Building Islamic Ethics into Development: Exploring the Role and Limitations of “Islamic” Microfinance in Poverty Alleviation—An Indonesian Case Study

Farrar Salim () and Uddin Tanvir ()
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Farrar Salim: University of Sydney, Sydney, New South Wales, Australia
Uddin Tanvir: University of Sydney, Sydney Law School, Australia

The Law and Development Review, 2020, vol. 13, issue 2, 371-406

Abstract: In this article, we examine the role and ethics of IBF in the context of development and address the critique that IBF is merely a rebranding of the conventional sector and merely exploits and further marginalises beneficiaries for profit. We focus on Islamic microfinance (IMF) in Indonesia and explore how it is applied to poverty alleviation. In addition to a review of the research to date, we perform a qualitative sociolegal study involving 27 interviews of two IMF institutions’ (BMT Muda and BPRS Mitra Syariah in East Java) beneficiaries, field staff, management and industry stakeholders. Our fieldwork investigates how institution staff members apply Islamic rules and norms when implementing programs, noting any discrepancies between the rhetoric of the Islamic ethical framework for development and the practice. We ultimately argue that while IMF is still a work in progress that would benefit from further regulatory and institutional reform, it is generating wide-ranging economic, social and spiritual benefits. We find evidence of social empowerment and brotherhood in IMF, emblematic of Islamic ethics, as well as genuine contributions to the economic and social development of Indonesia

Keywords: Islamic finance; Islamic microfinance; Indonesia; ethics; development (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1515/ldr-2020-0047

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