Microfinance has always been an essential tool for reducing the poverty level in Indonesia. The poverty level in West Java Indonesia has been decreasing for the past ten years, but at the same time, the reducing level was slowing down. The slow down growth of poverty reduction seems contradictory to the growth of Baitul Maal Wat Tamwil (BMT) as one of the most famous Islamic microfinance institutions in Indonesia. The most significant number of BMT located in West Java with 637 BMTs and their most prominent clients are the micro-entrepreneurs. This raises the question: is there any impact of Islamic microfinance establishment to achieve “sejahtera” level and whether it is also impacting the poverty alleviation in Indonesia. Imam Al-Ghazali divides poverty into two parts: first, poverty concerning material needs; and second, poverty concerning spiritual needs; meanwhile, other scholars define poverty by combining both material and spiritual aspects. This research is intended to fill the gap in the study of poverty alleviation in general, as well as Islamic microfinance on poverty alleviation of micro-entrepreneur, that mostly only measuring the material aspect and not the spiritual aspect. This research also intended to fill the gap by measuring microfinance impact using micro-business as a unit of analysis. This research aimed at measuring micro-business of micro-entrepreneur using “sejahtera” measurement, which covers both material and spiritual aspects, and whether this is in line with poverty alleviation in their household, by comparing it with other well-known poverty alleviation measurements, such as the Poverty Gap Index and Headcount Index. The primary data obtained through survey questionnaires in West Java, Indonesia. The overall results show that there is an improvement of the “sejahtera” level of micro-entrepreneur at their micro-business performance after using BMT financing and the advancement of the “sejahtera” level at business performance positively correlated with alleviating poverty of micro-entrepreneurs household. In the end, this research found that after BMT financing, 27.5 percent of respondents achieved the “sejahtera” level at their business, 47.75 percent achieved a spiritually rich level, 9.25 percent made material only, and 15.5 percent still at an absolute poor level. For their household, after BMT financing, 31 percent of respondents still have income below the poverty line. Using the measurement of “sejahtera” discussed in this thesis, the government can measure the BMT impact in other areas outside West Java. The spiritual aspect can also become an alternative approach in redefining poverty, not only view based on the material but also on spiritual. Therefore the government can also focus its effort on alleviating poverty not only on material poverty but also on spiritual poverty.

In Indonesia, Islamic microfinance established through the presence of Baitul Mal wa Tamwil (BMT), the most popular type of Islamic microfinance institutions. BMT providing financing for the micro-entrepreneurs, as their potential clients, that operates their activities mostly at the traditional markets. The purpose of this study is to measure the impact of BMT for poverty alleviation in Bandung, the capital city of West Java as the biggest population province in Indonesia. This study is looking at income variables of micro entrepreneur’s household before and after they received financing from BMT, as well as the income of their micro-businesses. The primary data obtained through in-depth questionnaires in Bandung, Indonesia

The purpose of this study is to measure the impact of BMT on poverty alleviation in Bandung, as the capital city of West Java with the biggest population province in Indonesia. This study is incorporates income variables of micro-entrepreneur’s household, as well as the spiritual level indicator of micro-entrepreneur before and after they received financing from BMT. This is an impact assessment research. Any necessary information for this study will be extracted using empirical method. The primary data obtained through in-depth questionnaires in Bandung, Indonesia. The first object of impact assessment on this study is a group of micro-entrepreneurs that already using financing program from BMT one year or more, and second object is a group of micro-entrepreneurs that less than one year using BMT financing.To measure the impact of the BMT before and after financing on spiritual levels, this research using the pair-t test. The results of this study can be concluded that the number of poor micro-entrepreneurs in Bandung has been decreasing since they received BMT financing and BMT has influencing poverty alleviation among micro-entrepreneurs.