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Making Development Assistance Sustainable Through Islamic Microfinance

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  • Rodney Wilson

Abstract

Microfinance schemes have been operational since the 1960s, however, they mostly involve conventional finance, whereas many low income Muslims would prefer to have shar¥cah compliant finance. The aim of this paper is to explore how microfinance can be provided on a shar¥cah compliant basis and what instruments and structures could be used. The implication of this paper is that shar¥cah compliant microfinance is best provided by non-banking institutions, which in the case of the wakOElah model, may have links to the waqf and zakOEh authorities.With muèOErabah profit sharing microfinance, there is scope for commercial undertakings, but arguably specialized finance companies rather than banks, even Islamic banks, may be more appropriate institutions to get involved.

Suggested Citation

  • Rodney Wilson, 2007. "Making Development Assistance Sustainable Through Islamic Microfinance," IIUM Journal of Economics and Management, IIUM Journal of Economis and Management, vol. 15(2), pages 177-196, December.
    • Handle: RePEc:ije:journl:v:15:y:2007:i:2:p:177-196
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    References listed on IDEAS

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    1. Ahmed, Habib, 2002. "Financing Microenterprises: An Analytical Study Of Islamic Microfinance Institutions," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 9, pages 28-64.
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    1. Widiarto, Indra & Emrouznejad, Ali, 2015. "Social and financial efficiency of Islamic microfinance institutions: A Data Envelopment Analysis application," Socio-Economic Planning Sciences, Elsevier, vol. 50(C), pages 1-17.
    2. Ismail Abdulnasir Garane & Abdoul Rahman Mhd Ramez Al Jounaidi, 2020. "The Impact of Islamic Microfinance Institutions on Poverty Alleviation in Mogadishu-Somalia," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 7(4), pages 253-262, April.
    3. Siti Hajar Binti Mohd Abd Khar & Muhammad Pisol bin Mohd Mat Isa & Maran Marimuthu & Amin Jan, 2019. "The Perception of Micro-Entrepreneurs towards the Adoption of an Islamic Equity-Based Financing: Evidence from Malaysia," Business Management and Strategy, Macrothink Institute, vol. 10(2), pages 97-107, December.
    4. Fianto, Bayu Arie & Gan, Christopher & Hu, Baiding & Roudaki, Jamal, 2018. "Equity financing and debt-based financing: Evidence from Islamic microfinance institutions in Indonesia," Pacific-Basin Finance Journal, Elsevier, vol. 52(C), pages 163-172.
    5. Shahriar Kabir & Ruhul Salim, 2016. "Two-staged Capital Structure: An Operational Guideline for Islamic Microfinance System," Monash Economics Working Papers 05-16, Monash University, Department of Economics.
    6. Abdul Rahim Abdul Rahman, 2007. "Islamic Banking And Finance: Between Ideals And Realities," IIUM Journal of Economics and Management, IIUM Journal of Economis and Management, vol. 15(2), pages 123-142, December.
    7. Yang Songling & Muhammad Ishtiaq & Muhammad Anwar & Hamid Ahmed, 2018. "The Role of Government Support in Sustainable Competitive Position and Firm Performance," Sustainability, MDPI, vol. 10(10), pages 1-17, September.
    8. Hafiz Zahid Mahmood & Roheel Khan & Bilal Mehmood & Muhammad Khan, 2014. "Efficiency Analysis of Conventional vs. Islamic Microfinance: An Appraisal for Sustainability in Pakistan," International Journal of Empirical Finance, Research Academy of Social Sciences, vol. 3(4), pages 192-201.

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    More about this item

    Keywords

    Islamic finance; Islamic Economics; Microfinance.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion

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