Stakeholders’ Perceptions of Fraud in Indonesian BMT Islamic Cooperatives

Indonesia’s Baitul Maal wat Tamwil (known as BMT Islamic cooperatives; henceforth BMTs), are an important phenomenon in Indonesia due to their rapid growth (i.e. numbers, assets, members) and spread across the nation. BMTs are seen as organisations that fill a gap in the market by catering for small-micro-sized enterprises (SMEs) by which because of their size find it difficult to obtain access to the usual financial intermediaries such as banks. BMTs also have an important social role of contributing to poverty alleviation, since SMEs are perceived as vehicles through which wealth and prosperity can be improved. However, in contrast to what we would expect from organisations espousing Islamic values, in recent years there have been a number of frauds involving BMTs which both socially and economically has had a detrimental effect on society. This contradiction merits examination. Therefore, the purpose of this study is to examine stakeholders’ perceptions of fraud in BMTs. The research is comprised of three main stages: a critical literature review, an archival media analysis, and semi-structured interviews; followed by an analysis of the findings using stakeholder theory as an analytical tool. The literature is explored on three main issues: corporate governance, non-traditional organisation, and fraud. This research utilises the narrative case study method and content analysis. The narrative case study is adopted to gain in-depth understanding of fraud problems such as rigorous examination of stakeholders (i.e. managers, members, employees, authorities, society). This study finds that the fraud incidents in BMTs as a systematic failure as all stakeholder groups have their responsibilities on these failures. There are overlapping values between micro (individual) values and macro values (especially Islamic and cultural values) which enabled fraud to occur. This study contributes to the theory and literature by emphasises the importance of cultural and religious aspects to the analysis of corporate governance theories. This study also contributes to the practice of BMTs and mutuals by provide relevant insights and guidelines to policymakers and practitioners for the future development of BMT governance in Indonesia, particularly the fraud prevention strategies. Keywords: Indonesia, BMT Islamic Cooperative; Corporate Governance; Fraud; Stakeholder Theory

Name dc:type.qualificationname

phd

Level dc:type.qualificationlevel

doctoral

Grantor dc:publisher.institution

University of Essex

Year dc:date.issued

2018

Author dc:creator

• Rahajeng, Dian Kartika

• H Social Sciences (General)
• HD58.7 Organizational behavior, change and effectiveness. Corporate culture
• HF5601 Accounting

Language dc:language

en