The inherent social justice potential of Islamic economics
is a rich and underutilized resource for poverty alleviation. Currently, Islamic
microfinance is poised to grow the market of Islamic banking and finance (IBF)
by steering poor populations into formal financial activity. Expanding the reach
and profile of Islamic microfinance through partnerships and funding strategies
can help meet the financial needs of the poor—and help the global IBF industry
better embody motivations for Islamic economic activity in the teachings of the
Qur’an and Sunnah. In this context, Islamic microfinance holds tremendous
potential to tap into often-scattered Islamic donor streams – zakat, sadaqat,
and waqf – and channel them toward strategic, impact-oriented goals.
The value of worldwide Islamic financial assets is growing
quickly; since the 1970s, assets have leapt from half a million dollars to more
than two trillion USD. This number is expected to increase to 3.4 trillion
USD by 2018.
The IBF industry has long been dominated by advanced
economies in the Persian Gulf, but now the fastest-growing markets are more
spread across the world. The slow-but-steady growth of Islamic microfinance has
recently become dynamic – fueled by increased attention from governments, central
banks, donors, and IBF institutions.
As noted in the report: Islamic
(Micro)Finance: Culture, Context, Promise, Challenges, to better understand
Islamic microfinance and the role it can play, we should examine cultural
contexts as well as account for indicators and metrics. The anthropological
perspective of the report investigates how financial tools come to life in the
hands of clients and allows for more nuanced, complex understandings of user
experiences through a methodology of “participant-observation,” repeat
minimally-structured interviews, and relationship-building. This addresses
methodological challenges in microfinance research: banks, acting as
gatekeepers, can (un)intentionally circumscribe access for researchers. The
need for the poor to ensure continued access to banks can affect their
responses to market research and customer surveys.
Islamic (Micro)Finance report also offers historical and theological
background, overviews of Islamic financial products, summaries of key countries
and institutions, and in-depth examinations of Islamic (micro)finance
landscapes in Bangladesh, Indonesia, and Pakistan. Ethnographic attention is
given to the unique challenges faced by female clients and female-headed
households, implications of client relationships with field officers, and the
absence of tools for clients to address personal accounting and calculation
challenges. The report also offers starting points for digital interventions to
meet the needs of the poor while addressing longstanding inefficiencies in
Islamic (micro) finance.
The capacity for innovation in this still-nascent industry,
where supply has not met demand, should encourage impatient optimism of
industry observers, providers, and clients alike.