Determiner,
(4) Daily
Staff'
Compensation,
Compensation,
(7)
Staff'
Turn Over,
(10) Work's
Performance
evaluation,
Accountability.
and
growth: (1)
Clear
policies, (3)
(4) Minimum
experiences, (6)
Annual
Training
NPL.
customer’s
factors in
Compliance, (2)
Process,
(4) Low
Speed/Fast, (6)
Payment
Methods, (8)
Preference
and (10)
performance:
(1)
(4) Outreach-
to
clients and (6)
Perspectives
inside a MFI: a
owners and
dimension
between the
external
governance
three
dimensions
operations.
The internal
microfinance
institutions
in
table 1 below.
others
(yellow)?
344
Int. J Sup. Chain. Mgt Vol. 6, No. 4, December 2017
Table 1.
Internal Process Perspectives Average
Scores
For human resources, BPR is better than the others
followed by BPRS, BRI and BMT respectively. In
terms of structure organization, interviewer found
that all MFIs have a clear organizational structure,
a picture of which was hung on every MFI
headquarters’ wall. Score 1 for an MFI with a clear
structure organization and score 0 for the opposite.
Every MFI also has a stated vision for its institution
therefore all were scored 1. All MFIs were directed
and controlled by a Directors or CEO as a
professional institution. The rate of compensation
for staffs and loan officers shows that BRI gives
more than the others. On the subject of salary, we
compared MFI’s salary to other banking and
business sectors with the same level. The findings
of the comparison show that BPRSs and BRI
employee’ salaries were approximately higher than
the average similar industry while BPR and BMT
were approximately equal to the average salary in
the same level of industry. Managers said that MFI
give monthly salary, incentives and allowances.
These three components were added together as a
take home paid income per month.
All managers stated that staff/officer turnover rate
is low and almost zero. All managers stated and
also demonstrated a clear line of authority.
Managers were asked to explain whether there
were some work duplications in their office. They
confessed that sometimes there were overlapping
and duplicating tasks due to a lack of human
resources and tight deadlines. During the in-depth
interviews, the interviewer received very similar
responses from all managers that the performance
of administration staff, loan officers and managers
were routinely evaluated. On the topic of
transparency and accountability, all MFIs had their
own internal audit and published a financial report
quarterly for the public. Having an external auditor
is a prerequisite of running the business based on
Bank Indonesia regulation for BPR and BPRS.
Additionally, all MFIs used a particular
management information systems software for
operating daily transactions.
Overall score for Internal Process Perspectives is
11.33 out of a maximum of 12 for BRI (the best),
followed by BPRS with 10.72, BPR with 10 and
BMT (the worst) with 9.083, respectively.
1.1.2. Learning and Growth Perspectives
Learning and growth perspectives variables in a
MFI concern the availability of human resources of
a department, clarity of policies, professional
systems of recruitment, minimum criteria for staff,
sufficient budgets for training and staff
development and the awareness of staff
performance towards non-performance loans (NPL)
Table 2.
