This book is a compilation of papers presented in a thematic workshop on business models in Islamic microfinance, organized by International Islamic University Islamabad, Islamic Research and Training Institute (IRTI), and Agricultural Bank of Sudan. The objective of the workshop was to discuss specific Islamic microfinance business models and best practices, as well as the most advanced experiences at the international level.
Islamic microfinance is one of the most important sectors of Islamic social finance, which plays a very important role in curbing poverty and improving the standard of living, per capita income, employment level as well as achieving Maqasid al-Shariah, profitability and sustainability. This role of Islamic microfinance has become more crucial in the pandemic period. It has been clearly witnessed in developing countries such as Pakistan and Bangladesh, how Islamic microfinance institutions helped deprived and affected communities during the pandemic. Another important development during the pandemic was the introduction of blended models of Islamic microfinance such as waqf-based Islamic microfinance, a zakat-based model and the combination of Islamic commercial and social finance. Islamic microfinance institutions also aim to harness the power of digitalization and fintech, but they need to consider the necessary success factors to realize and gain the real benefits of technology. There are some major challenges related to regulations, management issues, lack of skilled human resources, a wide digital divide and low level of financial literacy in developing countries. These challenges need to be addressed to ensure stability, steady growth and sustainability in the sector. This book is a compendium on Islamic microfinance, including case studies from seven jurisdictions and prospects for the sector. The book will be a major contribution to the literature of Islamic economics and finance and a guide of equal importance for students, academics, institutions, regulators, fintechs, policy makers and the general public.
Islamic finance has emerged to meet the financial needs of people who seek a different approach to conventional banking and finance. Due to its late inception, Islamic finance has often been regarded as an "infant industry" compared to its traditional counterparts. Even though the Islamic finance industry is still classified as nascent, it has shown rapid growth in the last decade or so. The primary objective of this book is to highlight the main issues and challenges the Islamic finance industry faces and to offer practical solutions. Firstly, the book classifies the main components of Islamic finance such as money and banking, capital markets, fintech, microfinance, insurance as well as morality and governance. Secondly, all of the chapters are combined according to their relationship and link with each other so as to provide readers with a unique and holistic overview of the subject. The chapters are written by well-renowned experts in the field. As well as offering readers theoretical information about each subject under discussion, it also advances practical solutions that can contribute to the development of each field. The book answers questions such as how money is created by banks; what the business model of Islamic banking should look like; whether Islamic microfinance institutions are sustainable; what the likely framework of takaful should be; what the potential role of fintech could be in reshaping the Islamic financial system, and where and whether morality fits in the financial system. The book will attract the attention of students, researchers, practitioners, regulators and policymakers.
Objective - Islamic Microfinance Institutions (IMFIs) grown very rapidly in the last 10 years in Indonesia. On 2015, the number of IMFIs' reached more than 5,000. As a business and social entity, IMFIs has various business models, the way in providing services and manages the business to achieve its goals. This study aims to determine the business models of IMFIs.Methodology/Technique - This study uses qualitative approach by case study technique of Robert K. Yin. Subjects of this study are IMFIs in Indonesia that selected purposively with managers as a key informant.Findings - The result is the business model of IMFI is determined by eight elements, namely: organizational orientation, business and social functions, the source of capital and allocation, investors and customers, financing usage, types of contract, allocation technique, and membership.Novelty - The elements that determine IMFI, will form a business model of IMFI which determine how IMFI runs its business activities to achieve organization objective.Type of Paper - Review.
It is said that the COVID-19 pandemic has turned back the poverty clock. As such, there is a need to have social mechanisms put in place to provide relief to those who are affected in this regard. Islamic social finance consists of tools and institutions that could be used to alleviate poverty. This book explores the impact of COVID-19 on Islamic finance to better understand the effectiveness of Islamic social finance in helping those who have been affected by poverty overnight due to the halt in all major economic activities in the context of the pandemic. Since the struggle against poverty in each country will be different, the book attempts to shed light on the experiences of different countries by presenting successful models of Islamic social finance. The book first looks at poverty and COVID-19 before delving into the role of Islamic social financial institutions and how they have risen against COVID-19. The book concludes by examining the impact of COVID-19 on Islamic microfinance. This book is the first of its kind on the subject of COVID-19, and it intends to bridge the gap in the literature.
