Driving Sustainable Performance in Islamic Microfinance: Competence, Compensation, and Employee Engagement

Abstract

This study aimed to analyze the effects of employee competence and compensation on sustainable cooperative performance, with employee engagement as a mediating variable at KSPPS BMT Alhikmah Semesta. Based on Resource-Based View (RBV) theory, human resources were positioned as strategic internal organizational assets. This causal quantitative study employed a survey method involving the cooperative’s employee population. The sample was determined using purposive sampling, with the criteria of active employment, a minimum tenure of one year, and exclusion from top management, resulting in a final sample of 203 valid respondents. Data were collected using a five-point Likert-scale questionnaire and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS 4.1.1.8. The results showed that competence, compensation, and employee engagement had positive and significant effects on sustainable cooperative performance. Competence and compensation also had positive and significant effects on employee engagement. Employee engagement partially mediated the effect of competence on sustainable cooperative performance but did not mediate the effect of compensation on sustainable cooperative performance because compensation exerted a dominant direct effect. This study contributes theoretically to the RBV literature and provides practical insights for cooperative management in formulating sustainable human resource strategies.