Search results

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.

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.

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.

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.

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.

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

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').

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.

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.

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.

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.

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.

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

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.

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.

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.

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.

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.

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.

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.

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

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.

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.

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).

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.

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.

The purpose of this paper was to investigate the impact of credit risk-taking on financial and social efficiency and examine the relationship between credit risk, capital structure and efficiency in the context of Islamic microfinance institutions (MFIs) compared to their conventional counterparts.

The stochastic frontier approach was used to estimate the financial and social efficiency scores, in a first step. In a second step, the impact of risk-taking on efficiency was evaluated. The authors also took into account the moderating role of capital structure in this effect using the fixed and random effects generalized least squares (GLS) with a first-order autoregressive disturbance. The used dataset covers 326 conventional MFIs and 57 Islamic MFIs in six different regions of the world over the period of 2005–2015.

The overall average efficiency scores are less than 50%, where CMFIs could have produced their outputs using 48% of their actual inputs. IMFIs record the lowest financial (cost) efficiency that is equal to 28% on average. The estimation results also reveal a negative impact of nonperforming loan on financial and social efficiency. Finally, the moderating effect of leverage funding on the relationship between credit risk-taking and financial efficiency was confirmed in CMFIs. However, leverage seems to moderate the effect of risk-taking behavior on social efficiency for IMFIs.

This paper makes an initial attempt to evaluate the effect of risk-taking decision and its implication on efficiency and MFIs' sustainability. Besides, it takes into consideration the role played by the mode of governance through the ownership structure. In addition, this research study sheds light on the importance of the financial support for the development and sustainability of these institutions, which in return, contributes to a sustainable economic development.

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.

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.

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.

In the paper, the sample is limited.

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.

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

The purpose of this paper is to understand interest-free microfinance practices in India, identify issues and recommend possible solutions.

To achieve the proposed objectives, Bait-un-Nasr (BuN) Urban Cooperative Credit Society, located in Mumbai, India, is considered for the case study. The study is based on both primary and secondary data. The primary data are collected through questionnaires and secondary data from various sources. Performance of the institution is assessed in terms of growth and sustainability indicators.

It is found that BuN has been successful in providing interest-free microfinance services in India. A few operational issues have been highlighted and possible solutions are recommended. Moreover, it is found that in comparison to the microfinance industry standards, the performance of BuN has been lower.

BuN is evaluated from only growth and sustainability aspects and not from the aspect of the socio-economic impacts of its services on the lives of customers.

This study would become a documented source of interest-free microfinance practices in India. Moreover, the recommendations provided, if implemented, would help BuN in further growth and development.

This study would help create awareness in the society about the practices of interest-free microfinance.

This paper highlights the interest-free microfinance practices in India that have not received the needed attention. The paper also attempts to identify key issues pertaining to interest-free microfinance with possible solutions.

The purpose of this paper is to examine factors influencing the level of satisfaction of Islamic microfinance customers and their loyalty toward their patronized institution in Central Java, Indonesia.

The target population is all customers of Islamic microfinance institutions in Central Java, Indonesia. A sample of 300 respondents is selected for this study using purposive sampling and only 246 data are used in the analysis. The data are then analyzed using structural equation model with cost of loan, risk of loan, loan repayment, family welfare and Shariah issues as exogenous variables and satisfaction and loyalty as endogenous variables tested in the model.

The findings have shown that there is a significant effect of cost of loan, risk of loan and loan repayment upon the customers’ satisfaction and from the customers’ satisfaction toward the customers’ loyalty. The Shariah issues and family welfare were statistically insignificant to predict the customers’ satisfaction, which imply a big homework of Islamic finance academics and practitioners in Indonesia to educate people about Islamic finance and to show the real positive impact of Islamic finance models toward poverty.

Central Java is the province with a large number of SME and microfinance institutions, both conventional and Islamic, in Indonesia. This study provides a good insight for researchers seeking updated information about microfinance in Indonesia.

This study aims to compare the nexus between donations to Islamic and conventional microfinance institutions (MFIs) and their credit risk, financial performance and social outreach.

The authors use fixed effects and two-step system generalized methods of moments models with internal instrumentation. The analysis is conducted on an international sample of 1,519 MFIs in 55 countries during 1999–2019.

Islamic MFIs receiving greater donations experience an increase in credit risk, whereas the opposite occurs among their conventional counterparts. Donations are associated with an improvement in the depth of outreach of Islamic MFIs, allowing them to serve a poorer client base, despite a simultaneous decline in the breadth of their outreach. On the other hand, donations improve both the depth and breadth of conventional MFIs outreach. Donations also exhibit a positive relation with productivity, efficiency and sustainability in conventional MFIs.

This paper addresses a gap in the literature on Islamic MFIs and their use of donor funds by examining how donations contribute to the quality of their credit portfolios, financial performance and social outreach. This study used Ahmed’s (2012, 2017, 2020, 2021) total factor productivity model to capture the impact of donations on the performance of MFIs.

Donations are found to contribute to positive financial inclusion outcomes for both Islamic and conventional MFIs, a promising implication for society and donors alike.

This paper addresses a gap in the academic literature on Islamic MFIs and their use of donor funds by examining how donations contribute to the quality of their credit portfolios, financial performance and social outreach.