Learning Growth Perspectives Average
Scores
Learning
&
Growth
(LG)
BPRS
BPR
BMT
BRI
(LG1) H&R Department
0.67
0.8
0.5
1
(LG2) Clear policies
1
1
0.83
1
(LG3) Advertised Job
opportunity
0.5
0.5
0.5
1
(LG4) Minimum Staff
Criteria
0.5
0.25
0.42
1
(LG5) Min Staff
experiences
0.5
0.3
0.25
1
(LG6) Training for Staff
0.56
0.4
0.55
1
(LG7) Annual Training
Budgets
0.72
0.47
0.2
1
(LG8)
Average
NPL
0.67
0.53
0.67
0.67
Score
5.12
4.25
3.94
7.67
Internal Process (IP)
BPRS
BPR
BMT
BRI
(IP1)Total Human
Resources
0.39
0.4
0.17
0.33
(IP2) Structure
Organization
1
1
1
1
(IP3) MFI's Vision
Determiner
1
1
1
1
(IP4) Daily operation
controller
1
1
1
1
(IP5) Staff's
Compensation
0.83
0.8
0.67
1
(IP6) LO's
Compensation
0.83
0.8
0.67
1
(IP7) Comparison of
Salary
1
0.8
0.58
1
(IP8) Staff's Turn
Over
1
1
1
1
(IP9) Clear of Line of
Authority
1
1
1
1
(IP10)Work's
Duplication
0.67
0.2
0
1
(IP11)Performance
Evaluations
1
1
1
1
(IP12) Transparency
& Accountability
1
1
1
1
Score
10.72
10
9.083
11.33
345
Int. J Sup. Chain. Mgt Vol. 6, No. 4, December 2017
BRI has a human resources department but not all
branches of BPR, BPRS and BMT have it. In fact,
20% of BPR, 50% of BMT and 1/3 of BPRS did
not have special human resources department. In
term of policy, all MFIs have a clear policy which
is set out in written personnel manuals except for
one out of 6 BMTs. As a big commercial bank, BRI
always advertises job vacancies in the mass media
whether local or national. Only 50% of BPRS and
BMTs and 40% of BPR did it regularly. Some
MFIs state senior high school graduation as
minimum criteria, whereas other MFIs require a
Diploma or Bachelors degree as a prerequisite to
apply for the position.
Not all MFIs predetermined a minimum of years of
experiences to apply for a position. Some MFIs put
zero years experience as minimum criteria, whereas
the other MFIs put one year or two-years
experience as a prerequisite. All MFIs but BMT
were legally obliged by the central bank, Bank
Indonesia, to send their employees to attend
training sessions throughout the year. The
minimum yearly budget for training is 5% of a
MFI’s yearly personnel budget. As BMT is not
under Bank Indonesia’s supervision but under that
of the Ministry of Cooperatives, it does not have to
meet this compulsory 5% and can freely manage
budgets for training in proportion to their needs and
targets. In some MFIs, the director or committee
sets the target per group of loan officers and not per
individual. In an interview, there was a group of
loan officers with a yearly target of 1000 clients. It
looked like a big number, but in Bandung with
average density 13.345/km
2
people per square
kilometer this is a reasonable target.
The overall score for Learning and Growth
Perspectives is 7.67 out of a maximum of 8 for BRI
(the best) followed by BPRS with a score of 5.12,
BPR with a score of 4.25 and BMT with a score of
3.94 (the worst) respectively.
1.1.3. Customer Perspectives
It was important to learn customer/clients
perspectives, and the qualitative research stage
provided such an opportunity. In addition to using
quantitative methods to get empirical data, an in-
depth face-to-face interview technique was used to
explore the emotional dimensions of customer’s
opinions.
Table 3.
Customer/MFI Clients’ Perspectives
Customer/Clients
Perspectives (CP)
BPRS
BPR
BMT
BRI
(CP1
)
Sharia’h
Compliance 0.75 0.25 1 0.5
(CP2) Easiness 0.5 0.75 0.25 1
(CP3)
Application
Process 0.75 0.25 0.5 1
(CP4) Low
Interest/Cost of
Capital 0.75 0.5 0.25 1
(CP5) Speed/fastness
0.75 1 0.5 0.25
(CP6) Low
Collateral 0.75 0.25 0.5 1
(CP7)
Payment
Methods 0.75 0.5 0.25 1
(CP8) Loan Officers
Profile 0.75 0.5 0.25 1
(CP9) Preference 0.75 0.5 0.25 1
(CP10) Overall
Performance 0.75 0.5 0.25 1
Score
7.25
5
4
8.75
Every respondent scored in the following manner:
the best 1, good 0.75, average 0.5 and the worst
0.25. According to customer perspectives, BMT is
the best MFI for sharia’h compliance followed by
BPRS, BRI and BPR respectively. Regarding the
most available and relatively easy to find criteria,
BRI was scored highest followed by BPR, BPRS
and BMT in that order. Correspondingly, for credit
application process, BRI received the highest
followed by BPRS, BMT and BPR. As a state
commercial bank fully supported by the Indonesian
government with many cross subsidies for micro-
credit, inevitably, BRI is still the cheapest in terms
of credit interest rate. Overall score for Customer
Perspectives is 8.75 out of a maximum of 10 for
BRI (the best) followed by BPRS with a score of
7.25, BPR scored 5 and BMT received the lowest
score 4.
