An Institutional Network Approach Of Partnership Mode Of Interest-Free Microfinance And Islamic Banking: A Case Study

Interest-free banking has been expanding its operation in many countries. On the other hand, micro-credit has been increasingly becoming effective in different parts of the world. In the mean time, interest-free banks have started rendering micro-credit to the rural-based micro entrepreneurs in different developing nations. However, the effectiveness of partnership between interest-free banking and micro-credit finance has not been explored though there are similarities exist in both modes of operation. This chapter attempts to explore the “partnership mode” of Islamic banking; that is, how and to what extent Islamic banking finance contributes to eliminating rural poverty and creating job opportunities for unemployed people in rural areas. This exploratory case study is carried out within “Institutional-Network” theoretical approach with a particular reference to Omdruman, a suburb nearby Khartoum, Sudan. Face-to-face interview method was used to the collect the data. The empirical findings demonstrate that the “Partnership Mode” Islamic banking finance may work effectively in developing and developed countries for some reasons such as lenders and borrowers joint interest in a particular venture, and a unique lender–borrower network relationship.