scholarly journals Shariah Governance for Islamic Microfinance Industry (Tadbir Urus bagi Industri Kewangan Mikro Islam)

2020 ◽  
Vol 17 (2) ◽  
pp. 143-161
Author(s):  
Ibrahim Musa Tijani ◽  
Rusni Hassan ◽  
Wan Amir Shafiq bin Ab. Nasir
Keyword(s):  
Good Governance ◽  
Small And Medium Enterprises ◽  
Muslim Community ◽  
Effective Mechanism ◽  
Muslim Countries ◽  
The Poor ◽  
Islamic Microfinance ◽  
Shariah Governance ◽  
Medium Enterprises ◽  
Numerous People

Microfinance is a growing industry that caters to various forms of financing for the financially underprivileged segment of any society. The microfinance industry aims to provide financial assistance to the poor, small and medium enterprises (SMEs), micro-entrepreneurs, and other financially marginalized segments. Although the microfinance industry continues to assist numerous people, its traditional mechanism of financing, interest-based deposits and interest-bearing loans (riba), is not permissible according to the Muslim belief. As an alternative, Islamic Microfinance was established to cater to the Muslim community. Islamic microfinance is increasingly becoming an effective mechanism to tackle poverty, inequality and provide financing to micro-entrepreneurs and small and medium enterprises (SMEs) in Muslim countries. However, for the integrity and credibility of the Islamic microfinance industry there is a need for good governance and regulations. Governance and regulation are still a major concern for both microfinance and Islamic microfinance. An added aspect of governance that is peculiar to the Islamic microfinance is Shariah governance. This paper will examine the possible means to establish Shariah governance for the Islamic microfinance industry. The paper is conceptual in nature and is based on literature review to support the theory of the research. Keywords: Shariah Governance, Islamic Microfinance, Regulation. Abstrak Pembiayaan mikro adalah industri yang berkembang serta memenuhi pelbagai bentuk pembiayaan untuk segmen masyarakat yang kurang bernasib baik. Industri pembiayaan mikro bertujuan untuk memberikan bantuan kewangan kepada golongan miskin, perusahaan kecil dan sederhana (PKS), pengusaha mikro, dan segmen lain yang terpinggir dari segi sektor kewangan yang utama. Walaupun industri pembiayaan mikro banyak membantu golongan tersebut, tetapi mekanisme pembiayaan tradisional yang diamalkan adalah berdasarkan deposit serta pinjaman dengan faedah (riba) yang tidak dibenarkan menurut Islam. Sebagai alternatif, pembiayaan mikro Islam ditubuhkan untuk memenuhi keperluan masyarakat Islam. Pembiayaan mikro Islam menjadi mekanisme yang berkesan untuk mengatasi kemiskinan, ketidaksamaan dan menyediakan pembiayaan untuk pengusaha mikro dan perusahaan kecil dan sederhana (PKS) di negara-negara Islam. Namun, untuk menaiktaraf integriti dan kredibiliti industri kewangan mikro Islam, peraturan mengenai tadbir urus yang baik adalah diperlukan. Secara umumnya, peraturan mengenai tadbir urus yang baik masih menjadi perhatian utama bagi kedua-dua sektor pembiayaan mikro dan pembiayaan mikro Islam. Walaubagaimanapun, bagi pembiayaan mikro Islam terdapat tambahan khusus di dalam aspek tadbir urus mereka iaitu aspek pematuhan Syariah. Kertas ini akan mengkaji cara untuk mewujudkan tadbir urus Syariah bagi industri kewangan mikro Islam. Kertas ini bersifat berbentuk konseptual dan menggunapakai tinjauan literatur untuk menyokong teori penyelidikan yang dilakukan. Kata Kunci: tadbir urus Syariah, kewangan mikro Islam, peraturan.  

Adopting Islamic microfinance as a mechanism of financing small and medium enterprises in Uganda

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ssemambo Hussein Kakembo ◽  
Muhamad Abduh ◽  
Pg Md Hasnol Alwee Pg Hj Md Salleh
Keyword(s):  
Financial Services ◽  
Small And Medium Enterprises ◽  
Skills Training ◽  
Microfinance Institutions ◽  
Alternative Scheme ◽  
Content Type ◽  
The Poor ◽  
Islamic Microfinance ◽  
Financial Challenges ◽  
Medium Enterprises