1.1.4. Financial Perspectives
Some of the more popular sustainability indicators
for microfinance institutions include: financial
sustainability (return on assets (ROA), return on
equity (ROE), operational self-sufficient (OSS)),
outreach (breadth, depth and worth to clients),
346
Int. J Sup. Chain. Mgt Vol. 6, No. 4, December 2017
efficiency and loan repayment [18]. Based on the
availability of data, in this study, ROA, ROE, OSS
were used as financial ratios and the outreach of
MFIs, breadth, willingness to pay, depth as the
other indicators.
Financial reports of BRI, BPR and BPRS are easily
found at the central bank’s website because they
are under Bank Indonesia’s supervision. It was not
the case for BMTs which are not under the central
bank’s supervision. The Ministry of Cooperatives
is supposed to oversee cooperatives including
BMTs did not supervise them regularly and
appropriately so that it was hard to acquire
information concerning financial performance and
other management issues. But to make a BMT
reliable and credible in front of shareholders,
customers and stakeholders, Dinas Koperasi
(Cooperative Division) in each province in
Indonesia regularly collects and publishes their
financial reports as a form of responsibility to the
public.
Table 4.
Financial Perspectives
Financial
Perspectives
(FP)
BPRS
BPR
BMT
BRI
(FP1)ROA 0.54 0.5 0.42 0.75
(FP2) ROE 0.63 0.3 0.38 1
(FP3) OSS 0.5 0.45 0.42 0.5
Outreach
(FP-O1) Breadth
0.42 0.4 0.5 0.5
(FP-O3) Depth 0.42 0.45 0.67 0.75
(FP-O2) Worth
to
clients
0.5
0.84
0.75
0.6
Score
3.01
2.94
3.14
4.10
The financial ratios are obtained from MFIs
financial reports and outreach indicators were
gathered from in-depth interviews with managers.
For measurement and scoring purposes in Table 4,
the researcher put score 0 for ROA less than 0,
score 1 for ROA’s range between 0% and 2%,
score 2 for ROA’s range 2.01%-4%, score 3 for
ROA’s range between 4.01% and 6% and score 4
for a range of more than 6%. For ROE
measurement, the researcher put score 0 for ROE
less than 0, score 1 for a range between 0% and
10%, score 2 for a range between 10.01%-20%,
score 3 for a range between 20.01% and 30% and 4
where ROE was more than 30%. Similar to ROA’s
scoring method; ROE was also standardized and
averaged before being utilized as a BSC score.
Operational self-sufficient (OSS) ratio measures
the adequacy of a MFI’s revenue to cover its costs.
The original ratio of OSS was taken and then
standardized and averaged before putting those
scores as BSC’s score lists. BRI and BPRS have
the same highest score, followed by BPR and BMT
respectively.
Outreach indicators show MFI impact on society.
Most MFI experts put them together with the
financial indicators. In this section, there are three
indicators of outreach presented; breadth, depth and
worth to clients.
Breadth
is the number of MFIs clients covered by
the MFI. A MFI which has less than 500 clients
was scored 0. Score 1 for a MFI with clients
between 501 and 1500 clients, score 2 for a MFI
with clients between 1501 and 3000, score 3 for a
range of 3001 to 5000 and score 4 for an MFI
which has more than 5000 clients. The outreach
indicator
depth
is the average loan size per GNI
per capita. As the GNI per capita for each
respondent is the same, hence, it does not need to
be taken into account for the scoring process.
Similar to data for willingness to pay above, data
on average loan size was collected in the survey of
MFI managers’ perceptions of clients’ perceptions.
There were five options of answers chosen by MFI
managers to state the average loan size that their
MFI gave to their clients. Those who answered
option a (<2 millions IDR) received score 4, option
b (2-5 millions IDR) received score 3, etc. This fact
shows that BPRS managers gave bigger
loans/client than other MFI managers did and BRIs
managers gave the smaller loan/clients than others
did. The smaller loan/clients, the more poor clients
are reached and the bigger outreach score.
