Case study

Cultural Aspects on the Islamic Microfinance: An Early Observation on the Case of Islamic Microfinance Institution in Bandung, Indonesia

Investigating the impact of culture on microfinance development
Download 32 pages

This paper examines the effect of cultural factors on Islamic microfinance development, particularly in Indonesia.

The paper uses sample quantitative and qualitative data from Islamic MFIs in Bandung, Indonesia, and finds evidence that cultural aspects should be incorporated in the development and management of Islamic MFIs. Study findings include:

  • Cultural and religious sensitivities of the Islamic world must be given due importance in any attempt to include excluded Muslims into formal financial systems;
  • Grameen Bank’s success is due to its understanding of the cultural aspects of dealing with its clients;
  • Research on the informal credit system in Cambodia indicates that the understanding of local culture assists the effectiveness of microfinance in a society;
  • Islamic MFIs have denied the importance of cultural differences, and this has prevented them from providing culture-specific products.

Islamic MFIs should diversify their product range and design products that are in tune with the cultural characteristics of their target clientele. Innovative Sharia-compliant products and services would provide greater financial access to a broader segment of Islamic microfinance customers.

About this Publication

By Saefullah, K.