Achieving Social Well-Being and Financial Inclusion Through Islamic Microfinance: A Case Study of Akhuwat Islamic Microfinance

Abstract

The low-income groups in developing nations need microcredits to support their family needs. As banks avoid providing microcredits due to high costs, microfinance institutions are the last resort for this segment of society. The cost of borrowing for the borrowers is indeed high. However, these microfinance institutions play a significant role in financial inclusion. In Muslim countries where financial inclusion takes a hit as a portion of society does not want to indulge in usury transactions, Islamic microfinance institutions play a vital role. In this chapter, the focus is on the Islamic microfinance institutions and their role in achieving the objectives of Shari'ah (maqasid al-Shari'ah) along with the fulfillment of goal of financial inclusion. A case study of Akhuwat Foundation found that the institution offers different interest-free microcredit products along with free healthcare and clothing to the needy segment of society. In this way, not only that the financial inclusion is achieved but also the objectives of Shari'ah are fulfilled. The study provides key facts to the academia and microfinance industry in achieving financial inclusion and fulfilling maqasid al-Shari'ah altogether, in which the banking sector is lacking.

Citation

Khan, A., Zaidi, S.B., Mahmood, A. and Khan, S. (2024), "Achieving Social Well-Being and Financial Inclusion Through Islamic Microfinance: A Case Study of Akhuwat Islamic Microfinance", Smolo, E. and Raheem, M.M. (Ed.) The Future of Islamic Finance, Emerald Publishing Limited, Leeds, pp. 83-102. https://doi.org/10.1108/978-1-83549-906-120241006