Abstract
Despite the rising adoption of Islamic microfinance, there remains a crucial gap in the comparative analysis of how Islamic microfinance impacts the economic status of low-income families against conventional methods. This study investigates the factors influencing the effectiveness of Islamic microfinance in improving the economic status of low-income families in Muslim-majority regions compared to conventional microfinance methods. The research methodology encompasses a comprehensive literature review, utilizing sources from peer-reviewed academic journals, international financial organization reports, and books focused on microfinance and Islamic banking. The study involved thematic analysis to identify and critically evaluate key themes such as economic empowerment, comparison with conventional microfinance, regulatory dynamics, customer perceptions, and sustainability goals. The findings indicate that Islamic microfinance provides distinctive benefits due to its adherence to Sharia principles, which resonate well with the target communities’ cultural and religious norms. However, the effectiveness varies significantly across different regions due to diverse economic contexts and regulatory environments. This study contributes to the existing literature by providing a detailed comparative analysis of Islamic versus conventional microfinance, highlighting specific areas where Islamic microfinance excels or requires further improvement.
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