Online from: 1974
Subject Area: Economics
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|Title:||The link between Islamic banking and microfinancing|
|Author(s):||Nasrin Shahinpoor, (Department of Economics, Hanover College, Hanover, Indiana, USA)|
|Citation:||Nasrin Shahinpoor, (2009) "The link between Islamic banking and microfinancing", International Journal of Social Economics, Vol. 36 Iss: 10, pp.996 - 1007|
|Keywords:||Banking, Finance, Islam, Loans, Poverty|
|Article type:||Conceptual paper|
|DOI:||10.1108/03068290910984777 (Permanent URL)|
|Publisher:||Emerald Group Publishing Limited|
Purpose – The purpose of this paper is to show the link between Islamic banking and microfinancing.
Design/methodology/approach – The approach used in this paper is first to describe the basic principles of Islamic banking and microfinancing and then to show the link between the two financial practices. In general, it is believed that the two practices are not compatible since microfinance allows interest payments on loans and Islamic banking prohibits interest payment based on Islamic law,
Findings – Islamic religious leaders usually dismiss microfinancing because microfinancing requires high-interest rate which is against Islamic law. This paper finds that it is possible to combine the two practices and to convince Islamic religious leaders that Islamic banking could be applied to microfinancing.
Originality/value – Since microfinancing has been proven to help many poor people in different countries, the findings of this paper could be beneficial to the poor in some Islamic countries that do not practice microfinancing based on religious beliefs.
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