Sustainable financial inclusion: a fiqh analysis of zakat-based microfinance scheme

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Sustainability has remained one of the most significant challenges facing microfinance industry in general and Islamic microfinance in particular. With the advent of Islamic microfinance and Islamic microinsurance the need for Shari'ah compliance is indispensable. Such need poses another additional challenge for Islamic microfinance practitioners. Many practitioners have argued that in practice Shari'ah compliance should be sacrificed for profitability so that Islamic microfinance industry could achieve sustainability and competitiveness in the global microfinance market. However, not a few researchers and Shari'ah scholars argued that the industry risk identity loss by trading Shari'ah compliance for any other benefit no matter how lofty - be it profit or otherwise. They are of the opinion that Shari'ah, being the backbone of Islamic financial system must be abided by in all Islamic finance instruments and models and compromising it cannot be an option. The controversy on whether sustainability and Shari'ah compliance could be regarded as mutually exclusive has been very intense and unabated especially among the regulators, industry players and academicians. Based on the foregoing, this paper sets out to investigate achieving both Shari'ah compliance and sustainability through zakat-based microfinance scheme. Inductive qualitative methods were adopted as instruments to conduct the research. Data were also gathered from both primary and secondary sources of Shari'ah. This paper finds that Shari'ah compliance and sustainability in microfinance operations could be achieved pari passu through the zakat-based microfinance scheme and as such both factors are not necessarily mutually exclusive.
Shari'ah compliance , Zakat , Sustainability , Microfinance , Financial inclusion
Mikail, Sa'id Adekunle and Adekunle, Salami Saheed. (2020). Sustainable financial inclusion: a fiqh analysis of zakat-based microfinance scheme, 2 (1), pp. 41-50.
Lembaga Zakat Negeri Kedah Darul Aman

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