CHAPTER 8 THE DYNAMIC PRESENCE OF BMT IN YOGYAKARTA …
8.2. General Attribute of BMT Institution
8.2.6. Management and Human Resource Profile
In the structure of BMT organisation, the manager is the key person who is responsible for the daily operations of the BMT. In general, the quality of the managerial role and leadership determines the success or failure of the BMT from its establishment, thus the manager is the key success factor for the sustainability of the BMT.
Based on field research (Figure 8.3.) the management of BMTs is dominated by well- educated persons. More than half of the managers have graduated from university with degrees or diplomas, and another one-third hold college certificates. A majority of managers are followers of Muhammadiyah, but only a few of the managers have an entrepreneurship background or are associated with a political organisation.
Figure 8.3. Profile of BMT Management in Yogyakarta
This study supports the view that on the whole the BMT sector meets the general standard of the microfinance sector. However the interviews confirm that nearly all of the BMT managers are not graduates from economics, banking and finance faculties or courses. Instead, their academic background is in Islamic teachings, education and the social sciences. As discussed earlier, the interviews and survey data suggest that in the early stages of the establishment of a BMT, most BMTs have been struggling with the lack of competent human resources because – apart from religious motivation and knowledge – the majority of managers are inexperienced in banking and finance, especially in running a faith-based microfinance program.
To deal with this shortcoming, the managers usually attend a short course on the basic model of the Islamic financial microfinance system and the Islamic leadership development program. Subsequently they follow an internship period in other BMTs or
Master (2.0%)
Bachelor (36.7%)
Diploma (24.5%) College (36.7%)
Educational Background
Founder (54.9%)
Member 11.8%) Professional
(33.3%)
Composition of BMT Management Note: n = 55
in BPRS to understand the nature of the operation of the BMT system. The primary training providers are PINBUK and the BMT Center, which are the organisations that also provide technical and funding assistance (see further discussion in Chapter 7).
The MENEGKOP-UKM and local government agency also run several training activities over the fiscal year, especially to discuss more advanced curriculum or particular topics that related to the government budget. In 2009, the MENEGKOP- UKM designed a competency-based certified system for the manager and board members. The objective of the assessment and certification is to standardise the proficiency of the BMT manager and to ensure BMTs are managed by suitably qualified managers.
When examining the profile of BMT management, it is evident that more than half of the managerial positions in BMTs are in the hands of the influential founders. Another third are managed by professional managers, and only a few BMTs are controlled by the members.
The involvement of the founders in the management of BMTs is a strategic decision. It is a means to maintain the mission of the BMT and avoid the example of some microfinance programs that have lost their mission when they expand and become profitable. Also, according to Mardiono, founder of BMT Mitra Usaha Umat in Yogyakarta, the presence of a founder in management has the specific intention of maintaining the interest of the founders in the development of the BMT’s business strategy. Many of the BMT founder-managers are influential Muhammadiyah figures from well-established family backgrounds, with a university or college education.
Appointing high profile founder-managers from these backgrounds assists the BMT to attract new members and establish relationships with government agencies (interviewed on 18 June 2009).
However, the typical founder-manager tends to be a ‘one-man show’, especially if there is inadequate supervision from the board. In such cases there is a risk of poor governance and mismanagement. Another drawback is control by the founder-manager will lead to a problem in the long term because there is no leadership succession plan for the future of the BMT.
Interestingly, some other BMTs, often well-established ones, employ a professional manager to run the operation. The typical professional manager is recruited by the founder and/or board of management from within the institution, usually a senior staff member who has longstanding experience and has gained the trust of the founder and the board.
Mursida Rambe, founder of BMT Beringharjo, points out that trustworthiness and integrity are very important characteristics in the selection process, since the manager is the key person responsible for the BMT’s development and to keep the BMT mission on track. Other essential criteria of the manager are that the person should show excellent leadership and have a career record in business, be well known to the members and local community, and have an adequate knowledge of Islamic business values (interviewed on 4 June 2009).
There are some very rare cases where the BMT manager is recruited from outside the institution, mostly from another BMT. The main reason is lack of trust. It is also difficult to find candidate BMT manager in the market. If there is any, it is more common for talented BMT staff and manager to seek a better career in the banking sector (in either a conventional or Islamic bank) as it offers better prospects for a future position, improved salary and status, rather than a apply as BMT manager.102
Under the BMT staffing structure, under the manager there are several positions such as a marketing or lending officer, teller, administration or accounting officer and the Baitul Maal officer.
