Search results

1 – 10 of 664
Article
Publication date: 9 October 2023

Md Aslam Mia

Despite being a Muslim-dominated country, Bangladesh has widely embraced traditional microfinance since its inception in the mid-1970s. However, Islamic microfinance, which has a…

Abstract

Purpose

Despite being a Muslim-dominated country, Bangladesh has widely embraced traditional microfinance since its inception in the mid-1970s. However, Islamic microfinance, which has a lot to offer to the poor, is still in its infancy and has yet to gain momentum in the country. Therefore, the purpose of this study is to analyze the importance of Islamic microfinance and propose alternative Shariah-compliant microfinance models in Bangladesh.

Design/methodology/approach

This study is based on the desk research method, which relies on existing literature to collect secondary data on key concerns of traditional microfinance programs. In addition, institutional-level secondary data were also collected from the Microcredit Regulatory Authority (MRA) of Bangladesh. Guided by the Maqasid-al-Shariah, this study then proposes several Islamic microfinance models to overcome selected challenges faced by the microfinance industry in Bangladesh.

Findings

This study suggested three composite Shariah-compliant microfinance models, which are likely to help the underprivileged and thus ensure the achievement of the sustainable development goals in Bangladesh. The first model explained how the operational strategy of incumbent microfinance institutions (MFIs) could be restructured, while the second proposed the organizational strategies for establishing a new MFI. The third model used the notion of Sadaqah (charity) to address the multiple borrowing issues of the industry. Meanwhile, the successful transformation of the conventional microfinance industry to an Islamic one is dependent on the effective collaboration between the regulatory authorities, practitioners and MFIs.

Originality/value

Albeit the paucity of literature on the topic, the findings of this study will guide policymakers/practitioners in designing relevant microfinance models to help transform conventional microfinance into Islamic microfinance in Bangladesh.

Details

Qualitative Research in Financial Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1755-4179

Keywords

Open Access
Article
Publication date: 12 September 2019

Luqyan Tamanni and Mohd Hairul Azrin Haji Besar

The purpose of this paper is to shed some lights on the process of mission drifting or abandoning poverty objective by Islamic microfinance institutions (IMFs). The paper…

4552

Abstract

Purpose

The purpose of this paper is to shed some lights on the process of mission drifting or abandoning poverty objective by Islamic microfinance institutions (IMFs). The paper investigates whether the extensive use of banking logic changes IMFs, from focusing on both development and financial objectives to only considering sustainability as their primary mission.

Design/methodology/approach

This paper adopts mixed methods by analyzing 7,200 microfinance data from Microfinance Exchange Market and reviewing annual reports and websites of 25 IMFs to examine their vision and mission statements and other related information.

Findings

The finding shows Islamic microfinance has not changed, despite increasing adoption of financial or banking performance measures. However, size and age of the institutions may affect the outcome in the future. The authors find that smaller microfinance institutions maintain genuine objective to serve the poor, as the grow larger they would be more inclined toward sustainability objectives.

Research limitations/implications

The research is limited on the sample size as data on Islamic microfinance globally is limited. However, the paper looked at the global data rather than local data to compensate for this limitation. Future study would be further taking the study through qualitative methods to support the study.

Originality/value

This paper aims to shed some lights on the process of mission drifting or abandoning poverty objective by IMFIs. The paper investigates how has the extensive use of financing logic has changed IMFIs from focusing on both development and financial objectives to only considering sustainability as their primary mission. Arun and Hulme (2009) argued that the interaction of multiple logic within microfinance institutions, i.e. financial vs social, could pose some serious management dilemmas within microfinance institutions. Further, commercialization puts pressure on the field staffs to achieve financial targets and often neglect their poverty outreach mission to the poor. The well-known crisis in Andhra Pradesh, India where clients of microfinance institutions committed suicide after being shamed by field officers who tried to collect payments of loans (Mader, 2013; Taylor, 2011), provides a powerful case of the impact of financialization to microfinance clients.

