Examining Islamic microfinance as a mechanism of Takaful in high-risk countries: case study of Palestine

Abdalrahman Mohamad Migdad

International Journal of Ethics and Systems, 2022, vol. 39, issue 1, 126-142

Abstract: Purpose - This paper aims to identify the intersection between Islamic microfinance (MF) (IsMF) andTakafulin high-risk economies and propose a model for the sustainable application of IsMF. The wordTakaful, although used to refer to Islamic insurance, means solidarity and is used as such in this paper. Design/methodology/approach - The paper used a descriptive and analytical method to present findings derived from secondary data collected from the Palestinian Central Bureau of Statistics and primary data from semi-structured interviews. Findings - Need in the Palestinian household is very high, and the performance of Palestinian MF institutions (MFI) was found to have deviated from the spirit of MF. A significant shortcoming by MFI lies in the Palestinian law that focuses on organizing MFI’s operations as financial institutions only. With a deviated purpose and generalized laws, the paper proposed a model of IMF. The model consists of three stages covering mission and market-based financing for the economically incapable and those better off. Finally, enacting laws to protect micro-enterprises and cooperation between institutions that operate at each stage is necessary. Originality/value - This research contributes to the literature on MF and IsMF, especially in high-risk countries. Furthermore, this study proposes a model for IsMF best practices based on the spirit of MF where it is most needed.

Keywords: Takaful; Microfinance; Solidarity; Socio-economic development; Islamic microfinance (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijoesp:ijoes-11-2021-0214

DOI: 10.1108/IJOES-11-2021-0214

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