PurposeDespite the fact that small and medium enterprises (SMEs) play a crucial role in strengthening the financial sector within developing and emerging economies through providing employment opportunities to the rural and urban population, capacity building in the form of skills training and economic empowerment, they still face a plethora of challenges that continue to threaten their existence, performance and growth. Access to operational and administrative funds needed to execute their activities effectively is a significant challenge and detrimental to the growth of SMEs in Uganda. Conversely, Islamic microfinance has been noted as a panacea to the challenges of financial inaccessibility among SMEs, especially in developing countries. The purpose of this paper is therefore to investigate how the adoption of Islamic microfinance can play a fundamental role in enhancing the sustainability of microfinance institutions (MFIs) while meeting the financing challenges of SMEs in Uganda.Design/methodology/approachIn this study, a review of existing literature was carried out to critically examine relevant information (literature sources) and empirical studies on SMEs, their performance and challenges. The study being conceptual tries to understand how Islamic microfinance could be adopted as an alternative scheme of financing to bridge the gap and mitigate the financial challenges facing SMEs.FindingsThe study finds that the existing MFIs have failed to achieve their objectives of providing financial services to the poor and SMEs while remaining sustainable. This has left the majority of SMEs within Uganda's informal sector financially handicapped, thus leading to their failure in meeting their expectations and eventually collapsing even before celebrating their third or fourth birthdays. However, the enactment into law of the Financial Institutions Amendment Act 2016 that paved the way for the introduction of Islamic finance in Uganda, and the Tier 4 Microfinance Institutions and Money Lenders' Act, 2016 that incorporated the aspects of Islamic microfinance within the existing microfinance framework as seen and is perceived as a key factor in addressing the financial challenges faced by MFIs and the SMEs if fully adopted.Research limitations/implicationsThis study is conceptual with no empirical investigation and discussion of key theories. On the contrary, it will be imperative and useful when carrying out more extensive hypothetical studies by future researchers, specifically in the area of Islamic microfinance that is relatively new in Uganda.Practical implicationsPractically, this paper will serve as a guide to policymakers and practitioners in the field of microfinance by adding a flair that could enable in bridging the challenges associated with inadequate financing of SMEs in Uganda.Social implicationsSocially, the social aspects of charity (Zakah and Sadaqah) will help to improve the livelihood of the poorest of the poor who cannot engage in active business through meeting their basic needs of life without begging thereby preventing them from being social outcasts.Originality/valueThe study establishes Islamic microfinance (IMF) as a promising and unexplored viable option potentially needed in intensifying the financing needs of SMEs in Uganda. The paper provides an entirely new dimension in nature and way microfinance products should be structured with a view of ensuring that there is sustainable provision of financial services to SMEs. The paper adds real value to the existing conventional microfinance products and services in Uganda, given the ethical and moral attributes of Islamic microfinancing practices that are assumed to efficiently and effectively motivate SME owners and other small entrepreneurs to thrive.

scholarly journals Challenges Facing Financial Inclusion Due to the COVID-19 Pandemic

2020 ◽  
Vol 3 (2) ◽  
pp. 50
Author(s):  
Tea Kasradze
Keyword(s):  
Low Income ◽  
Small And Medium Enterprises ◽  
Financial Inclusion ◽  
Financial Resources ◽  
Financial Products ◽  
The Poor ◽  
Wide Range ◽  
Medium Enterprises ◽  
The Impact ◽  
Poor Population

Financial inclusion is often considered as an access to financial resources for the wide public and small and medium-sized businesses, although it is a much broader concept and includes a wide range of access to quality financial products and services, including loans, deposit services, insurance, pensions and payment systems. Mechanisms for protecting the rights of consumers of financial products and services are also considered to be subject to financial inclusion. Financial inclusion acquires great importance during the pandemic and post-pandemic period. The economic crisis caused by the pandemic is particularly painful for low-income vulnerable population. A large part of the poor population who were working informally has lost source of income due to lockdown from the pandemic. Remittances have also been reduced / minimized, as the remitters had also lost jobs and are unable to send money home. Today, when people die from Coronavirus disease, it may be awkward to talk about the financial side of a pandemic, but the financial consequences can be far-reaching if steps are not taken today to ensure access to and inclusion of financial resources. The paper examines the impact of the pandemic on financial inclusion and the responses of the governments and the financial sectors to the challenge of ensuring the financial inclusion of the poor population and small and medium enterprises.

scholarly journals Barriers and potential solutions for MSMEs in developing economies: Evidence from India

2021 ◽  
Vol 19 (4) ◽  
pp. 325-337
Author(s):  
Bishwajeet Prakash ◽  
Indrajit Kumar ◽  
Jainendra Kumar Verma
Keyword(s):  
Good Governance ◽  
Developing Economies ◽  
Raw Materials ◽  
Small And Medium Enterprises ◽  
Developing Regions ◽  
Potential Growth ◽  
Factors Affecting ◽  
Analysis Technique ◽  
Medium Enterprises ◽  
Bihar State

