Al-Tawhid in relation to the economic order of microfinance institutions

Abstract

Purpose – This paper aims to study the problems faced by microfinance institutions (MFIs) and relates it with Al-Tawhid to see the solutions. Design/methodology/approach – An exploratory method was used to examine various literature that discuss MFIs, the challenge issues growing in tandem with the growth of the microfinance sector and the economic order of MFIs and tries to link it to Al-Tawhid. Findings – The absence of Al-Tawhid concept in the practice of conventional MFIs caused the practices are not acceptable to Muslim micro entrepreneurs. Hence, the use of Al-Tawhid principles of contract suggested practices that are fair and free from elements of riba and gharar. It relates to the economics order by looking into the aims of providing finance up to reaching the consensus process or shuratic. Cash waqf is suggested as a source of fund for Islamic MFI for sustainability. Research limitations/implications – The findings need to be supported with empirical study to come up with suitable models. Practical implications – Alternative sustainable source of funds for the Islamic MFI is suggested. Social implications – Activating the cash waqf will involve the society in large to contribute to the economic development. The beneficiaries, such as the poor and needy, will be able to find a source of living and be actively involved in generating income activities. Originality/value – This paper highlights the cause of problems faced by conventional microfinance and relats the Al-Tawhid to overcome those problem conceptually.

An Empirical Study of Islamic Microfinance Performance for Poor Family: Maqashid Al-Sharia Perspective

“…Costs are low and qardhul hasan loans used to replace high interest rates charged by MFIs conventional. With the consultation process, it will help Islamic MFIs to understand the poor micro-entrepreneurs (Abdullah and Ismail, 2014). Dusuki and Bouheraoua (2011) define Maqasid Al-Sharia as the ultimate goal of Islamic law that serves the interests of all humanity (Maslahah).…”

“…Among the substances that must exist in the Islamic Microfinance based on the principle of monotheism, that is the maqasid sharia, trust, qard-hasan and cooperative. Fight to against interest; and the process of learning / shuratic process (Abdullah and Ismail, 2014).…”

“…Therefore, Islamic Microfinance model is needed which include compliance based on the perspective of monotheism. During this time Microfinance Islamic studies only focus on financial instruments which should be free of usury, not pay attention to sharia compliance in all aspects of Islamic Microfinance and how the achievement of the members who get financing (Abdullah and Ismail, 2014).…”

Islamic Financial Inclusion Contribution to the Empowerment and Development of Informal Sector

“…For the purpose of poverty alleviation, it is needed. Since, poverty not only is an economic issue, but also has moral, social and political dimensions [10].…”

Natural rubber institutional arrangement in efforts to accelerate rural economic development in the province of Riau

“…The research has the objectives to determine Rapid Rural Appraisal (RRA) and economic development. Several studies on development of RRA by Akan (2011), Badu et al (2013); Bateman (1998), Chigara (2011); Kovič (2010); Kshetri (2011), Kyei and Chan (2017); Lixin (2009), McGill (1995); McGill (1997), Mihret et al (2012); Noordin et al (2017); Silva et al (2015); Williams and Horodnic (2016); Yoon and Hyun (2010); and economic development by Abdullah and Ismail (2014), Adanu (2017); Alao and Raimi (2011), Chatterjee (1996); Clarke (1999), Giffin (1994); Grossekettler (1994), Herath (2005); Huang et al (2017), Intriligator (1996); Marsh (2015), Mohamed et al (2014); Prasad (2003), Thapisa (1999); Tuna and Nilsson (2013). …”