Application of microfinance in selected Islamic banks in Malaysia: challenges and prospects
Views & Download
This paper aims to investigate the issues and challenges faced by Islamic banks in implementing Microfinance (MF) in selected Islamic banks in Malaysia. An empirical study is endeavoured consisting of semi structured interviews with senior managers and officers from four Islamic banks in order to address the main research questions. Out of the four selected Islamic Banks, only two are currently providing MF. The MF programs in these two banks are mostly restricted to pensioners, army wives, registered companies and companies operating for a minimum of two to three years. The main challenges facing Islamic Banks when dealing with MF can be highlighted in the following points: the default risk, the lack of funds and the unwillingness of shareholders to take MF risk, the high operating cost, the complexity of MF processing, and regulatory restrictions. Other hindrances include the lack of well trained staff capable of efficiently managing MF. This research concludes with a call for Islamic Banks to seriously participate in economic and social development through greater involvement in MF.
Islamic microfinance , Islamic banks , Microfinance , Malaysia
Kachkar, O., Djafri, F., & Noordin, K. (2016). Application of microfinance in selected Islamic banks in Malaysia: challenges and prospects. Middle East Journal of Business, 11(2), 12-18.