Micro, small and medium enterprises (MSMEs) have emerged as an accelerator of economic growth with a sizeable contribution in job creation, innovation development, and reduction of regional disparities in most world economies. This paper investigates the influence of external and internal factors affecting the growth of MSMEs in poor-performing Bihar state, India. The objective of the study is to identify the major deep-rooted causes for the inability of MSMEs to compete in developing states and identify potential solutions. The study is based on an empirical database; it tested various dimensions of MSMEs barriers in their potential growth. The target group included MSMEs of Bihar state, India, using a sample of 450 entrepreneurs. The paper adopted a multistage stage sampling and multivariate analysis technique. The results showed that there are twelve major potential barriers, both endogenous and exogenous, faced by MSMEs, such as availability of raw materials, financial issues, labor force challenges, technology inefficiency, power/electricity scarcity, poor marketing, competition, knowledge-related challenges, government and administration problems, infrastructure inefficiency, etc. The findings show that these barriers affect the promotion and growth of MSMEs in developing regions. In future, it is suggested to focus on the implementation of good governance that helps to remove effectively the major barriers of MSMEs in underdeveloped states, such as Bihar, India.

scholarly journals The Role of Islamic Crowdfunding Mechanisms in Business and Business Development

2019 ◽  
Vol 4 (1) ◽  
pp. 10-23
Author(s):  
Achsania Hendratmi ◽  
Puji Sucia Sukmaningrum ◽  
Muhamad Nafik Hadi Ryandono ◽  
Tri Ratnasari
Keyword(s):  
Small And Medium Enterprises ◽  
Jel Classification ◽  
Business Development ◽  
Muslim Countries ◽  
Start Up ◽  
Population Type ◽  
Medium Enterprises ◽  
Depth Interviews

Objective - This study aims to determine the role of Islamic crowdfunding towards business development of start-up businesses financed in Singapore, Malaysia and Indonesia. Methodology/Technique - This study uses a qualitative approach with an exploratory case study strategy. The data collection was carried out by conducting in-depth interviews with CEOs and COOs of Kapital Boost and CEO Investee (funded SMEs) informants. Findings - The results show that there is an increase in assets, sales turnover, and the capacity of Micro, Small and Medium Enterprises (MSMEs) and Startup businesses that received funding through campaigns on the Kapital Boost platform. In addition, pioneering business people can get easier access to financing compared to financing through bank-provided credit. Novelty - The findings of this paper can be used to develop crowdfunding platform will be implemented in Muslim countries or countries with a majority Muslim population. Type of Paper: Empirical. Keywords: Crowdfunding Platforms; Islamic Crowdfunding; Business Development; MSMEs; Start-up Companies. JEL Classification: E44, M21, M29. DOI: https://doi.org/10.35609/jber.2019.4.1(2)

The Utilization of Fintech (P2P Landing) as SME’s Capital Solution in Indonesia: Perspective in Islamic Economics (Qirad)

2018 ◽  
Vol 2 ◽  
pp. 12-22
Author(s):  
Astri Rumondang
Keyword(s):  
Financial Services ◽  
Small And Medium Enterprises ◽  
Small Business Owners ◽  
Business Opportunity ◽  
Muslim Countries ◽  
Long Run ◽  
New Business ◽  
P2p Lending ◽  
Trading Activities ◽  
Medium Enterprises

FinTech as a technology-based financial service, generally opens opportunities for increased efficiency in creating new business, better risk management and ease of transactions and trading activities. The limited access to capital resources (particularly banking) and with many SMEs that are unable to obtain financial services, is utilized by FinTech (P2P lending) practicioners as a good business opportunity at this moment. Fintech P2P Lending is considered able to overcome the problems of Small and Medium Enterprises (SME) and become one of the captial solution and empowerment strategy for SME in the future. This is because it enables small business owners or SME to get their capital in a shorter time with more simple terms and conditions, and also with the shorter loan period. It will be encouraging the development of SMEs, which will, in a long run, affect the equity level of welfare and the economy of the middle classes. As one of the majority Muslim countries, Indonesia should apply the FinTech-based financial transaction service pattern in accordance with the perspective in Islamic economics (Qirad). Where in lending the capital must be in accordance with the provisions set by God. In Qirad, it is stipulated that in lending the capital to others, then the lender has to know or understand what type of business will be done by the borrower.