Details

Asian Journal of Accounting Research, vol. 4 no. 2
Type: Research Article
ISSN: 2443-4175

Keywords

Article
Publication date: 7 March 2023

Asma Ben Salem and Ines Ben Abdelkader

The aim of this study is to investigate the effect of income and geographic diversification on the double bottom line of microfinance institutions (MFIs) in Middle East and North…

Abstract

Purpose

The aim of this study is to investigate the effect of income and geographic diversification on the double bottom line of microfinance institutions (MFIs) in Middle East and North Africa (MENA) countries where conventional and Islamic MFIs coexist. The idea is to explore whether diversification impacts MFIs' financial performance and outreach differ for Islamic microfinance.

Design/methodology/approach

The authors test the effect of diversification and business models of MFIs on their performance and poverty outreach. The authors’ data set is an unbalanced panel sample of 81 (Islamic and conventional) MFIs in MENA countries covering 1999–2018, comprising 743 MFI-year observations.

Findings

The authors find that increasing income diversification in microfinance and focusing on rural areas decreases the financial performance of MFIs in MENA countries. Islamic MFIs benefit from income diversification by increasing their financial performance. The results provide evidence of a nonlinear relationship between income diversification and the financial performance of MFIs. Although conventional MFIs improve their depth of outreach by diversifying their income, Islamic MFIs have a lower breadth of outreach because they show a higher degree of income diversification.

Practical implications

This research contributes to the ongoing debate of whether MFIs should focus on or diversify their services to Islamic microfinance. Therefore, the findings of this study are practically crucial for MFIs' stakeholders to understand the contribution of diversification strategies in improving the Islamic MFIs to achieve both financial and social objectives.

Originality/value

To the best of the authors’ knowledge, it is the first research that addresses the impact of diversification strategies in Islamic microfinance. Additionally, using a panel data set of conventional and Islamic MFIs in MENA countries spanning 1999–2018, this study provides empirical evidence on the diversification versus focus issue from the microfinance industry and the subset of Islamic microfinance.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 16 no. 5
Type: Research Article
ISSN: 1753-8394

Keywords

Article
Publication date: 2 November 2010

Abdul Rahim Abdul Rahman

The purpose of this paper is to assess the potential of Islamic financing schemes for microfinancing purposes.

7282

Abstract

Purpose

The purpose of this paper is to assess the potential of Islamic financing schemes for microfinancing purposes.

Design/methodology/approach

The paper contends that Islamic finance has an important role to contribute for furthering socio‐economic development of the poor and small (micro) entrepreneurs without charging interest (read: riba').

Findings

Islamic finance offers various ethical schemes and instruments that can be advanced and adapted for the purpose of microfinance. Comparatively, qardhul hasan, murabahah, and ijarah schemes are relatively easy to manage and will ensure the capital needs (qardhul hasan), equipments (murabahah) and leased equipments (ijarah) for potential micro‐entrepreneurs and the poor. Participatory schemes such as mudarabah and musharakah, on the other hand, have great potentials for microfinance purposes as these schemes can satisfy the risk sharing needs of the micro‐entrepreneurs.

Research limitations/implications

The paper is only conceptual and does not aim to empirically examine the issues or theories. However, the paper will definitely be useful to develop hypotheses for future research, especially in this relatively new area of Islamic microfinance.

Practical implications

The Islamic concepts of microfinance will be of interest especially to many microfinance institutions. The paper will also be a good introduction to practitioners in the microfinance sector to understand the relevance and limitations of Islamic financing schemes.

Originality/value

Islamic financing schemes are argued as having moral and ethical attributes that can effectively motivate micro‐entrepreneurs to thrive. These schemes, however, require specialized skills in managing risks inherent in the structure of the contracts. In theory, different schemes can be used for different purposes depending on the risk profile of the micro‐entrepreneurs.

Details

Humanomics, vol. 26 no. 4
Type: Research Article
ISSN: 0828-8666

Keywords

Article
Publication date: 10 August 2015

Abul Hassan

The purpose of this paper is to initiate a direct discourse towards an Islamic microfinance focus agenda for the economic enlistment of the poor minority community and to allow…

2938

Abstract

Purpose

The purpose of this paper is to initiate a direct discourse towards an Islamic microfinance focus agenda for the economic enlistment of the poor minority community and to allow poorer households in the financial inclusion. The issue of the Indian conventional microfinance institutions in failing to attract the poorest of the poor amongst Muslims is important for the purpose of this paper. This study explores a Shari’ah-compliant microfinance system which will create a level of playing-field with respect to the financial inclusion of the poor.

