Explaining Issues Relating to Islamic Microfinance Sustainability: African Perspective

International Journal of Business Society, Vol. 3, Issue 6
Vatimetou Mokhtar MaouloudSalina KassimEjaz AslamHaneffa Muchlis GazaliAnwar Hasan
Islamic microfinancePoverty alleviationSustainabilityAfrica
PDFRegular IssueDOI: 10.30566/ijo-bs/2019.124
3Volume
6Issue

Abstract

Islamic microfinance is an effective tool for poverty alleviation worldwide. Islamic microfinance is a beneficial mode1l that enhances individual’s wellbeing not only for Muslims but also for the non- Muslims well. Thus, the aim of this study is to highlight the main issues encountering the Islamic microfinance institutions related to their effectiveness and durability. This study theoretically evalue the past prominent literature on Islamic microfinance and find out its existing problems in microfinancing. Islamic microfinance institutions are facing several obstacles to sustain in front of the high competition with the conventional microfinance institutions. Among these hindrances: low market penetration, high cost of transactions, shariah regulations, fund mobilization, risks, performance and profitability all of which are considered among the major barriers of Islamic microfinance development. Thus, Islamic microfinance operators must pay more attention to the factors affecting the sustainability of their institutions to be a durable mechanism to alleviate poverty. This a conceptual paper which provides recommendations and solutions to reduce the effects of these problems so that Islamic microfinance can be more efficient and effective strategy to minimize poverty and inequality.

References

[1]

Abdul Rahman, R., & Dean, F. (2013). Challenges and solutions in Islamic microfinance. Humanomics , 29(4), 293 –306.

[2]

Acha Ikechukwu, A., & Acha, I. (2012). Microfinance banking in Nigeria: Problems and prospects. International Journal of Finance and Accounting, 1(5), 106 –111. https://doi.org/10.5923/j.ijfa.20120105.04

[3]

Ahmed, H. (2002). Financing microenterprises: An analytical study of Islamic microfinance institutions. Islamic Economic Studies , 9(2), 27 –62. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3164247&download=yes

[4]

Aslam, E., Haron, R., & Tahir, M. N. (2019). How director remuneration impacts firm perfo rmance: An empirical analysis of executive director remuneration in Pakistan. Borsa Istanbul Review , 19(2), 186– 196.

[5]

Aslam, E., Ijaz, F., & Iqbal, A. (2016). Does Working Capital and Financial Structure Impact Profitability of Islamic and Conventional Banks Differently? Islamic Banking and Finance Review , 3(1), 50 –67. https://doi.org/10.32350/ibfr.2016.03.05

[6]

Aslam, E., Kalim, R., & Fizza, S. (2019). Do Cash Holding and Corporate Governance Structure Matter for the Performance of Firms? Evidence from the KMI 30 -and KSE 100- Indexed Firms in Pakistan. Global Business Review , 20(2), 313 –330.

[7]

Alaro, A. A. -M., & Alalubosa, A. H. (2018). Potential of Sharī’ah compliant microfinance in alleviating poverty in Nigeria: A lesson from Bangladesh. International Journal of Islamic and Middle Eastern Finance and Management .

[8]

Al-Shami, S. S. A., Majid, I. B. A., Rashid, N. A., & Hamid, M. S. R. B. A. (2013). Conceptual framework: The role of microfinance on the wellbeing of poor people cases studies from Malaysia and Yemen. Asian Social Science, 10(1), 230.

[9]

Maouloud et al. (2020). Explaining Issues Relating to Islamic Microfinance Sustainability: African Perspective. International Journal of Business Society, 4(2), 34 -40

[10]

Albalawi, K. M. (2019). The Evaluation of Saudi Insurance Industry and Potential for Takaful Insurance. International Journal of Business Society, 3 (11), 22 -37

[11]

Al-Qaisi , K.M. (2018), “ Factors Affecting Operation Risk Management in Islamic Banks ” International Journal of Business Society, Vol 2 No.2 , pp. 25-37.

[12]

Ali, A. elrhman E. S. (2017). The challenges facing poverty alleviation and financial inclusion in North -East Kenya Province (NEKP). International Journal of Social Economics , 44(12), 2208– 2223. https://doi.org/10.1108/IJSE-05-2016-0133

[13]

Aliyu, S., Yusof, R. M., & Naiimi, N. (2017). The role of moral transaction mode for sustainability of banking business: A proposed conceptual model for Islamic microfinance banks in Nigeria. International Journal of Social Economics , 44(12), 2238– 2256. https://doi.org/10.1108/IJSE-07-2016-0205

[14]

Amendola, A., Boccia, M., Mele, G., & Sensini, L. (2016). Financial Access and Household Welfare Evidence from Mauritania . The World Bank.