Data for
worth to clients
(defined as willingness to
pay) were captured in a survey of managers’
perceptions of clients’ perceptions. There were five
answer options chosen by managers to predict the
willingness of clients to pay a monthly interest rate.
The average of interest rate was put as a score for
example: Those who answered option c).1%-2%
were scored 1.5 or d). 2%-3% were scored 2.5 and
etc. This fact shows that BPR managers perceived
more than other MFI’s managers concerning the
clients’ capability or willingness to pay high
interest rates.
The overall score for financial perspectives was 4.1
out of a maximum of 6 for BRI (the best) is
followed by BMT with score 3.14, BPRS was
scored 3.01 and BPR was scored lowest with 2.94.
347
Int. J Sup. Chain. Mgt Vol. 6, No. 4, December 2017
1.1.5. Overall Performance of MFIsbased on
Balance Scorecard Perspectives
The overall scores of Balanced Scorecard from four
perspectives for MFIs can be seen in Table 5
below. BRI received the highest score 31.85 out of
a maximum of 36, BPRS was second with a score
of 26.09, followed by BPR and BMT in the third
(22.19) and fourth place (20.16) respectively.
Tabel 5.
Balanced Scorecard in MFIs
BPRS
BPR
BMT
BRI
Internal Process
(IP)
10.72 10 9.08 11.33
Learning &
Growth (LG) 5.11 4.25 3.94 7.67
Customer
Perspectives
(CP) 7.25 5 4 8.75
Financial
Perspectives
(FP) 3.01 2.94 3.14 4.10
OVERALL
SCORE
26.09 22.19 20.16 31.85
Cronbach’s Alpha Test
According to Pallant and Vaus, it is deemed
reliable if the result is at least 0.7 (highly internal
consistency).
Table 6.
Result of Reliability Test
Reliability Test for MFIs
N %
Cases Valid 18
94.7
Excluded
a
1
5.3
Total 19
100.0
a. Listwise deletion based on all variables in the procedure.
Reliability Statistics
Cronbach's Alpha
Cronbach's Alpha Based
on Standardized Items N of Items
.782
.844 25
The result of this study’s interviews with MFI
managers based on the Balanced Scorecard (BSC)
showed a Cronbach’s alpha coefficient of 0.844
(see the Table 6).
Cronbach’s alpha coefficient indicator for all
questions in this study was 0.844 after considering
the 25 items that used the scale. The value of 0.844
is above Cronbach’s alpha coefficient 0.7.
Therefore, the scale used in this research has a
good level of internal consistency and is also
reliable
All indicators above are the Key Performance
Indicators (KPI) for a MFI from four perspective
based on this research. The BSC model postulates a
causal-effect chain that leads from the capability of
internal business process through learning and
growth to customer perspectives and ultimately
affects the financial performance. This structure is
consistent with the Balanced Scorecard concept
developed by Kaplan & Norton [19] & [15], who
emphasize the importance of keeping a balance
between the financial and non-financial elements in
the business entity.
6.
The Statistical Result of Correlation
between BSC’s Elements
The correlation between the four perspectives can
be seen in Table 7. There are strong significant
correlations between a) internal process and
customer’s perspectives (63.8%), b) customer’s
perspectives and learning-and-growth (58.1%) and
c) learning-and-growth and financial performance
(47.4%) (see figure 3).
Table 7.
Correlations of Different BSC
Perspectives
Spearman's rho
Av_I
P
Av_C
P
Av_
LG
Av_F
P
Av_O
utR
Av_I
P Correlation
Coefficient 1.000
.638**
.357
.283
.387
Sig. (2-tailed) .
.004
.146
.256
.113
N 18
18
18
18
18
Av
_C
P
Correlation
Coefficient .638*
*
1.000
.581*
.354
-.042
Sig. (2-tailed) .004
.