Design/methodology/approach

The paper is a theoretical discussion on Islamic microfinancial services for financial inclusion of the poor. Therefore, there is little to say about “methodology” other than the conventional microfinance model is reviewed, and an alternative model of Islamic microfinancial service has been suggested to allow poorer households in the financial inclusion.

Findings

The paper finds that there are some opportunities capable of improving the economic condition of the poor Muslim communities through some innovative approaches. To illustrate this finding, the paper emphasises on designing and delivering Islamic microfinancial products suitable for the poor based on the principle of Islamic solidarity. It argues that this service will help the poor and turn their savings into sums large enough to satisfy a wide range of personal, social and asset-building needs as well as needs relating to small businesses and consumption.

Research limitations/implications

The paper’s findings are limited to the matter of financial inclusion of the poor through Islamic microfinancial services in India.

Originality/value

Combining the Islamic social principle of solidarity for the less fortunate with the power of microfinance to provide financial access to the poor has the potential to reach out to millions more people. The ideas presented in this paper are designed to direct discourse towards an Islamic microfinance focus agenda for the economic enlistment of the poor Muslims in India.

Article
Publication date: 29 April 2021

Ssemambo Hussein Kakembo, Muhamad Abduh and Pg Md Hasnol Alwee Pg Hj Md Salleh

Despite the fact that small and medium enterprises (SMEs) play a crucial role in strengthening the financial sector within developing and emerging economies through providing…

1218

Abstract

Purpose

Despite the fact that small and medium enterprises (SMEs) play a crucial role in strengthening the financial sector within developing and emerging economies through providing employment opportunities to the rural and urban population, capacity building in the form of skills training and economic empowerment, they still face a plethora of challenges that continue to threaten their existence, performance and growth. Access to operational and administrative funds needed to execute their activities effectively is a significant challenge and detrimental to the growth of SMEs in Uganda. Conversely, Islamic microfinance has been noted as a panacea to the challenges of financial inaccessibility among SMEs, especially in developing countries. The purpose of this paper is therefore to investigate how the adoption of Islamic microfinance can play a fundamental role in enhancing the sustainability of microfinance institutions (MFIs) while meeting the financing challenges of SMEs in Uganda.

Design/methodology/approach

In this study, a review of existing literature was carried out to critically examine relevant information (literature sources) and empirical studies on SMEs, their performance and challenges. The study being conceptual tries to understand how Islamic microfinance could be adopted as an alternative scheme of financing to bridge the gap and mitigate the financial challenges facing SMEs.

Findings

The study finds that the existing MFIs have failed to achieve their objectives of providing financial services to the poor and SMEs while remaining sustainable. This has left the majority of SMEs within Uganda's informal sector financially handicapped, thus leading to their failure in meeting their expectations and eventually collapsing even before celebrating their third or fourth birthdays. However, the enactment into law of the Financial Institutions Amendment Act 2016 that paved the way for the introduction of Islamic finance in Uganda, and the Tier 4 Microfinance Institutions and Money Lenders' Act, 2016 that incorporated the aspects of Islamic microfinance within the existing microfinance framework as seen and is perceived as a key factor in addressing the financial challenges faced by MFIs and the SMEs if fully adopted.

Research limitations/implications

This study is conceptual with no empirical investigation and discussion of key theories. On the contrary, it will be imperative and useful when carrying out more extensive hypothetical studies by future researchers, specifically in the area of Islamic microfinance that is relatively new in Uganda.

Practical implications

Practically, this paper will serve as a guide to policymakers and practitioners in the field of microfinance by adding a flair that could enable in bridging the challenges associated with inadequate financing of SMEs in Uganda.

Social implications

Socially, the social aspects of charity (Zakah and Sadaqah) will help to improve the livelihood of the poorest of the poor who cannot engage in active business through meeting their basic needs of life without begging thereby preventing them from being social outcasts.