The survey on the profile of the BMT staff found that the majority (69.2 per cent) of BMTs’ staff have graduated from high school or college (Sekolah Menengah Umum or SMA & Sekolah Menengah Kejuruan or SMK), while 17.9 per cent have diplomas and a further 12.8 per cent have bachelor degrees. It seems that the standard approach of BMT human resource management (HRM) is to employ employees with lower qualifications to fill the clerical positions because the BMT modus operandi is fairly uncomplicated –it involves basic lending and saving procedures, hence high school qualifications are thought to be adequate for most positions in the BMTs. In addition, by
102 There is an informal agreement that BMT would not recruit existing personnel from other BMTs, thus the turnover of BMT personnel seems very low.
recruiting high school graduates this reduces the operational costs of salaries and other fringe benefits, and it reflects a preference of many BMTs to recruit from their own community. Finally, Yogyakarta is a very famous education centre, with many university and diploma as well as high school graduates in the local job market.
However, in the recent years, in line with the significant expansion of the sector, well- established BMTs have attracted new diploma and university graduates with an economics and business studies background to fill important positions such as marketing or lending officer. This policy is employed in order to address the increasing competition in the microfinance market, and also to develop a younger generation of personnel in BMTs. In this context, because of the long-term domination of the founder- manager in management positions, a large number of BMTs face a shortage of skilled and experienced staff with whom to develop new branch networks.
In contrast to the selection of managers, the recruitment of staff is largely from external sources. Normally, BMTs advertise positions in local newspapers and/or through the student associations of Islamic universities. The well-established BMTs usually employ a selection process consisting of administrative screening, a general academic test, Islamic knowledge (reciting the Qur’an) and an interview. However, for smaller BMTs, the recruitment procedure is less complicated and they rely more upon internal references in order to minimise costs.
The successful candidates attend a short introductory training and internship program to provide them with the knowledge and technical skills used in BMT operations. For recruitment as a marketing/lending officer, the training curriculum is more specific, using an experiential learning methodology and hands-on coaching and mentoring from the manager and/or the senior staff. This specific curriculum enables the candidate to understand the salient features and the potential risk of the BMT loan products.
BMT managers, when interviewed, report that the staff recruitment process is very time-consuming. They also say that it is quite difficult to obtain qualified staff from the local employment market. Karim (Manager of BMT DT) notes that in many cases most of the applicants are under-qualified intellectually and in terms of banking knowledge and overall performance (interviewed on 28 July 2009).
According to Rama Widia (Manager of BMT Al-Ikhwan), young graduates do not consider a career in the BMT sector as a promising choice for a future livelihood. As the BMT is a community-based microfinance institution that pays low salaries, he considers that the main motivation of the applicants is religious rather than money. However, from casual discussions with some BMT staff, it seems that they work in BMTs not merely for religious reasons, but rather they are conscious of the limited opportunities to find a better job, to work close to home (a preferably situation for female staff), and with a less rigorous selection process for those graduates who have lower academic qualifications. It is worth nothing that the BMTs have experienced a very low rate of staff turnover.
Remuneration is one of critical issues in the BMT sector. Like other local community- based microfinance institutions, such as the LPD in Bali (Arsyad 2006), the remuneration system of BMTs consists of a basic monthly salary plus a bonus. The salary is based on the minimum regional wage that is determined by the DIY administration. The average salary for the manager is roughly equivalent to that for a clerical position in the banking sector, and the staff earns similar to clerical or manufacturing wages. However, well-established BMTs, with better financial performance, pay their managers and staff slightly above the average. In some cases, these institutions also pay additional fringe benefits such as basic health insurance or medical treatment allowances, and accident insurance on top of the salary package.
In addition to the monthly salary, BMTs typically provide a bonus and incentives to acknowledge outstanding performance by the manager and staff. There may also be a
‘best practice’ bonus or an incentive plan in the banking and financial sector, the primary objective of which is to encourage employees to perform beyond expectations, or to exceed targets. More technically, the bonus scheme is related to monthly performance indicators in particular funding mobilisation, loan disbursement, non- performing loans (NPL), and bottom-line profitability. The bonus is paid on a monthly basis. Finally, annual profit-based bonuses are allocated proportionally among the manager, marketing and credit officers, administrative staff and tellers. The incentive scheme is usually timed in association with a religious festive such as Tunjangan Hari Raya (THR) at the end of Ramadan. However, the BMT institution does not provide a
monthly basic salary for the supervisory board; instead there is an annual bonus based on the profit of the BMT, which acts as an incentive for each supervisory activity.
In summary, it seems that there are strong and weak points concerning the HRM practice in the BMT sector Overall, the BMTs seem to have recognised the importance of human resources in achieving sustainability (FGD, 20 August 2009 in Yogyakarta).
However, there are some critical issues that challenge the BMT management and those should become a priority to be addressed, especially the need for improvement in the competence and capacity of personnel through training, and succession planning at the managerial level. Equally, it is also important to provide a better remuneration scheme in order to motivate the employees and to retain outstanding personnel.