Baitul Qirad: Reconstructing Islamic Cooperatives in Aceh, Indonesia

This paper describes the post-tsunami rehabilitation and reconstruction programs that the German Technical Cooperation (GTZ) and the Indonesian Central Bank undertook to reconstruct and revive the Islamic Financial Cooperative (baitul qirad/BQ) in the province of Nanggroe Aceh Darussalam (NAD).The paper discusses:

• The development of Islamic finance;
• The cooperative sector in Indonesia.

It then elaborates on the following points about the reconstruction of BQs in Aceh:

• The scope to replicate the decentralized model in the remote parts of Aceh;
• The introduction of BQs in 1994 in Aceh;
• The GTZ assessment that concluded that BQs needed to perform on cooperative principles;
• The following levels of the holistic approach adopted for reconstruction:
  • Micro level: Establishing new BQs all over the province and providing technical assistance in education and training,
  • Meso level: Establishing a secondary structure responsible for channelling donor's funds to members,
  • Macro and Meta levels: Ensuring close cooperation with cooperative offices at the district level.

The paper concludes that:

• As a member based organization, the establishment of a cooperative cannot be induced by external actors;
• The people should decide by themselves how they will establish it and let them select their own representatives on the board;
• However, the understanding of cooperative principles should be disbursed to all members from the beginning;
• Existing BQs should be enforced to implement cooperative principles gradually.