The Influence of Faith on Islamic Microfinance Programmes

Abstract

Although the number of Islamic microfinance initiatives remains limited, less than 1% of total global microfinance outreach (Karim et al 2008:1), there is for a number of reasons increasing interest in developing microfinance programmes based on Islamic financing principles. Firstly, it is apparent that a significant proportion of Muslims refrain from using interest based microfinance services for fear of breaching their religious beliefs (ibid). Indeed, it is likely that even less religiously observant Muslims who currently use interest based microfinance may prefer Shari’ah - compliant microfinance if available. Secondly, some, particularly Muslim faith based, microfinance providers are striving to abide by the wishes of their donors, many of whom want to ensure that their funds are only utilised in a halal or permitted manner. Finally, many programme staff are motivated by their faith to develop Shari’ah-compliant microfinance alternatives.