WORLD - ARTICLES - Sustainable Growth and Inclusive Economic Development from an Islamic Perspective

The Role of Islamic Finance
in Enhancing Financial Inclusion in OIC Countries

Mahmoud Mohieldin, Zamir Iqbal, Ahmed Rostom and Xiaochen Fu

8th International Conference on Islamic Economics and Finance

Sustainable Growth and Inclusive Economic Development from an Islamic Perspective

Doha – Qatar

18th – 20th December 2011

Source:: http://conference.qfis.edu.qa  also here  (abstract hereunder)


The core principles of Islam lay great emphasis on social justice, inclusion, and sharing of resources between haves and haves not. Islamic finance addresses the issue of “financial inclusion” or “access to finance” from two directions—one through promoting risk-sharing contracts which provide a viable alternative to conventional debt-based financing, and the other through specific instruments of redistribution of the wealth among the society. Use of risk-sharing financing instruments can offer Shariah-compliant Microfinance, SME financing and micro-insurance to enhance the access to finance. And redistributive instruments such as Zakah, Sadaqat, waqf, and qard-al-hassan complement risk-sharing instruments to target poor sector of the society to offer a comprehensive approach to eradicating poverty and to build a healthy and vibrant economy. Instruments offered by Islam have strong historical roots and have been applied throughout the history in various Muslim communities. The paper also identifies gaps currently existing in OIC countries on each front, i.e. Shariah-compliant Micro-finance and SME financing and the state of traditional redistributive instruments. The paper concludes that Islam offers rich set of instruments and unconventional approaches if implemented in true spirits can lead to reduced poverty and inequality in Muslim countries plagued by massive poverty. Therefore, the policy makers in Muslim countries who are serious about enhancing the access to finance or “financial inclusion” should exploit the potential of Islamic instruments to achieve this goal and focus on improving the regulatory and financial infrastructure to promote enabling environment.