Innovative Islamic social finance for housing microfinance

Abstract EN

For a long time, microfinance was considered an appropriate tool to accomplish social and financial goals simultaneously.

Over time microfinance has become more commercialized, transforming into a financially efficient industry, allowing more customers to have access to more sophisticated banking products (e.g.

small housing loans).

Despite interest from the commercial sector, the industry has yet to find a workable market-based solution to fund (housing) microfinance and to improve access to finance.

Microfinance in member countries of the Organization of Islamic Cooperation (OIC) face three challenges: (i) affordable funding, (ii) financial exclusion due to religion and limited access of consumers to financial services, and (iii) constraints in the area of risk and management capabilities.

Growing populations and rising urbanization have impeded the access of low income groups to housing finance.

Housing costs in relation to incomes and the lack of formal title have forced people to live in informal settlements.