[15]

Amin, M. F. Bin. (2010). Islamic Micro Finance Development: Challenges and Initiatives. International Journal of Economics, Management and Accounting , 18(1).

[16]

Ashraf, A., Hassan, M. K., & Hippler III, J. W. (2014). Performance of microfinance institutions in Muslim countries. Humanomics , 30(2), 162 –182. https://doi.org/10.1108/H-11-2013-0073

[17]

Beck, T., & Cull, R. (2013). Banking in Africa. The World Bank.

[18]

Bhuiyan, A. B., Siwar, C., Ismail, A. G., & Omar, N. (2017). The experiences of the Grameen and Islami Bank microfinance on the poverty alleviation in Bangladesh. Journal of Islamic Economics, Banking and Finance , 13(3), 64 –81.

[19]

Bourhime, S., & Tkiouat, M. (2018). Rethinking Microfinance in a Dual Financial System: An Agent- based Simulation. Scientific Annals of Economics and Business , 65(1), 13 –29. https://doi.org/10.2478/saeb-2018-0002

[20]

Bradshaw, T. K. (2007). Theories of Poverty and Anti -Poverty Programs in Community Development. Journal of the Community Development Society, 38(1), 7 –25. https://doi.org/10.5539/ass.v11n9p273

[21]

Chikalipah, S. (2018). Do microsavings stimulate financial performance of microfinance institutions in Sub -Saharan Africa? Journal of Economic Studies , 45(5), 1072 –1087. https://doi.org/10.1108/JES-05-2017-0131

[22]

Das, C. (2019). Significant Issues of Financial Literacy and Application in Stock Market: A Descriptive Study on Bangladesh Capital Market. International Journal of Business Society, Vol.3 No.1, pp. 38- 44.

[23]

de Quidt, J., Fetzer, T., & Ghatak, M. (2018). Market Structure and Borrower Welfare in Microfinance. Economic Journal , 128(610), 1019– 1046. https://doi.org/10.1111/ecoj.12591

[24]

El-Komi, M., & Croson, R. (2013). Experiments in Islamic microfinance. Journal of Economic Behavior and Organization, 95, 252 –269. https://doi.org/10.1016/j.jebo.2012.08.009

[25]

Ghalib, M.M. (2019). Impact of Intellectual Capital on Performance of the Information Technology Sector in Malaysia. International Journal of Business Society, 2(2), 58-69.

[26]

Hassan, A. (2014). The challenge in poverty alleviation: Role of Islamic microfinance and social capital. Humanomics , 30(1), 76 –90. https://doi.org/10.1108/H-10-2013-0068

[27]

Hassan, A. (2015). Financial inclusion of the poor: from microcredit to Islamic micro financial services. Humanomics , 31(3), 354–371. https://doi.org/10.1108/H-07-2014-0051

[28]

Hassan, A., & Saleem, S. (2017). An Islamic microfinance business model in Bangladesh: Its role in alleviation of poverty and socio-economic well-being of women. Humanomics , 33(1), 15 –37. https://doi.org/10.1108/H-08-2016-0066

[29]

Islamic Republic of Mauritania: Poverty Reduction Strategy Paper — Joint Staff Advisory Note The. (n.d.). https://doi.org/10.5539/ass.v10n1p230

[30]

Kassim, S., Hassan, R., & Nadhirah, S. (2018). Good Governance and Sustainability in Islamic Microfinance Institutions. Journal of Islamic Finance , 7(2), 21 –28.

[31]

Khaki, A. R., & Sangmi, M.- D. U. D. (2017). Does access to finance alleviate poverty? A case study of SGSY beneficiaries in Kashmir Valley. International Journal of Social Economics , 44(8), 1032– 1045. https://doi.org/10.1108/IJSE-10-2015-0277

[32]

Khaleequzzaman, M. (2007). Islamic Microfinance: Outreach and Sustainability. In A paper presented at IIUM International Conference on Islamic Banking and Finance (pp. 23–25).

[33]

Khan, S. A., & Aslam, E. (2018). Partnership Based Microfinance in Islamic Banks: Need, Application and Commandments in Modern Age. Journal of Islamic Thought and Civilization , 8(1), 192 –208.

[34]

Khawar T, Ali. AB. (2018). Identifying Customer Satisfaction of Islamic Transaction Banking Industry in Oman . International Journal of Business Society, 2(2), 33-38.

[35]

Mahmood, H. Z., Fatima, M., Khan, M., & Qamar, M. A. (2015). Islamic Microfinance and Poverty Alleviation: An Empirical Ascertainment from Pakistan. Journal of Islamic Economics, Banking and Finance , 11(2), 85 –105.