.011
.150
.870
N 18
18
18
18
18
Av
_L
G
Correlation
Coefficient .357
.581*
1.000
.474*
-.116
Sig. (2-tailed) .146
.011
.
.047
.646
N 18
18
18
18
18
348
Int. J Sup. Chain. Mgt Vol. 6, No. 4, December 2017
Spearman's rho
Av_I
P
Av_C
P
Av_
LG
Av_F
P
Av_O
utR
Av_I
P Correlation
Coefficient 1.000
.638**
.357
.283
.387
Sig. (2-tailed) .
.004
.146
.256
.113
N 18
18
18
18
18
Av
_F
P
Correlation
Coefficient .283
.354
.474*
1.000
.321
Sig. (2-tailed) .256
.150
0.47
.
.194
N 18
18
18
18
18
Av
_O
ut
R
Correlation
Coefficient .387
-.042
-.116
.321
1.000
Sig. (2-tailed) .113
.870
.646
.194
.
N 18
18
18
18
18
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
From the 6 hypotheses were statistically tested, the
empirical data showed only three hypotheses could
be proved to be statistically significant:
H
1
: Internal Process’ Perspectives are positively
related to Customers’ Perspectives
H
3
: Learning & Growth Perspectives are positively
related to Customers’ Perspectives
H
6
: Financial Perspectives are positively related to
Learning & Growth Perspective
Figure 3.
Structure of MFI’s Performance based on
BSC elements
The other hypotheses; H
2
, H
4
, H
5
were not proved
to be statistically significant in this research. When
the financial performance was combined with
outreach and the empirical data run together with
the other three perspectives, there was no
correlation at all for financial performance and
outreach with other perspectives. Similar results
were found when using the outreach element itself.
Therefore, after taking outreach from financial
performance perspectives separately, the results
turned out to be different. Therefore, it can be
concluded that outreach did not have correlation
with BSC perspectives.
7. DISCUSSION OF 'THE BSC based MFIs’
MODEL
’
7.1 Internal Process of ‘The BSC based
MFIs’ Model’
As suggested by Norton and Kaplan [14], internal
business processes are something that the
institution must excel at and BRI has excelled itself
to the desire level. With low level of staff’s turn
over, clarity in the line of authority and very low
duplication of works among the staffs, BRI can be
an example for other MFIs for internal process
perspectives. BRI’s achievements have been
written in many publications by Robinson
[11];[20];[21] and other authors.
BPRS was scored the second highest with moderate
number of human resources, clear structure
organization, vision and daily operation. BPRS was
slightly below BRI, meanwhile BPR almost has the
same scores as BPRS except comparison of salary.
The lowest score was BMT. BMTs need more
clients and more human resources to scale up their
business.
7.2 Learning and Growth Perspectives of
‘The BSC based MFIs’ Model’
BSC measures both inside and outside the
institutions which are contributed to MFI’s
mission, learning and growth perspectives are one
way to achieve the objectives and mission of a MFI
[22]. The overall score for Learning and Growth
Perspectives was highest for BRI, followed by
BPRS, BPR and BMT. With routine and regular
training for its staff, BRI created many innovative
ways to achieve a desirable performance as
highlighted by Kaplan and Norton [19].
7.3 Customer Perspectives of ‘The BSC
based MFIs’ Model’
Identifying customer perspectives is important for
setting any organization’s policies [19]. Overall
score for customer perspectives, BRI was the
highest, followed by BPRS, BPR and BMT. The
research conducted by Robinson [11]; [20], [21],
[1] supported the findings above. Kaplan and
Norton [14] also underlined the importance of
customer satisfaction to boost the performance.
Only for
Shari’ah
compliance and
speed/promptness criteria, BRI got the lowest
scores. BMT was scored the best MFI for
Shari’ah
compliance. Cost of financing (transaction costs,
interest rates and other charges) is still an important
factor for MFI clients [23]. Hence, it makes sense
Internal
Process
Learning &
Growth
Customer
Perspectives
Financial
Performance
58.1%
63.8%
47.4%
349
Int. J Sup. Chain. Mgt Vol. 6, No. 4, December 2017
that BRI became the most preferable MFI because
of its interest rates.
