Toward Inclusive Islamic Finance

This paper aims to summarize the experiences and lessons learned by GIZ and other international organizations while working with Islamic microfinance initiatives over the past ten years. It identifies hindrances, discusses the way forward, and suggests interventions to provide support for an Islamic microfinance revolution to take place. By focusing on members from donor organizations and implementing agencies as well as government and non-government organizations, the paper provides an understanding of the principles of Islamic microfinance and the various products offered. The paper also outlines the obstacles regarding further development and details some successful Islamic microfinance cases. In addition, it attempts to show how Islamic microfinance and conventional microfinance overlap. The paper covers the following aspects of Islamic microfinance in detail:

• Basics including economic history, Islamic economics, and underlying principles;
• Products and services available including agricultural finance, loans, deposits, and Islamic insurance;
• Demand and pricing of the different products and services;
• Financial literacy of beneficiaries and the staff of Islamic microfinance;
• Regulation and risk involved in furthering Islamic microfinance;
• Funding sources with a focus on savings, corporate funds, individual shareholders, crowd funding, and charitable giving;
• Recommendations and the way forward for the sector.