The influence of faith on Islamic microfinance programmes

Although the number of Islamic microfinance initiatives remains limited, there is an increasing interest in developing microfinance programmes based on Islamic financing principles. Since Islamic microfinance is a new area, and because the outreach of such programmes has so far been limited, relativ

Author: Contributors
Country: International
Category: Microfinance

Since Islamic microfinance is a new area, and because the outreach of such programmes has so far been limited, relatively little research has been conducted on their impact. This paper examines one such programme that is being implemented in Kosovo under the auspices of Islamic Relief and explores a number of questions.

Does an association with faith make Islamic microfinance programmes more or less effective? Can faith-based microfinance providers reduce problems of moral hazard and adverse selection, and as a result encourage higher repayment? Are programme staff more motivated? This investigation explores these and other issues by interviewing both borrowers and programme staff. This paper also describes the Islamic financing principles that govern the structure and operations of Shari’ah-compliant microfinance programmes as well as the principal financing methodologies employed.

While from the outset it was obvious that the performance of any microfinance programme is largely determined by organisational traits and the context in which it is implemented, the research highlighted a number of areas in which faith impacts upon the behaviour of programme staff and borrowers in Kosovo. While the resultant behaviour appears to contribute to the success of the programme, the extent of this influence is difficult to determine amid a number of other influencing factors. Indeed, in overall terms, factors such as the macroeconomic environment, the capacity of staff, and programme structure, policies and procedures are likely to be far more influential. Nevertheless, it is apparent from the research findings that faith does have some influence on the way borrowers perceive and behave and it also has a motivational impact on programme staff.

Click Here to Download the PDF

Click edit button to change this text.

Related Projects

LEAVE A REPLY

Your email address will not be published. Required fields are marked *