7.4 Financial Perspectives of ‘The BSC based
MFIs’ Model’
Based on financial performance, BRI got the
highest score for ROA, ROE and OSS. As such
BRI is good at utilizing its total assets to generate
returns (ROA) and produce returns for the owner
(ROE). OSS ratio as highlighted [24];[25]
measures how well BRI is able to cover its total
costs of operating.
In relation to breadth of outreach, BRI and BMT
have the same score which cover a large number of
client (breadth) but in term of average loan size
(depth), BRI’s score is slightly higher than BMT.
Five indicators in measuring a MFI for CGAP, with
this breadth score means BRI had served more
clients and also more poor clients compared than
BMT [18]. BPR and BPRS followed them. The
smaller loan/clients, the more poor clients are
reached and the greater depth of outreach [25].
Hatch & Frederick [26] and Dunford [27] found the
opposite facts to Engels’ argument; loan size is
ineffective in selecting poor.
For
‘worth to clients’
indicator, BPR and BMT
were better than BRI. Similar to BRI, BPRS got the
second highest score for financial ratios (ROA,
ROE and OSS) but for outreach indicators, BPRS
got the lowest MFIs. Overall, BMT was the lowest
for financial ratio but the highest for outreach. In
general, BPRS’ and BPR’s positions for financial
ratio and outreach were in between of BRI and
BMT.
8. CONCLUSION
A balanced non-financial and financial
performance is extremely important to create
sustainability through supply chains microfinance
institutions. In all perspectives BRI got the highest
scores. BRI has proved that with four balanced
perspectives created more positive results to overall
performance. As Islamic microfinance, BPRS’s
performance is the second best. BPRS has the more
capability and capacity than BPR and BMT with
more balanced perspectives as a starting point.
BMT needs to push almost every element
simultaneously to create MFI sustainability in the
future [23];[28];[18] and [25] for a healthy MFI.
With the lowest score for internal process, learning-
and-growth, customer satisfaction and financial
ratios, BMT seemed that it is not well managed. If
this condition continues, it will jeopardize
institutions in the long run. The contribution of this
study is to show how the four perspectives work
together simultaneously leading to the balanced and
sustainable performance of MFIs in the future.
Acknowledgments
The authors would like to thank you to Durham
University, UK and University of Padjadjaran,
Indonesia for supporting this research.
References
[1] J. Armendáriz de Aghion, B., &
Modurch,
The Economics of
Microfinance
. Cambrige,
Massachusetts., 2005.
[2] H. Ahmed, “‘Waqf-based microfinance:
Realizing the social role of Islamic
finance.,’” 2007.
[3] J. Armendáriz, B., & Morduch, “The
economics of microfinance,” 2010.
[4] M. Asutay, “A Political Economy
Approach to Islamic Economics:
Systemic Undertanding for an
Alternative Economic System.,”
Kyoto
Bull. Islam. Area Stud.
, vol. 1, no. 2, pp.
3–18, 2007.
[5] M. U. Chapra,
The Future of Economics,
An Islamic Perspectives: The Islamic
Foundation
. Markfield, Leicester,
United Kingdom, 2000.
[6] M. U. Chapra, “The Islamic Vision of
Development in the Light of Maqasid al-
Shari’ah. London: The International
Institute of Islamic Thought,” London,
2008.
[7] M. Kahf, “Toward the Revival of
Awqaf: A Few Fighi Issues to
Reconsider.,” in
Paper presented at the
The Harvard Forum on Islamic Finance
and Economics, Cambridge, MA
, 1999.
[8] D. Masyita, “Developing a Computer
Simulation Based Approach to Simulate
Potency of Islamic Voluntary Sector to
Alleviate the Poverty in Indonesia Using
System Dynamics Methodology.,” in
Paper presented at the First
International Conference on Inclusive
Islamic Financial Sector Development;
Enhancing Islamic Financial Services
for Micro and Medium Sized Enterprises
(MMEs)
, 2007.
