The transformation of conventional microfinance into Islamic microfinance in Bangladesh: proposed Shariah- based model(s)
Qualitative Research in Financial Markets
ISSN: 1755-4179
Article publication date: 9 October 2023
Issue publication date: 10 April 2024
Abstract
Purpose
Despite being a Muslim-dominated country, Bangladesh has widely embraced traditional microfinance since its inception in the mid-1970s. However, Islamic microfinance, which has a lot to offer to the poor, is still in its infancy and has yet to gain momentum in the country. Therefore, the purpose of this study is to analyze the importance of Islamic microfinance and propose alternative Shariah-compliant microfinance models in Bangladesh.
Design/methodology/approach
This study is based on the desk research method, which relies on existing literature to collect secondary data on key concerns of traditional microfinance programs. In addition, institutional-level secondary data were also collected from the Microcredit Regulatory Authority (MRA) of Bangladesh. Guided by the Maqasid-al-Shariah, this study then proposes several Islamic microfinance models to overcome selected challenges faced by the microfinance industry in Bangladesh.
Findings
This study suggested three composite Shariah-compliant microfinance models, which are likely to help the underprivileged and thus ensure the achievement of the sustainable development goals in Bangladesh. The first model explained how the operational strategy of incumbent microfinance institutions (MFIs) could be restructured, while the second proposed the organizational strategies for establishing a new MFI. The third model used the notion of Sadaqah (charity) to address the multiple borrowing issues of the industry. Meanwhile, the successful transformation of the conventional microfinance industry to an Islamic one is dependent on the effective collaboration between the regulatory authorities, practitioners and MFIs.
Originality/value
Albeit the paucity of literature on the topic, the findings of this study will guide policymakers/practitioners in designing relevant microfinance models to help transform conventional microfinance into Islamic microfinance in Bangladesh.
Keywords
Acknowledgements
The author gratefully acknowledges constructive comments and feedback from three anonymous reviewers and the associate editor. The initial draft of the paper was presented at the Annual International Conference on Islamic Finance (AICIF 2021), Universitas Negeri Sunan Kalijaga, Yogyakarta, Indonesia, November 17–19, 2021. The author also appreciates various feedback from the participants and the discussant/chair of the aforementioned conference. Moreover, a great deal of appreciation also goes to Dr. Shamima Nasrin and Noman Bashir for their thoughtful remarks during the inception of this study.
Conflict of interest: The author declares no known conflict of interest related to this study.
Citation
Mia, M.A. (2024), "The transformation of conventional microfinance into Islamic microfinance in Bangladesh: proposed
Publisher
:Emerald Publishing Limited
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