Enhancing Financial Inclusion Through Sustainable Islamic Microfinance in Pakistan: A Participatory Products Development Perspective

Muhammad Khaleequzzaman ()
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Muhammad Khaleequzzaman: School of Islamic Banking and Finance, International Islamic University Islamabad

Chapter Chapter 8 in Enhancing Financial Inclusion through Islamic Finance, Volume II, 2020, pp 201-219 from Palgrave Macmillan

Abstract: Abstract Significant numbers live below the poverty line in Pakistan where the incidence of poverty in the rural areas is twice that of the urban areas. A lack of focus on the development of the youth leaves one-third of the population vulnerable to violence and conflict. Women access to economic opportunities is also quite low. The interest-based models of conventional microfinance institutions that lend at exorbitant rates also perpetuate exclusion. There is a high demand for Islamic financial services but only a few Islamic microfinance institutions (IMFIs) exist that are subject to sustainability challenges such as Murabahah product concentration, paucity of funds, absence of Shariah structuring capacity, and ineligibility for financing from Islamic commercial banks. This research concludes that a gradual shift toward participatory modes of financing and the use of Waqf and Solidarity Groups to provide cheaper financing safeguard against adverse selection and agency problem is required.

Keywords: Islamic microfinance; Participatory mode of financing; Real sector economy; Access to cheaper finance (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:pal:psibcp:978-3-030-39939-9_8

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DOI: 10.1007/978-3-030-39939-9_8

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