Originality/value

The study establishes Islamic microfinance (IMF) as a promising and unexplored viable option potentially needed in intensifying the financing needs of SMEs in Uganda. The paper provides an entirely new dimension in nature and way microfinance products should be structured with a view of ensuring that there is sustainable provision of financial services to SMEs. The paper adds real value to the existing conventional microfinance products and services in Uganda, given the ethical and moral attributes of Islamic microfinancing practices that are assumed to efficiently and effectively motivate SME owners and other small entrepreneurs to thrive.

Details

Journal of Small Business and Enterprise Development, vol. 28 no. 4
Type: Research Article
ISSN: 1462-6004

Keywords

Article
Publication date: 19 May 2022

Salih Ülev, Fatih Savaşan and Mücahit Özdemir

This paper aims to investigate the effect of Islamic microfinance on poor households through the case of the IKSAR Qard al-Hasan Program in Turkey. To achieve this aim, it…

Abstract

Purpose

This paper aims to investigate the effect of Islamic microfinance on poor households through the case of the IKSAR Qard al-Hasan Program in Turkey. To achieve this aim, it examined the changes in the socio-economic status of beneficiaries before and after the program.

Design/methodology/approach

This paper adopts the convergent parallel mixed method design. It conducted two surveys to micro-entrepreneurs: the first is when they received the loan and the second is when they finished their installments. In addition to the longitudinal data obtained from these two surveys, qualitative data were collected by participant observation and interview technique with visiting these people periodically throughout the interest-free loan (qard al-hasan).

Findings

According to the results obtained from the analysis of the pre- and post-surveys, a statistically significant increase of 35% was experienced in the monthly household income after receiving the qard al-hasan loan compared to before. Similarly, a statistically significant increase was found in the monthly expenditures of 23 out of 30 households after receiving the qard al-hasan.

Originality/value

There are two originalities of this study. To the best of the authors’ knowledge, it is the first research that examines the only Islamic microfinance program in Turkey. Second, it uses longitudinal data while examining the impact of Islamic microfinance on the welfare of the poor. In the relevant literature, no study has been identified that uses longitudinal data in Islamic microfinance. Similarly, a limited number of longitudinal studies examine the impact of conventional microfinance institutions on the poor.

Details

International Journal of Ethics and Systems, vol. 39 no. 2
Type: Research Article
ISSN: 2514-9369

Keywords

Article
Publication date: 29 November 2018

Halima Begum, A.S.A. Ferdous Alam, Md Aslam Mia, Faruk Bhuiyan and Ahmad Bashawir Abdul Ghani

Though microfinance has been working for many years as a tool to eradicate poverty from its root, most of the least developed and developing countries are yet to significantly…

1788

Abstract

Purpose

Though microfinance has been working for many years as a tool to eradicate poverty from its root, most of the least developed and developing countries are yet to significantly alleviate it from the society. The purpose of this paper is to focus on Shariah-based microfinance products in the context of sustainable poverty alleviation approach and provide them financial benefits to enhance their livelihoods.

Design/methodology/approach

Here, this qualitative study critically analyzes the basics of the sustainable Islamic microfinance to exterminate the level of poverty.

Findings

Islamic microfinance is a more ethical practice than the traditional motives of profit maximization, and it encourages extending the time of repayment if the debtors are in hardship. In some case, it suggests to give charity if the creditor has capability.

Research limitations/implications

Most importantly, research scholars and experts have already criticized the concept of conventional microfinance on the basis of various points, especially for its high rate of interest.

Social implications

Islamic microfinance is provided with a view to fulfill two tools simultaneously, i.e., social and financial inclusion. In this case, credits and Zakah can be given to the extreme poor people for satisfying basic needs. In terms of social responsibility, Islam encourages the people to be soft in case of collecting the lending money.

Originality/value

The study discoursed that sustainable Islamic Microfinance (IM) may be a promising future option to draw the attention of the religiously sensitive people toward the Shariah-based microfinance which can, in turn, mitigate the poverty level.

Details

Journal of Economic and Administrative Sciences, vol. 35 no. 3
Type: Research Article
ISSN: 1026-4116

Keywords

Article
Publication date: 14 September 2015

Kausar Abbas and Nasim Shirazi

This study aims to know the present structure and move of the Islamic banks of Pakistan as well as current issues and challenges for Islamic microfinance. However, this is based…

2171

Abstract

Purpose

This study aims to know the present structure and move of the Islamic banks of Pakistan as well as current issues and challenges for Islamic microfinance. However, this is based on perceptions of the Islamic bankers, regulators and micro-entrepreneurs and petty traders, as they are the key players in the credit market.

