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Borsa Istanbul Review xxx (xxxx) xxx
http://www.elsevier.com/journals/borsa-istanbul-review/2214-8450

Full Length Article

Does Islamic microfinance serve maq
asid al-shari'a?

Ahmed Mansoor Alkhan a, M. Kabir Hassan b,*
a
Department of Islamic Banking, University of Bahrain, P.O. Box 32038, Sakheer, Kingdom of Bahrain
b
Department of Economics and Finance, University of New Orleans, New Orleans, LA, 70148, USA

Received 16 February 2020; revised 4 July 2020; accepted 24 July 2020

Available online ▪ ▪ ▪

Abstract

The purpose of this paper is to analyze whether the practice of Islamic microfinance serves maq
asid al-shari'a (underlying intents of Islamic
law) or not. The paper uses a qualitative methodology. Using the literature, five key factors of maq
asid al-shari'a (underlying intents of Islamic
law) pertaining to an Islamic economy and mal (wealth) are developed, which are then used as a base of analysis for analyzing whether the practice
of Islamic microfinance serves maq
asid al-shari'a. The research further uses an Islamic microfinance window based in Kyrgyzstan as a case study.
The empirical data and analysis indicates that Islamic microfinance contributes to serving many key aspects of maq
asid al-shari'a, including: (1)
Poverty reduction (2) economy enhancement (3) enhancing social condition of society (4) wealth distribution and circulation, and (5) enhancing
intellectual levels of society. This research may have contributed to knowledge by possibly being one of the first researches analyzing the impact of
Islamic microfinance on maq
asid al-shari'a, by using contemporary empirical data from Kyrgyzstan (2017 onwards) as a case study.
_
Copyright © 2020, Borsa Istanbul Anonim Şirketi. Production and hosting by Elsevier B.V. This is an open access article under the CC BY-NC-
ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

JEL classification: E49; G30; Q01

Keywords: Islamic microfinance; Islamic finance; Maq
asid Al-Shari'a; Islamic law

1. Introduction this component of Islamic banking and finance e Islamic

There has been a debate whether modern Islamic financial
practices fulfill maq
asid al-shari'a (underlying intents of Is-
lamic law) or not. The Islamic finance industry has often been
criticized for not complying with Shari'a (Islamic law) and not
fulfilling maq
asid al-shari'a (Moqbel, 2014). Most of these
claims however were attributed to Islamic banking as a whole,
or certain components of Islamic banking such as Islamic
retail and wholesale banking.
Islamic microfinance is one of the offshoots of Islamic
banking and finance. Abdul Rahman (2007) argued in 2007
that Islamic microfinance was a missing component in Islamic
banking. Since then however, a number of Islamic micro-
finance initiatives have emerged. This paper examines whether
* Corresponding author.
E-mail addresses: ahmed.alkhan@hotmail.com (A.M. Alkhan), mhassan@
uno.edu (M.K. Hassan).
_
Peer review under responsibility of Borsa Istanbul Anonim Şirketi.
microfinance - serves maq
asid al-shari'a or not, by using a
new Islamic microfinance initiative that was launched in 2017
in Kyrgyzstan.
1.1. Research gap and aims
A review of literature indicates that there may be a lot of
literature pertaining to Islamic microfinance.1 In addition, a lot
of literature may exist in terms of maq
asid al-shari'a and its
relationship with Islamic banking as a whole.2 However, there
1
For example, please see: Ahmed (2002); Abdul Rahman (2007);
Obaidullah (2008); Obaidullah and Khan (2008); Seibel (2008); Wilson
(2007); Abdul-Rahman (2010); El-Komi and Croson (2013); Abdul Rahman
and Dean (2013); Dusuki (2008); amongst others.
2
For example, please see: Mohammad and Shahwan (2013); Abozaid and
Dusuki (2007); Antonio, Sanrego, and Taufiq (2012); Ahmed (2011); Asutay
and Harningtyas (2015); Abu Hurayra (2015); Mohammed (2009); amongst
others.