[36]

Marakkath, N., & Attuel-Mendes, L. (2015). Can microfinance crowdfunding reduce financial exclusion? Regulatory issues. Marketing Intelligence and Planning, 33(5), 624 –636. https://doi.org/10.1108/IJBM-06-2014-0080

[37]

Müller-Jung, F. (2018). World Bank report: Poverty rates remain high in Africa | Africa | DW | 17.10.2018. Retrieved February 6, 2019, from https://www.dw.com/en/world-bank-report-poverty-rates-remain-high-in-africa/a-45926382

[38]

Murshid, N. S. (2018). Microfinance Participation and Women’s Decision-Making Power in the Household in Bangladesh. Journal of Social Service Research , 1–11.

[39]

Nyanzu, F., Peprah, J. A., & Ayayi, A. G. (2018). Regulation, Outreach, and Sustainability of Microfinance Institutions in Sub-Saharan Africa: A Multilevel Analysis. Journal of Small Business Management , 00, 1 –18. https://doi.org/10.1111/jsbm.12467

[40]

Obaidullah, M. (2008). Introduction to Islamic microfinance. Mohammed Obaidullah, INTRODUCTION TO ISLAMIC MICROFINANCE, IBF Net Limited , (August 2008).

[41]

Obaidullah, M. (2015). Enhancing food security with Islamic microfinance: Insights from some recent experiments. Agricultural Finance Review , 75(2), 142– 168. https://doi.org/10.1108/AFR-11-2014-0033

[42]

Obaidullah, M., & Khan, T. (2008). Islamic microfinance development: Challenges and initiatives.

[43]

Obayelu, O. A., & Awoyemi, T. T. (2010). Spatial dimension of poverty in rural Nigeria. Journal of Development and Agricultural Economics , 2(6), 231–244.

[44]

Rahman, A. R. A. (2010). Islamic microfinance: an ethical alternative to poverty alleviation. Humanomics, 26(4), 284–295. https://doi.org/10.1108/08288661011090884

[45]

Seibel, H. D. (2008). Islamic microfinance in Indonesia: The challenge of institutional diversity, regulation, and supervision. Sojourn: Journal of Social Issues in Southeast Asia, 23(1), 86–103.

[46]

Singh, J., & Yadav, P. (2012). Micro Finance As A Tool For Financial Inclusion & Reduction Of Poverty. Journal of Business Management & Social Sciences Research (JBM&SSR) , 1(1), 1 –12.

[47]

Siwale, J., & Okoye, N. (2017). Microfinance Regulation and Social Sustainability of Microfinance Institutions: the Case of Nigeria and Zambia. Annals of Public and Cooperative Economics , 88(4), 611 –632. https://doi.org/10.1111/apce.12165

[48]

Tchakoute-Tchuigoua, H., & Soumaré, I. (2019). The effect of loan approval decentralization on microfinance institutions’ outreach and loan portfolio quality. Journal of Business Research , 94(May 2017), 1–17. https://doi.org/10.1016/j.jbusres.2018.09.021

[49]

Umar Faruq Ahmad, A., & Rafique Ahmad, A. B. (2009). Islamic microfinance: the evidence from Australia. Humanomics , 25(3), 217 –235.

[50]

van Rooyen, C., Stewart, R., & de Wet, T. (2012). The Impact of Microfinance in Sub-Saharan Africa: A Systematic Review of the Evidence. World Development, 40(11), 2249–2262. https://doi.org/10.1016/J.WORLD DEV.2012.03.012

[51]

Wahyudi, I. (2014). Commitment and trust in achieving financial goals of strategic alliance: Case in Islamic microfinance. International Journal of Islamic and Middle Eastern Finance and Management , 7(4), 421 –442.

[52]

Wajdi Dusuki, A. (2008). Banking for the poor: The role of Islamic banking in microfinance initiatives. Humanomics , 24(1), 49 –66. https://doi.org/10.1108/08288660810851469

[53]

Wilson, R. (2007). Making development assistance sustainable through Islamic microfinance. IIUM Journal of Economics and Management , 15(2), 197–217. https://doi.org/10.4324/9780203808832

[54]

Wulandari, P., & Kassim, S. (2016). Issues and challenges in financing the poor: case of Baitul Maal Wa Tamwil in Indonesia. International Journal of Bank Marketing , 34(2), 216 –234. https://doi.org/10.1108/IJBM-01-2015-0007

Article Information

Article Details
Volume & IssueVol. 3, Iss. 6
Publication DateDec 31, 2019
Authors
Vatimetou Mokhtar Maouloud
Salina Kassim
Ejaz Aslam
Haneffa Muchlis Gazali
Anwar Hasan
DOI
10.30566/ijo-bs/2019.124
PDF Download