scholarly journals Micro Small and Medium Enterprises Accessibility to Financing at Islamic Microfinance Institution in Indonesia

2019 ◽  
pp. 1435-1441
Author(s):  
Metti Paramita ◽  
Andri Brawijaya ◽  
Wildan Munawar
Keyword(s):  
Small And Medium Enterprises ◽  
Analytical Techniques ◽  
Microfinance Institution ◽  
Qualitative Descriptive ◽  
Islamic Microfinance ◽  
Medium Enterprises

Micro small and medium enterprises (MSMEs) role for a region is very strategic. MSMEs can support large industries, but there are many obstacles in MSMEs operations, one of which is capital. This study aims to determine the financing access that can be obtained by MSMEs on Islamic Microfinance Institution. Analytical techniques in this research is qualitative descriptive technique. The results of this study shows that MSMEs can possibly have access to financing from Islamic microfinance institution if it meets some specified criteria, such as business age, turnover and distance MSMEs.

scholarly journals Integrated financing model in Islamic microfinance institutions for agriculture and fisheries sector

2019 ◽  
Vol 16 (4) ◽  
pp. 303-314
Author(s):  
Aan Zainul Anwar ◽  
Edi Susilo ◽  
Fatchur Rohman ◽  
Purbayu Budi Santosa ◽  
Edy Yusuf Agung Gunanto
Keyword(s):  
Small And Medium Enterprises ◽  
Descriptive Analysis ◽  
Microfinance Institutions ◽  
Central Java ◽  
Islamic Financial Institutions ◽  
Qualitative Descriptive ◽  
Islamic Microfinance ◽  
Financing Model ◽  
Medium Enterprises ◽  
Islamic Insurance

The uniqueness of micro, small and medium enterprises (MSMEs) in the agriculture and fisheries sector has led to thoughts of innovation in the microfinance institutions (MFIs) that serve it. Service innovations in the agriculture and fisheries sector have been carried out in various countries to facilitate the development of this sector. This study aims to analyze the financing model of Islamic microfinance institutions (Islamic MFIs) based on the characteristics of the agriculture and fisheries sectors and the reconstruction of Salam contracts of Islamic financial institutions for farmers and fishermen. The research method used is qualitative descriptive analysis. The data were obtained through in-depth interviews with the agriculture and fisheries businesses in Central Java, Indonesia. The result showed that Salam contract constructed according to the characteristics of the fishing community to alleviate it from the shackles of moneylenders and wholesalers, including Islamic MFIs, farmers, and fishers as members of Islamic MFIs, buyers, Islamic banks and Islamic insurance. The output of this research is that farmers and fishermen can form a community to help one another with financial needs and are managed by Islamic MFIs that work in synergy with fisheries and agriculture companies, as well as an integrated Salam contract application system for Islamic MFIs.

Exploring sustainability, good governance, and social responsibility in small and medium enterprises

2019 ◽  
Vol 27 (2) ◽  
pp. 852-869 ◽  
Author(s):  
Mercedes Rubio‐Andrés ◽  
María del Mar Ramos‐González ◽  
Miguel Ángel Sastre‐Castillo ◽  
Ignacio Danvila‐del‐Valle
Keyword(s):  
Social Responsibility ◽  
Good Governance ◽  
Small And Medium Enterprises ◽  
Medium Enterprises

scholarly journals ANALISIS DAMPAK EKONOMI DAN PSIKOLOGI PEMBIAYAAN BAITUL MAAL WAT TAMWIIL (BMT)

1970 ◽  
Vol 7 (1) ◽  
pp. 1-10
Author(s):  
Afief El Ashfahany ◽  
Mei Nurul Aini
Keyword(s):  
Economic Impact ◽  
Financial Institutions ◽  
Small And Medium Enterprises ◽  
Psychological Impact ◽  
The Other ◽  
Peace Of Mind ◽  
Positive Economic ◽  
Other Hand ◽  
Islamic Microfinance ◽  
Medium Enterprises

Baitul Maal Wat Tamwiil (BMT) or Islamic microfinancing has become one of the alternatives for Small and Medium Enterprises (SME’s) problem of financing due to lack of capacity to reach any formal financial institutions such as a bank. This study aims to explore the economic and psychological impact of SMEs by acquiring financial facilities through Islamic microfinancing or BMT.  The study is using descriptive with an inductive analysis. This study finds that financing through Islamic microfinance has a positive economic impact to increase the potential income of SMEs. On the other hand, financing through BMT has its positive psychological impact such as peace of mind and increasing the religiosity level of the respondent.

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