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2020 | Buch

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Enhancing Financial Inclusion through Islamic Finance, Volume I

herausgegeben von: Abdelrahman Elzahi Saaid Ali, Dr. Khalifa Mohamed Ali, Muhammad Khaleequzzaman

Verlag: Springer International Publishing

Buchreihe : Palgrave Studies in Islamic Banking, Finance, and Economics

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

This book, the first of two volumes, highlights the concept of financial inclusion from the Islamic perspective. An important element of the Sustainable Development Goals (SDGs), financial inclusion has been given significant prominence in reform and development agendas proposed by the United Nations and G-20. The significance of Islamic financial inclusion goes beyond improved access to finance to encompass enhanced access to savings and risk mitigation products, as well as social inclusion that allows individuals and companies to engage more actively in the real economy. It represents one of the important drivers of economic growth.

Gender disparity exists within financial access and its extent varies widely across world economies. South Asia, the Middle East and North Africa have the largest gender gaps, with women in these regions being forty per cent less likely than men to have a formal account at a financial institution. Analysing how Islamic financial inclusion can empower individuals, this volume explores the contribution of Islamic microfinance in achieving SDGs and solving income and wealth inequality. Comprising a combination of empirical evidence, theory and modelling, this edited collection illustrates how to improve access to finance, making it essential reading for those researching both Islamic finance and development finance.

Inhaltsverzeichnis

Frontmatter

Enhancing Financial Inclusion Through Islamic Finance

Frontmatter

Chapter 1. Introduction

Abstract

Financial inclusion, as considered by the World Bank, targets the individuals and businesses having “access to useful and affordable financial products and services that meet their needs—transactions, payments, savings, credit and insurance—delivered in a responsible and sustainable way”. However, the World Bank cites several challenges when about 200 million formal and informal micro, small and medium-sized enterprises in emerging economies lack adequate financing to thrive and grow (World Bank 2017). These enterprises are constrained by the absence of collateral, informality of the businesses and credit history. Women and rural and remotely located inhabitants are affected more than the others.

Abdelrahman Elzahi Saaid Ali, Khalifa Mohamed Ali, Muhammad Khaleequzzaman

Chapter 2. Empowering the Poor and Enhancing Financial Inclusion from a Multidimensional Perspective

Abstract

Traditional economic thinking assumes the poor will want to earn their way out of poverty, but studies show that poverty makes people feel powerless and helpless and subjects them to extraordinary levels of stress and anxiety, which makes favorable decision-making difficult. The poor lack the institutional framework which, in the more prosperous and advanced economies, enhances decisions toward affluence. A multidimensional approach to achieve financial inclusion and empower the poor is discussed in this chapter. Five key areas are listed that need to be developed in order to secure a just and prosperous future for all: financial literacy and access to financial services; income and wealth redistributive instruments; development of micro, small, and medium enterprises (MSMEs); a sound legal and enforcement system; and an adequate metric set to measure effectiveness, performance, and progress of such initiatives. This chapter includes behavioral issues in financial decision-making and suggests a behavioral approach to strategy implementation.

Hazik Mohamed

Chapter 3. Causes of Income and Wealth Inequalities: Perspectives of Economists from the Fields of Conventional and Islamic Economics

Abstract

Inequality in income and wealth is a tremendous problem within the capitalist system. Piketty succeeded in bringing the issue into the limelight with his 2013 book. The reasons given for income inequality differ from the explanations put forward by Islamic finance. Piketty blames inheritance, while Muslim economists blame defectiveness in the capitalist system. The central cause—rate of interest—fronted by Islamic finance and economics scholars is mentioned in parting and as a minor component. Some Western movements such as Positive Money recently highlighted interest as the culprit, but this is a whisper compared to the loud voices of Piketty and Stiglitz, who are looking in another direction. This theoretical and analytical chapter examines the views of economists from conventional and Islamic finance. It shows that conventional economists largely fail to admit that interest is the fundamental causative factor in generating income and wealth inequalities, something Muslim economists have identified for a long time.

