Case Study
Empowering Islamic Microfinance: Lesson from Group-based Lending Scheme and Ibn Khaldun's Concept of Asabiyah'
Paper presented at "4th International Islamic Banking and Finance Conference"
17 pages
This paper examines the potential of microfinance group-based lending schemes from an Islamic perspective.
The paper reviews the group-based lending model in the light of Ibn Khalduns social solidarity concept. It states that:
- Microfinance enables the poor, who have traditionally been excluded from mainstream banking services to benefit from various products and services;
- Microfinance can be examined from an Islamic perspective;
- Social capital is critical for the successful design of group-based lending programs;
- Microfinances concern about credit provision and access to finance for the poor is very relevant to Islamic banks;
- Islamic banks place great importance on social welfare responsibilities and religious commitments to achieve Islamic economic objectives;
- Islamic principles include social justice, equitable distribution of income and wealth and promoting economic development;
- Group-based lending is not alien to Islam and has been described in Ibn Khalduns concept of Asabiyah or social solidarity.
Finally, Islamic banks could adopt group-based lending approaches to offer Islamic financial products and services without compromising on institutional viability and sustainability.
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