[9] A. S. Masyita, D., Tasrif, M., & Telaga,
“A Dynamic Model for Cash Waqf
Management as One of The Alternative
Instruments for The Poverty Alleviation
in Indonesia.,” in
Paper presented at the
The 23rd International Conference of
The System Dynamics Society organized
by Massachussets Institute of
350
Int. J Sup. Chain. Mgt Vol. 6, No. 4, December 2017
Technology (MIT) System Dynamics
Group
, 2005.
[10] M. Obaidullah,
Introduction to Islamic
Microfinance
, Internatio. New Delhi -
India, 2008.
[11] M. S. Robinson,
Supply and Demand in
Microfinance
, Microfinan. London and
New York: Routledge., 2009.
[12] I. M. Fund, “STAFF REPORT FOR
THE 2013 ARTICLE IV,” no. 13, 2013.
[13] R. Kayed, “Islamic Financing and the
Saudi Entrepreneur: Readings from the
Field.,” in
Paper presented at the The
First International Conference on
Inclusive Islamic Financial Sector
Development: Enhancing Islamic
Financial Services for Micro and
Medium Sized Enterprises (MMEs)
,
2007.
[14] D. P. Kaplan, R. S., & Norton,
Translating Strategy into Action, The
Balanced Scorecard
. Boston,
Massachussets: Harvard Business
School Press., 1996.
[15] D. P. Kaplan, R. S., & Norton,
The
Strategy Focused Organization, How
Balanced Scorecard Companies Thrive
In The New Business Environment
.
Boston, Massachusetts.: Harvard
Business School Press, 2001.
[16] H. D. Seibel, “Research Notes and
Comments - Islamic Microfinance in
Indonesia: The Challenge of
Institutional Diversity Regulation, and
Supervision,”
SOJOURN J. Soc. Issues
Southeast Asia
, vol. 23, no. 1, pp. 86–
103, 2008.
[17] R. Ø. Mersland, R., & Strøm,
“Performance and governance in
microfinance institutions,”
J. Bank.
Financ.
, vol. 33, no. 4, pp. 662–669,
2009.
[18] R. Rosenberg,
Measuring Results of
Microfinance Institutions; Minimum
Indicators That Donors and Investors
Should Track - A Technical Guide
.
Washington, DC: Consultative Group to
Assist the Poor (CGAP), 2009.
[19] D. P. Kaplan, R. S., & Norton, “Linking
the balanced scorecard to strategy,”
Calif. Manage. Rev.
, vol. 39, no. 1, pp.
53–79, 1996.
[20] J. Morduch,
The Microfinance Schism
,
Microfinan. London and New York:
Routledge., 2009.
[21] T. Hulme, D., & Arun,
Introduction -
Microfinance; A Reader
, In D. Hulm.
2009.
[22] S. Tapanya, “Examining the Factors
which influence Performance
Measurement and Management in the
Thai Banking Industry: An Application
of the Balanced Scorecard Framework:
Unpublished PhD,” Murdoch
University., 2004.
[23] M. Schreiner, “Aspects of Outreach: A
Framework for the Discussion of the
Social Benefits of Microfinance,”
Washington DC, 1999.
[24] M. Ahlin, C., Lin, J., & Maio, “Where
does microfinance flourish?
Microfinance institution performance in
macroeconomic context.,”
J. Dev. Econ.
,
vol. 95, no. 2, pp. 105–120, 2011.
[25] P. (Ed. . Engels, “MISSION DRIFT IN
MICROFINANCE: The Influence of
Institutional and Country Risk Indicators
on the Trade-Off between the Financial
and Social Performance of Microfinance
Institutions,” vol. 1, Stuttgart: The
Deutsche Nationalbibliothek., 2010.
[26] L. Hatch, J. K., & Frederick, “Poverty
Assessment by Microfinance
Institutions: A Review of Current
Practice: U.S. Agency for International
Development.,” 1998.
[27] C. Dunford, “What’s wrong with loan
size?,” C. . F. F. H. Davis, Ed. 2002.
[28] A. G. Vinelli, “The Management and
Performance of Microfinance
Organizations,” Harvard University,
Cambridge, Massachusetts, 2002.
