Empowering the Ummah: The Role of Bayt al-Mal wa al-Tamwil in Islamic Economic Development

Abstract

Financial exclusion and economic disparities remain significant challenges in many Muslim communities. This conceptual study explores the function of Bayt al-Mal wa al-Tamwil (BMT) as a faith-based institution in advancing financial inclusion and economic empowerment grounded in Islamic economic principles. Utilizing a qualitative document-based method, the research analyzes BMTs through the lens of institutional, stakeholder, and development finance theories. Findings reveal that BMTs effectively mobilize ethical capital, provide Sharia-compliant microfinance, and foster entrepreneurial growth among underserved populations. Additionally, BMTs serve as social institutions that reinforce community cohesion and spiritual values, aligning with the broader objectives of Islamic economics. The study identifies key institutional mechanisms—such as participatory governance, diversified financial instruments, and community legitimacy—that contribute to BMTs' sustainability. The implications underscore BMTs' potential to offer scalable models for equitable development and social justice. This research contributes to filling the gap in Islamic finance literature and offers actionable insights for policymakers and scholars seeking alternatives to interest-based systems in Muslim-majority contexts.