An Efficient Sharia Savings and Loan and Financing Cooperative Model Based on the Soft System Methodology (SSM) Approach to Improve Member Welfare

Abstract

This research aims to develop an efficient Sharia Savings and Loan and Financing Cooperative (Koperasi Simpan Pinjam dan Pembiayaan Syariah, abbreviated as KSPPS) model to support the welfare of members. The Soft System Methodology (SSM) approach was used together with Analytic Hierarchy Process (AHP) and Interpretive Structural Modeling (ISM) to identify key elements and relationships between variables. The study was conducted on two leading KSPPS in Indonesia (medium and small scales). The results of AHP analysis show the priority weights of elements: (1) Islamic financial literacy (40%); (2). Information technology (30%) and (3). Sharia compliance (30%). AHP Priorities hierarchically are KSPPS, Equality income, and welfare of members, also Market expansion and added value of MSMEs; and the results of ISM also show that Islamic financial literacy, information technology, and sharia compliance are the main factors that support the operational efficiency of KSPPS. With the strengthening of ecosystems and regulations, especially in the supervision system consisting of elements of regulations, infrastructure, and apparatus, which are well organized and coordinated. This model is expected to contribute to poverty reduction and the strengthening of MSMEs. Implications of the Efficient KSPPS Model are as follows: (1) Improving the welfare of members through the distribution of productive financing; (2). Support for the growth of MSMEs and poverty reduction; (3). Integration of the KSPPS model with inclusive and sustainable policies, and the government needs to support KSPPS through inclusive regulations; (4). KSPPS management needs to utilize information technology to improve services; and (5). Islamic financial literacy education must be a priority in the development of KSPPS. Because the model is also aligned with the SDG, so the model can be applied in other countries in the world, especially Muslim countries.