Shariah governance for Islamic microfinance industry

Abstract EN

Microfinance is a growing industry that caters to various forms of financing for the financially underprivileged segment of any society.

the microfinance industry aims to provide financial assistance to the poor, small and medium enterprises (SMEs), micro-entrepreneurs, and other financially marginalized segments.

although the microfinance industry continues to assist numerous people, its traditional mechanism of financing, interest-based deposits and interest-bearing loans (riba), is not permissible according to the Muslim belief.

as an alternative, Islamic microfinance was established to cater to the Muslim community.

Islamic microfinance is increasingly becoming an effective mechanism to tackle poverty, inequality and provide financing to micro-entrepreneurs and small and medium enterprises (smes) in Muslim countries.

however, for the integrity and credibility of the Islamic microfinance industry there is a need for good governance and regulations.

governance and regulation are still a major concern for both microfinance and Islamic microfinance.

an added aspect of governance that is peculiar to the Islamic microfinance is shariah governance.

this paper will examine the possible means to establish shariah governance for the Islamic microfinance industry.

the paper is conceptual in nature and is based on literature review to support the theory of the research.