Exploring Risk Management Practices and Fiqh Muamalat to Improve the Performance of Islamic Microfinance Institutions

The purpose of this study is to explore risk management practices and fiqh muamalat to improve the performance of Islamic microfinance institutions. This study focuses on BMT UGT Nusantara, one of the largest Islamic microfinance institutions (IMFIs) in Indonesia. Due to the site's unique characteristics, the study design is a descriptive exploratory, single-case study with a holistic approach. Data were acquired using various methodologies, including in-depth interviews with informants, field observations, focus group discussions, and document reviews. The Interactive Model is used to analyze data, which is then tested for validity through the evaluation of credibility, transferability, dependability, and confirmability. This study highlights several substantial findings, including the successful implementation of risk management practices at IMFIs. Risk management involves understanding, identifying, mitigating, and assessing risks. Despite the lack of standards and the perception that risk management is only partial, risk management practices have improved financial and organizational performance. Sharia compliance risk is the most widely acknowledged, while finance and liquidity risk are the most anticipated. The practice of Islamic jurisprudence (fiqh muamalat) is efficiently implemented by integrating Sharia compliance as an operational system and Sharia practices as a work culture, which fosters ethical behavior and is acknowledged as a good risk management practice.