Currently there is limited application of Islamic microfinance instruments in Brunei Darussalam in the business and banking industries. The main objective of the exploratory study on the potentiality of Islamic microfinancing in the handicraft industry is to encourage students pursuing the Master in Islamic Banking and Finance (MIBF) program to apply the Islamic finance to real life situations. This exploratory applied research has allowed students the opportunity to appreciate the potentialities of Islamic microfinance in assisting the development of microbusinesses especially in the rural areas in Brunei Darussalam.
The phenomenal growth of Islamic finance in the last few decades has been accompanied by a host of interesting questions and challenges. One of the critical challenges is how Islamic financial institutions can be motivated to participate in the 'equity-like' profit-and-loss sharing (PLS) contracts. It is observed that Islamic banks are reluctant to participate in the pure PLS scheme which is manifested by the rising concentration of investment on murabaha or mark-up financing. This phenomenon has been the hotbed of academic criticism on the contemporary practice of Islamic banking. This book explains the 'murabaha syndrome' in light of the incentive provided by the current institutional framework and what are the changes required in the governance structure to mend this anomaly.
In the recent past, Islamic finance has made an impressive case on the banking scene by becoming an alternative to the popular conventional financial systems, spurring a lively academic debate on how the Islamic finance industry can expand its services to cover the poor. Several propositions have been aired which suggest that the Islamic finance industry should consider developing an efficient Shari‘a compliant microfinance model. This book brings together original contributions from leading authorities on the subject of Shari‘a Compliant Microfinance (Islamic Microfinance) to propose innovative solutions and models by carefully studying experiments conducted in various countries. Where critiques of the current microfinance concepts, methods, regulatory measures and practices have often revolved around its practice of charging very high interest, this book discusses the several models that draw on both theory and case studies to provide a sustainable Shari‘a compliant alternative. Arguing that while Islamic finance might have made a remarkable contribution in the financial markets, there remains a big question with regards to its social relevance, the book provides new perspectives and innovative solutions to issues facing the Islamic microfinance industry. A comprehensive reference book for anyone wanting to learn more about Shari‘a Compliant Microfinance, this book will also be of use to students and scholars of microfinance, Islamic finance, and to anyone interested in learning about ethical and socially responsible businesses.
Most books on Islamic finance and development issues are written from an academic perspective. Although academic reflection is key for future direction, dissatisfaction with previous development efforts, as evidenced by their lack of sustainability, suggests the need for a different type of review. Development work is complex and requires a detailed and transparent approach in order to ensure a cogent resolution for potential long-term issues. Each intervention area requires specific elaboration for meaningful impact. The perfect solution for one sector might be detrimental for another. Islamic finance, with its strict Riba restrictions, rules, and other checks and balances, is a good fit for infrastructure development in pursuit of sustainable development. When it comes to sustainable development, this book argues, Islamic finance has the tools to intervene for maximum impact. However, the issue of sustainability is not only related to Islamic finance; more policy discourse is needed. This requires guidance from the principles of Islamic economics, as well. This book discusses infrastructure development vis-à-vis sustainable development, drawn from decades of real-life development banking experience, and proposes impactful intervention methods based on wisdom from Islamic economics and finance.
Islamic finance has been growing faster than conventional finance for most of the past decade. It has done this on a model of finance that rejects interest and promotes profit sharing. How is this possible? Yet the wealth potential of Islamic finance is far from being its most attractive feature. What is most compelling about Islamic finance are its ethical principles and strong corporate governance based on Shariah law. This SECOND EDITION explains and updates how conventional financial products work — from mortgages and leases to trade finance and insurance — before delving into their Islamic versions and contains three new topics on microfinance, the ethical company and wealth successionAbout the Authors Daud Vicary Abdullah has been in the finance and consulting industry for more than 40 years, and has focused solely on Islamic finance since 2002. At Hong Leong Islamic Bank, he was instrumental in transforming an Islamic banking window into a full-fledged Islamic banking subsidiary. Today, he helms INCEIF (International Centre for Education in Islamic Finance), the global university for Islamic finance set up by Bank Negara (Central Bank of Malaysia) in December 2005. He is also a frequent speaker and commentator on matters relating to Islamic finance. Keon Chee is a senior executive in Singapore where he oversees the wills, trusts and corporate services businesses in his firm. He has many years' experience in investment research, derivatives, financial training and insurance. He obtained an MBA from Columbia University and an LL.B (Hons) from the University of London, and enjoys using his broad background in helping clients with their estate planning needs. He is also co-author of the best-selling Make Your Money Work For You.
