A Research Agenda for Financial Inclusion and Microfinance
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A Research Agenda for Financial Inclusion and Microfinance

Edited by Marek Hudon, Marc Labie and Ariane Szafarz

How can financial services, such as credit, deposit accounts, financial transfers, and insurance be provided to people in need? This challenging and complex issue has been a topic of interest for the international aid community for decades. Drawing on renowned experts in microfinance and financial inclusion, this Research Agenda sheds much-needed light on this multifaceted challenge and points the way ahead for future research.
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Chapter 8: Islamic microfinance

Laurent Weill

Abstract

Islamic finance can be defined as finance that conforms to Islamic law (Sharia) derived from the Qur’an and other sources. It has considerably expanded over the last two decades, with Islamic financial assets increasing from $150 billion in the mid-90s to $1880 billion at the end of 2015 (Islamic Financial Services, 2016). Islamic finance is particularly prominent in Southeast Asia, South Asia, and in Middle Eastern countries. According to Obaidullah and Khan (2008, p.6) in a report for the Islamic Development Bank, “microfinance and Islamic finance have much in common . . .. Both focus on developmental and social goals. Both advocate financial inclusion . . .. Both involve participation by the poor.” It therefore appears natural that Islamic microfinance has emerged to supply microfinance tools which are Shariacompliant. Our objective in this chapter is to describe and to discuss Islamic microfinance. We aim at explaining how Islamic microfinance works nowadays in the world. To this end, we explain what characterizes Islamic finance and present the differences between Islamic microfinance and conventional microfinance. Literature on Islamic microfinance is still very limited, which limits the current knowledge we have on the effects of Islamic microfinance.

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