Humble Beginnings

KSPPS  Bina Dhu’afa Beringharjo was established in December 1994, in the Special Region of Yogyakarta (DIY). The primary motivation was to help the local traders in Beringharjo market to move away from their reliance on local loan sharks. The founders of BMT Beringharjo began working from a single room in a local mosque with a funding of IDR 100 million. In thirteen years, BMT Beringharjo expanded to become a prominent BMT in the country with assets totaling IDR 173 billion as of June 2018.

A Noble Innitiative

BMT Beringharjo was set up with the idea to implement Islamic economics. It began its work on charity based models, such as food transfer, free-of-charge health services, sanitation & fresh water supply for the poor, and a scholarship program for orphans. Gradually, it shifted its focus to social financing. Angkringan Simbah Harjo was one of its flagship programs which became very popular. This program targeted the food kiosk traders. Over 200 traders have joined this program so far; the traders return the loans on installment basis without any interest. BMT Beringharjo plans to offer support for the entire supply chain of food kiosk traders to enable them to do their business on Islamic principles.

Social & Commerical Work

The Maal (social) division at BMT Beringharjo managed the social and micro-business empowerment program. It also manages programs in health sector (Bering Sehat), freshwater supply program (Bering Tirta), micro-business incubation (Sahabat Ikhtiar Mandiri), mentoring of the pedicab community (Kompak Harjo) and spiritual assistance for market porters (Buruh Gendong Mengaji). The founders are still actively involved in the management of the BMT which has kept the cooperative close to its mission since inception.

BMT Beringharjo offers two main types of savings products - saving accounts and time deposit accounts. Most savings products are time deposits and use mudarabah muqayyadah (profit-sharing) contracts.

Success and Expansion

Several factors have contributed to the success of BMT Beringharjo. Firstly, its focus on the needs of the small local traders has helped in its widespread popularity. In a highly competitive market place marked by micro banks, village banks, and conventional credit unions, as well as the loan sharks, BMT Beringharjo has managed to continually expand with its service offerings. It offers a daily pickup service to both depositors and borrowers, which has greatly contributed towards building a regular and long-term relation with the members. This approach has particularly helped the BMT to compete against micro banks. Meanwhile, BMT Beringharjo offers loans at lower costs to compete with the loan sharks.

Member Engagement

BMT Beringharjo prioritizes improving service quality for its depositors rather than focusing on financial incentives. This policy has also favored the BMT as most borrowers are also depositors and they look at the whole package of service being offered by the BMT. It offers financial education to help its members better manage their financial assets, plan their expenditures according to their incomes and include mandatory savings. It also offers a comprehensive training program to its members known as Binar program, which has encouraged many traders to become the members of this BMT despite the lower return on deposit compared to its competitors. Like other BMTs, BMT Beringharjo also engages members through spiritual commitment. Their marketing staff is trained to maintain good relations with members.

Adapting to New Age

Indonesia’s microfinance industry has seen growing popularity in fintech (financial technology) and BMTs may need to join the ranks soon. While fintech has not posed any major challenge for BMT Beringharjo so far, the management may have to start thinking longer term to incorporate technological development. Lately, BMT Beringharjo has initiated a technology-based service which shows that the management realizes the need to incorporate technological advancement in its service offering. In addition, BMT Beringharjo may also need to focus on increasing efficiency and productivity to be able to provide competitive rates to depositors and secure its sustainability in the long run.

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