Islamic microfinance institutions: An empirical analysis of rural households welfare in Indonesia

Abstract

This paper investigates the impact of Islamic microfinance institutions (MFIs) on rural households' welfare in Indonesia. The study used a survey questionnaire to collect data from four Islamic MFis in East Java, Indonesia. A two-year panel dataset and a difference-in­ difference method are used to examine the impact of financing from Islamic MFis on rural household welfare in Indonesia. The study sample comprises of 289 clients of Islamic MFis and 140 non-clients. The study results show rural households that received financing from Islamic MFis exhibit improvement in their income than those who did not received financing.