https://doi.org/10.1016/j.bir.2020.07.002
_
2214-8450/Copyright © 2020, Borsa Istanbul Anonim Şirketi. Production and hosting by Elsevier B.V. This is an open access article under the CC BY-NC-ND
license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
_
Please cite this article as: Alkhan, A. M., & Hassan, M. K., Does Islamic microfinance serve maq
asid al-shari'a?, Borsa Istanbul Review, https://doi.org/10.1016/
j.bir.2020.07.002
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A.M. Alkhan, M.K. Hassan / Borsa Istanbul Review xxx (xxxx) xxx
seems to be limited literature or research papers specifically
addressing whether the concept of Islamic microfinance serves
maq
asid al-shari'a or not.3 Furthermore, there does not seem
to be a research paper that uses contemporary data (2017
onwards) from Kyrgyzstan as a case study. Therefore, this
research tries to tap into these two research gaps, which may
be a valuable contribution to knowledge. Thus, the following
research aims were developed:
1. To theoretically explore the concept of microfinance and
maq
asid al-shari'a (underlying intents of Islamic law)
related to transactions.
2. To investigate the practice of Islamic microfinance, and
analyse whether the practice of Islamic microfinance
contributes in serving maq
asid al-shari'a (underlying in-
tents of Islamic law), by using an Islamic microfinance
window in Kyrgyzstan as a case study.
1.2. Research outline
Following this introductory section, section 2 reviews
literature pertaining to microfinance, maq
asid al-shari'a and
Islamic finance, maq
asid al-shari'a of an Islamic economy and
m
al (wealth), Shari'a ruling for micro-lending, Islamic
microfinance, and concludes by providing a literature sum-
mary. Section 3 is the research methodology section, which
explains the use of a qualitative methodology and an Islamic
microfinance institution in Kyrgyzstan as a case study. Section
4 is the empirical section that provides the empirical data and
analysis. Section 5 offers a conclusion.
2. Review of literature
2.1. Microfinance
The Microcredit Summit (1997) defines microfinance as a
program that extends small loans to people below the poverty
line in order to engage in self employed projects that generate
income, thereby allowing them to provide for themselves and
their families. Robinson (2001) explains that microfinance
refers to small-scale financial services provided to the poor.
Microfinance has also generally been seen as a significant tool
for poverty alleviation (Morduch, 2000; Obaidullah, 2008).
Leading advocates of microfinance claim that those who
follow principles of good banking, such as microfinance, are
the most who will contribute to poverty reduction (Morduch,
2000). Abdul Rahman (2007) further puts forth the argument
of microfinance advocates, who claim that microfinance has
helped reduce poverty, enhanced educational levels, and either
resulted in the establishment or expansion of millions of small
businesses. Ahmed (2002) suggests that the growth of
3
The researcher found one paper authored by Ismail and Arshad (2010),
which is a conference paper that used a quantitative methodology and focused
on evaluating whether microfinance achieves maq
asid al-shariah through
financial ratios.
Please cite this article as: Alkhan, A. M., & Hassan, M. K., Does Islamic microfinance serve maq
asid al-shari'a?, Borsa Istanbul Review, https://doi.org/10.1016/
j.bir.2020.07.002
microenterprises or small businesses may result in employ-
ment generation and development of poor countries. In short,
we may conclude that microfinance refers to small loans
provided to the poor that may be utilized for income-
generating activities, and it has been used as a tool to alle-
viate and/or reduce poverty.
A review of literature also indicates that the terms
“microfinance” and “poverty”, almost go hand in hand
together. Whether it may be microfinance fighting poverty,
microfinance eradicating poverty, microfinance contributing to
poverty reduction, or otherwise.4 Many microfinance litera-
tures also have the two terminologies “microfinance” and
“poverty” included within their title.5 This may support the
notion that according to literature, the main philosophy behind
microfinance is to address the challenge of poverty, whether
internationally or locally.
It may be concluded by this section, that there seems to be
no question about the objective of microfinance or its intended
implications, which is to combat poverty.
2.2. Maq
asid Al-Shari'a (Underlying intents of Islamic
law) and Islamic finance
Islamic finance is a system of finance that operates according
to the principles of Shari'a (Islamic law) (Alkhan, 2016; Abdul-
Raheem 2010; Kettel, 2011; Abdul Rahman, 2010; Soumare,
2008; Ayub, 2007). The Shari'a is often translated to Islamic
law,6 which consists of rulings derived from four main sources,
namely: The Holy Qur'an, Sunnah (Prophetic Sayings and Tra-
ditions), Ijma’ (Consensus), and Qiyas (Analogy) (Ahdar &
Arony, 2010; Auda, 2008; Ayub, 2007; Farooq & El-Ghattis,
2018; Possami, Richardson, & Turner 2015; Jokisch, 2007;
Prince, 1986). Amongst other sources used in the absence of
specific guidance from the Qur'an and Sunnah (Prophetic sayings
and traditions) include istihsan (juristic preference), ‘urf
(custom), and istislah or maslaha mursalah (public interest)
(Farooq & El-Ghattis, 2018). Each ruling in Shari'a, whether
general or specific, has a deeper meaning with wisdom behind it
(Alkhan, 2016; Ash-Shubail
, 2015; Auda, 2008). This is referred
to as maq
asid al-shari'a (Abdel-Sal
am 2008; Al-Sh
atibï 2008;

