ISLAMIC MICROFINANCE: LOCOMOTIVE IN THE SERVICE OF FINANCIAL INCLUSION

Abstract

Abstract— The exclusion of poor people within the society from the conventional banking system was the starting and focal point for the creation and development of microfinance institutions. The implementation of a new financial inclusion policy has become the priority of several public programs by encouraging microfinance institutions to diversify their products range in order to meet the deprived populations’ needs. Emerged as a new market niche, Islamic microfinance represents the confluence of two fast growing sectors: microfinance and Islamic finance. Indeed, it has the potential of not only suggesting financial and non financial services of proximity to individuals operating in the informal sector, but also supporting excluded ones from the banking sector because of their low income and lack of payment guarantees. As mentioned above, due to limited financial resources or an incompliance of conventional products with the ethical financial principles set in Islamic law, excluded individuals and entrepreneurs from conventional microfinance are not taking advantage of their country’s economic growth and development. Therefore, the purpose of this paper is to put into perspective the relevance of Islamic microfinance to broadening access of financial services for low-income populations, and also to present the potential barriers that can block the growth and development of Islamic microfinance institutions whether they are economic, social or structural.