Can micro-enterprises use tawarruq fardi financing (TFF) for fund raising?

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Micro-enterprises, like any other business entity, face financing challenges. However, micro-enterprises often cannot access financial institutions as they cannot fulfill the conditions to obtain financing facilities from a formal financial institution. As such, they have to rely on family or friends for financing needs. The most critical challenge faced in this regard to Muslim micro-enterprises is finding out a way in which family and friends could give a financial helping hand without the involvement of riba (interest). At the same time, the person giving the financing can enjoy a profit. This paper aims to propose the tawarruq fardi financing (TFF) model that Islamic micro-enterprises could use to fulfill their financial needs. It becomes a solution when obtaining financing from friends and family or any other third party who could be a private investor who does not want to engage in an equity relationship. This study adopts a qualitative research methodology, combining descriptive and content analysis using the inductive reasoning approach. The paper's outcome shows that the proposed TFF could assist Islamic micro-enterprises in obtaining Shariah-compliant financing without engaging in an equity partnership. It allows them to fulfill their financing needs bearing in mind the interest of both parties involved in the transaction.
Islamic finance , Islamic microfinance , New model , Tawarruq
Siddiky, S., Swandaru, R., & Muneeza, A. (2022). Can micro-enterprises use tawarruq fardi financing (TFF) for fund raising? PSU Research Review.
Emerald Publishing Limited

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