Muhammad Imran Ejaz

Chapter 4. Contribution of Islamic Microfinance Studies in Achieving Sustainable Development Goals

Abstract

The Sustainable Development Goals (SDGs) aim to eradicate extreme poverty by 2030 and reduce at least half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions. This chapter reviews extant empirical studies in the area of Islamic microfinance in orderto analyse the contribution of Islamic microfinance to SDGs by mapping research direction on the SDGs. The studies are categorized based on the discussion on research paradigm, countries being researched, methods employed and results that lead to action for achieving MDGs and SDGs. It finds that the studies under review mostly employ poststructuralism and interpretivism paradigm with countries being researched are mostly Bangladesh, Malaysia and Indonesia. Finally, the chapter offers insights on future research aiming to promote the achievements and issues faced in the implementation of SDGs.

Murniati Mukhlisin, Luqyan Tamanni, Toseef Azid, Rifka Mustafida

Chapter 5. Islamic Finance and Its Impact on Financial Inclusion

Abstract

Islamic banking that advocates risk-sharing and equity finance while prohibiting debt financing and leveraging needs to enhance its current operating model to attract depositors and expand credit services by tailoring its instruments to specific market needs. Given the emphasis on social and economic justice and the eradication of poverty, we would expect Islamic instruments that targeted to address inequity, such as zakat, sadaqah, waqf, and qard al-hasan, to play an important role if the required institutional structures are developed. There is a need to formalize or institutionalize Islamic redistributive mechanisms designed to empower the economically weak segments of the society, and also provide a Shariah-compliant finance company model for microfinance and micro-takaful, remove interest rate caps for microcredit for SMEs, and strengthen customer protection laws.

Wissal Msellek

Chapter 6. A Critical Review of Takaful Companies’ Contributions to Economic Developments in Fulfilment of Maqasid al-Sharīʿah: Evidence from Malaysia

Abstract

Islamic insurance (Takaful) has seen rapid growth in recent years. Past studies have provided empirical evidence that Islamic finance industry can play a positive role in economic development. However, limited empirical evidences exist on the influence of takaful industry developments towards ensuring economic development. The relevant data were collected for the takaful industry from Bank Negara Malaysia, the Malaysian central bank’s website, while macroeconomic data have been collected from the World Bank’s website. Regression analysis has provided statistically positive evidence that takaful industry growth can contribute towards economic development. While this study is limited to Malaysian context, it is expected that future studies can improve generalizability by exploring a global scenario. In fact, this study is unique in the sense that it provides empirical evidences that allow regulators and takaful operators to realize the contribution of takaful industry towards the economy.

Abu Umar Faruq Ahmad, Rashedul Hasan

Islamic Financial Inclusion: Cases and Modeling

Frontmatter

Chapter 7. Making Islamic Finance a Vehicle for Social Inclusion: A Case for Revisiting the Liquidity Management Practices by Islamic Banks

Abstract

Islamic finance is theoretically said to be leading to socioeconomic inclusion, balanced development of human societies and economies by the dint of its established strengths of ban on interest, avoidance from gharar, short selling and speculation, financing of certain economic sectors, and its profit and loss sharing and asset-backing principles. However, its growth is hampered by the shortage of liquidity management (LM) tools. Although liquidity shortage is a genuine concern for Islamic banks, excess liquidity has been the hallmark rendering liquidity management a case of profit maximization even where it leads to the compromise on Shariah principles and becoming a conduit for transfer of liquidity to the interest-based system. This chapter analyzes such products/practices and suggests policy changes for the evolvement of a real, stable, and sustainable Islamic system of finance—a means for achieving the SDGs with focus on fair and just distribution of benefits of sustainable growth.

