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Financing Microenterprises: An Analytical Study Of Islamic Microfinance Institutions

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  • AHMED, HABIB

    (Islamic Research & Training Institute)

Abstract

While conventional microfinance institutions (MFIs) have expanded their operations in the last two decades, poverty-focused MFIs based on Islamic principles are lagging behind. This paper provides the theoretical basis, operational framework, and empirical support for the establishment of Islamic MFIs. After critically evaluating the conventional MFIs, an Islamic alternative is presented. The theoretical part of the paper shows that there is a great potentiality of Islamic MFIs that can cater for the needs of the poor. Islamic MFIs have some inherent characteristics that can mitigate some of the problems faced by conventional MFIs. Empirical evidence from three Islamic MFIs operating in Bangladesh, in general, supports some of the theoretical assertions. The case studies, however, reveal that Islamic MFIs have not yet tapped some of the sources of funds, nor have they used the variety of financial instruments in their operations.

Suggested Citation

  • 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.
  • Handle: RePEc:ris:isecst:0079
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    1. repec:taf:oabmxx:v:4:y:2017:i:1:p:1305674 is not listed on IDEAS
    2. Sami Ben Naceur & Adolfo Barajas & Alexander Massara, 2017. "Can Islamic banking increase financial inclusion?," Chapters,in: Handbook of Empirical Research on Islam and Economic Life, chapter 9, pages 213-252 Edward Elgar Publishing.
    3. Abul Hassan أبوالحسن, 2008. "Secondary Databases and their Use in Research in Islamic Economics استخدام قواعد البيانات الثانوية في البحث في الاقتصاد الإسلامي," Papers and books based on the proceedings of the Conferences organized by the Islamic Economics Institute, KAAU. 46, King Abdulaziz University, Islamic Economics Institute..
    4. 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.
    5. Shaban, Mohamed & Duygun, Meryem & Fry, John, 2016. "SME's lending and Islamic finance. Is it a “win–win” situation?," Economic Modelling, Elsevier, vol. 55(C), pages 1-5.
    6. repec:abd:kauiea:v:26:y:2013:i:2:no:5:p:151-179 is not listed on IDEAS
    7. 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.
    8. Mohieldin , Mahmoud & Rostom , Ahmed & Fu, Xiaochen & Iqbal, Zamir, 2012. "The Role of Islamic Finance in Enhancing Financial Inclusion in Organization of Islamic Cooperation (OIC) Countries," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 20, pages 55-120.
    9. KASRI, RAHMATINA & Ahmed, Habib, 2015. "Assessing Socio-Economic Development based on Maqāṣid al-Sharīʿah Principles: Normative Frameworks, Methods and Implementation in Indonesia," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 23, pages 73-100.
    10. Aida Kammoun Abdelmoula & Asma Abidi, 2013. "The Effect of the Subprime Crisis on the Financing of Entrepreneurial Activities by Islamic Banks," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 77-90, November.
    11. Md Aslam Mia & V. G. R. Chandran, 2016. "Measuring Financial and Social Outreach Productivity of Microfinance Institutions in Bangladesh," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 127(2), pages 505-527, June.
    12. repec:ipn:esecon:v:12:y:2017:i:46:p:41-60 is not listed on IDEAS
    13. Hamdino Hamdan & Pazim @ Fadzim Othman & Wan Sabri Wan Hussin, 2012. "The Importance Of Monitoring And Entrepreneurship Concept As Future Direction Of Microfinance In Malaysia: Case Study In The State Of Selangor," Journal of Global Entrepreneurship, Global Research Agency, vol. 3(1), pages 1-25, July.
    14. Abdul Rahim Abdul Rahman, 2010. "Islamic microfinance: an ethical alternative to poverty alleviation," Humanomics: The International Journal of Systems and Ethics, Emerald Group Publishing, vol. 26(4), pages 284-295, November.
    15. repec:abd:kauiea:v:26:y:2013:i:2:p:151-179 is not listed on IDEAS
    16. Bashir, Rabia & Bajwa, Sami & Mamoon, Dawood, 2017. "Channeling Local Culture into Sustainable Microfinance Solutions by Akhuwat: From Borrowers to Donors," MPRA Paper 81591, University Library of Munich, Germany.
    17. Masyita, Dian & Ahmed, Habib, 2013. "Why is Growth of Islamic Microfinance Lower than its Conventional Counterparts in Indonesia?," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 21, pages 35-62.
    18. Ahmed,Habib & Mohieldin,Mahmoud & Verbeek,Jos & Aboulmagd,Farida Wael, 2015. "On the sustainable development goals and the role of Islamic finance," Policy Research Working Paper Series 7266, The World Bank.
    19. Widiyanto bin Mislan Cokro Hadisumarto & Abdul Ghafar B. Ismail, 2010. "Improving the effectiveness of Islamic micro-financing: Learning from BMT experience," Humanomics: The International Journal of Systems and Ethics, Emerald Group Publishing, vol. 26(1), pages 65-75, February.
    20. Imène Berguiga & Yosra Said & Philippe Adair, 2017. "The social and financial performance of Microfinance institutions in the MENA region: Do Islamic institutions perform better?," Post-Print hal-01667406, HAL.
    21. Ahmad, Mohd. Izhar & Masood, Tariq & Khan, Mohd Saeed, 2010. "Problems and Prospects of Islamic Banking: a case Study of Takaful," MPRA Paper 22232, University Library of Munich, Germany, revised 09 Mar 2010.
    22. repec:rss:jnljef:v3i4p3 is not listed on IDEAS

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