Design/methodology/approach

The study gathered relevant information through conducting field survey. Two questionnaires were designed for the survey. One questionnaire was administered to survey 270 micro-entrepreneurs and petty traders in three major cities of Pakistan. Another survey deals with the perceptions of Islamic bankers. In total, 100 people from middle and top management were surveyed from five full-fledged Islamic banks of Pakistan. The SPSS software, version 16, was used for questionnaire reliability and descriptive analysis to analyse the data.

Findings

In general, the study found the strong opinions of the respondents speak in favour of Islamic microfinance under a system of profit and loss sharing. Conversely, the majority of the clients also feel that Islamic banks do not encourage lower-income micro-entrepreneurs. In addition, the study found that Islamic microfinance is constrained by lack of knowledge, experience and professionalism of the supporting staff; however, Islamic bankers have shown great consensus that Islamic banks should offer Islamic microfinance products and instruments to respond to the needs of the poor for poverty alleviation.

Research limitations/implications

The first limitation of the study is the meagre interest of micro-entrepreneurs and petty traders to participate in the survey. The second limitation of this work concerns the extremely busy schedule of top management and administrative impediment to approach and fix an appointment. Despite these limitations, the findings of this study provide insights to Islamic banks in diversifying their products by offering Islamic microfinance to the low-income entrepreneurs but with proper guidelines and policies.

Practical implications

There is a need to educate the community towards the merits of Islamic banking system by developing a good information system using good visuals and professionally presented seminars, banners and arranging regular sessions with the business community. The growth and development of Islamic banking in the country largely depend on its customers’ enhanced knowledge and awareness about its products and services.

Social implications

It is the responsibility of the community as well as of government to change the mindset of the poor that banks are meant to serve the interest of everybody, regardless of social, economic and political status.

Originality/value

Theoretically, this study contributes to the existing body of knowledge in the area of Islamic microfinance by examining the perceptions of Islamic bankers and micro-entrepreneurs. This can help Islamic banks of Pakistan to design and formulate new administrative as well as operational procedures to serve the interest of the poor with commitment towards Islamic values.

Details

Journal of Islamic Accounting and Business Research, vol. 6 no. 2
Type: Research Article
ISSN: 1759-0817

Keywords

Open Access
Article
Publication date: 15 February 2022

Takwa Zitouni and Khoutem Ben Jedidia

Islamic microfinance is a substantial tool for poverty alleviation and economic empowerment. The paper aims at accessing the potential of Islamic microfinance for the purpose of…

2187

Abstract

Purpose

Islamic microfinance is a substantial tool for poverty alleviation and economic empowerment. The paper aims at accessing the potential of Islamic microfinance for the purpose of achieving the economic empowerment in Tunisia.

Design/methodology/approach

A structured questionnaire survey method is used. The method is intended for some of the beneficiaries of Zitouna Tamkeen (ZT), the only Islamic microfinance institution in Tunisia. Responses are analyzed using the statistical package for the social sciences program.

Findings

The authors infer that though the Islamic and conventional microfinance have similar objectives, the methods are different. What is more, the economic empowerment requires not only financial inclusion and entrepreneurship, but also skill development. The results of the survey reveal that ZT has contributed to certain economic empowerment of most of ZT's beneficiaries. In addition, the authors bring to the fore that providing supportive infrastructure and investment is a prominent component of the economic empowerment process.

Research limitations/implications

In the paper, the sample is limited.

Practical implications

The authors have highlighted that some structural barriers to entrepreneurship – such as legal, operational and marketing challenges – need to be addressed in a practical way.

Originality/value

This paper establishes the relationship between the Islamic microfinance and economic empowerment. The current paper is the first investigation in this field in Tunisia.

Details

Journal of Business and Socio-economic Development, vol. 2 no. 1
Type: Research Article
ISSN: 2635-1374

Keywords

1 – 10 of 664