Muhammad Ayub

Chapter 8. Improving Access to Financial Services: Theory and Practice Around the Globe

Abstract

Lack of access to formal financial services for poor segments of the society and its potential consequences is well documented. However, researchers argue that it is not only the poor that lack access to formal financial services, but limited access to financial services by non-poor entrepreneurs is likely to be even more important for growth and overall poverty reduction (Beck et al., Access to Financial Services: Measurement, Impact, and Policies. The World Bank Research Observer, 24 (1), 119–145 2009). We therefore broaden the definitional scope of financial inclusion to include poor as well as non-poor entrepreneurs. We then use systems thinking to present causal mapping of the organic relationships found in the development theories to locate financial inclusion as a development tool to materialize the quality of life in both the worlds. To improve the operationalization of our conceptualization, we take stock of the practices around the globe by reviewing the relevant literature and present our framework to address this issue.

Muhammad Azeem Qureshi, Toseef Azid

Chapter 9. Fintech and Financial Inclusion in Pakistan: An Exploratory Study

Abstract

Fintech has the potential of promoting financial inclusion in terms of secured digital payments, financing, InsureTech, and investments through crowdfunding and P2P lending to unserved or less served businesses, start-ups, and segments of the population. Fintech is deployed using the latest technologies such as big data analytics, clouds, Internet of Things, blockchain, and artificial intelligence to provide highly secured, instant, easy-to-access, easy-to-use, low-cost, and finally more customer-centric financial services and products. For Fintech to boost Islamic financial inclusion, shariah compatibility in the applications is necessary. Empirical evidence shows that Pakistan is a highly financially exclusive country. This study provides an overview of financial inclusion and digital finance status in Pakistan, a comparative analysis of information and communication technologies (ICT) environment, and Pakistan’s performance in ICTs. This study elucidates the potential of Fintech applications and proposes a pragmatic scheme to develop a Fintech ecosystem capable of achieving the goal of financial inclusion in Pakistan.

Hassnian Ali, Rose Abdullah

Chapter 10. Financial Inclusion for Farmers Through Appropriate Financing Products: Analytic Network Process Approach

Abstract

Food security is an issue worldwide, including in Indonesia a developing agricultural country. Yields from farming are deemed insignificant and take time. Farmers and land owners tend to sell their land for fast cash. Access to capital is also a major issue since crops, such as rice, mature in several months, which constrains the banking industry from financing farmers. Baitul Maal Wat Tamwill, Demak, Indonesia, offers a financing mode that accepts payment after harvest. This research analyzes benefit, opportunity, cost, and risk (BOCR) elements of product implementation. Analytic network process (ANP) is applied. All elements are observed from farmers’ perspective and the IFIs/BMT’s wide in-depth interviews. Results from pairwise comparisons indicate that the benefit and opportunity of this product have more significant weight compared to cost and risk elements. Alternative strategies for maximizing benefit and opportunity while minimizing cost and risk are proposed.

Dika Megantara, Anita Priantina

Chapter 11. Skill-Based and Interest-Free Microfinance Model of Entrepreneurship as the More Sustainable Model

Abstract

The chapter investigates whether or not skill-based interest-free microfinance to entrepreneurs in Pakistan is a more sustainable model of microfinance. The study is quantitative (descriptive statistics) and qualitative (multiple cases of Pakistani entrepreneurs who have successfully initiated their own businesses) in nature. The researchers are interested to compare three entrepreneurs’ microfinance models prevailing in the country which are interest-free skilled-based financial investment, interest-free financial investment and interest-based financial investment. The findings verify that out of tthree models discussed in this chapter, the skilled-based and interest-free model of microfinance is not only innovative but also more sustainable model of microfinance for entrepreneur.

Farhat Mahmood, Adeeba Ishaq

Backmatter

Titel: Enhancing Financial Inclusion through Islamic Finance, Volume I
herausgegeben von: Abdelrahman Elzahi Saaid Ali
Dr. Khalifa Mohamed Ali
Muhammad Khaleequzzaman
Verlag: Springer International Publishing
Electronic ISBN: 978-3-030-39935-1
Print ISBN: 978-3-030-39934-4
DOI: https://doi.org/10.1007/978-3-030-39935-1