Institutionalization and Development of Saving Habits Through Bai-Muajjal Mode of Islamic Banking Finance (A Unique Means of Mobilizing Rural Savings Towards Productive Sources)

This article discusses how the Bai-Muajjal mode of Islamic banking finance serves to institutionalize savings among rural small and cottage industry (SCI) owners in Bangladesh. It describes how this lending technique successfully mobilizes rural savings towards productive and profitable purposes.

The article states that most people who live in rural areas wish to save but have little access to formal and informal lending organizations. Institutionalizing the saving habit through lending procedures might contribute to developing a saving mentality among rural SCI owners and also to mobilize these savings towards productive sectors. Bai-Muajjal mode of Islamic banking finance requires clients to have a minimum savings balance in order to qualify for a loan. Conclusions include:

• Not using rural savings for productive purposes leads to economic misery and rural poverty;
• Bangladesh needs an organization-based guide to safeguard and use rural savings;
• Institutionalized saving habits contribute to generating working capital, proving credit worthiness, adding security, and creating mutual obligations between parties;
• Institutionalizing the saving habits through the Bai-Muajjal mode of lending procedure helps to educate rural SCI owners and use their savings for productive purposes.