Countering Moneylender Exploitation through Islamic Nanofinance: A Literature Review

Zuraidah Mohamed Isa, Zaiful Affendi Ahmad Zabib, Rini Lestari and Abdulllah Matt
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Zuraidah Mohamed Isa: Faculty of Business and Management, Digital Innovations & Social Entrepreneurship, Universiti Teknologi MARA, Cawangan Kedah, Kampus Sungai Petani, Malaysia
Zaiful Affendi Ahmad Zabib: Sekolah Kem Lapangan Terbang, 08000 Sungai Petani, Kedah, Malaysia
Rini Lestari: Faculty of Economics and Business, Department of Accounting, Universitas Islam Bandung, INDONESIA
Abdulllah Matt: Sigma Resources (M) Sdn Bhd, Lot A88, Kawasan Perindustrian MIEL, Sungai Lalang, 08000, Sungai Petani, Kedah, Malaysia

International Journal of Research and Innovation in Social Science, 2024, vol. 8, issue 9, 3632-3638

Abstract: The prevalence of predatory lending practices poses a significant threat to marginalized communities, perpetuating cycles of debt and financial exclusion. This study aims to explore the potential of Islamic nanofinance as a viable solution to counter moneylender exploitation, focusing on its principles and practices in Southeast and South Asia. A comprehensive literature review was conducted, highlighting the distinctions between nanofinance and microfinance, the ethical frameworks underpinning Islamic finance, and the detrimental impacts of exploitative lending on vulnerable populations. Key findings reveal that Islamic nanofinance, grounded in principles like Qard al-Hasan (interest-free loans) and waqf (charitable endowments), offers sustainable financial alternatives that promote social justice and economic empowerment. Furthermore, successful case studies from countries such as Malaysia, Indonesia, Thailand, and India illustrate the effective implementation of Islamic nanofinance initiatives in alleviating financial burdens and addressing systemic inequities. However, challenges such as limited awareness, regulatory hurdles, and resource constraints hinder broader adoption. The implications of this study underscore the need for greater policy support and community engagement to enhance the reach of Islamic nanofinance programs. By fostering collaboration among financial institutions, governments, and civil society, this research advocates for a paradigm shift towards more inclusive financial systems that can effectively mitigate the adverse effects of predatory lending and empower marginalized communities through ethical financing solutions.

Date: 2024
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