ur, 2004; Khall
af, 1993; Al-Amidi,
Ibn Ash

1981; Al-Ghazali &
Abï, 1971).
One of the leading classical Shari'a scholars, Imam Al-
Ghaz
alï, explains that the maq
asid al-shari'a in relation to
creation is to protect and preserve for them their: (1) deen
(religion/faith), (2) nafs (oneself, lives), (3) ‘aql (intellect), (4)
nasl (posterity/decendents), and (5) m
al (wealth) (Al-Ghazali
& Abï, 2008 & Al-B
utï, 2009).
4
For example, please see: Morduch (1999); Morduch (2000); Banerjee,
Duflo, Glennerster, and Kinnan (2015); Cull, Demirgüç-Kunt, and Morduch
(2009), amongst others.
5
For example, please see: Robinson (2001); Rhyne (2001); Khandker
(2005); Ledgerwood and White (2006); amongst others.
6
Although, some authors have recently argued that translating the term
“Shari'a” into “Islamic law” may not be the most suitable terminology. Please
see Farooq and El-Ghattis (2018) for more elaboration.
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A.M. Alkhan, M.K. Hassan / Borsa Istanbul Review xxx (xxxx) xxx
On a separate notion, many critics have argued that Islamic
finance does not fulfill maq

asid al-shari'a (Moqbel, 2014). An
example of this criticism is displayed below:
“One fair criticism of current Islamic finance is that it is
delinked from the broader goals or underlying intents
(maqasid ) of Islam. Thus, it is not connecting to and as
such not having any impact on the real economic chal-
lenges, such as economic development in general and
poverty, destitution, inequalities, etc., in particular.”
(Farooq, 2009, p.46)
Shari'a rulings covers a vast range of issues related to
mankind, including worship, transactions, family law, amongst
others (Farooq & El-Ghattis, 2018). As Islamic finance is a
component of an Islamic economy and mainly deals with trans-
actions, the following section (section 2.2.1) mainly focuses on
the maq
asid al-shari'a pertaining to an Islamic economy, in
addition to the maq
asid al-shari'a mentioned by Al-Ghazali and
Abï (2008) in his fifth category, which is m

al (wealth).
2.2.1. Maq
asid Al-Shari'a of an Islamic economy and M
al
(Wealth)
Al-Qura-D
aghï (2011) explains that the maq
asid al-shari'a
of an Islamic economy includes the general development of
the human being and the society economically, socially,
culturally, and intellectually (Alkhan, 2016; Al-Qura-D
aghï,
2011). Another maqsad (objective) is the protection of
wealth along with its enhancement through investments and
engagement in business contracts in a risk-mitigated manner,
and to manage m
al (wealth) in a balanced manner (Al-Qura-
D
aghï, 2011). Also, literature suggests that one of the main
maq
asid al-shari'a is poverty alleviation (Ash-Shubail
, 2015).
Since one of the main objectives behind microfinance is to
alleviate/reduce poverty (Morduch, 2000), which in turn en-
hances the socio-economic condition of societies, we may
conclude that this objective and implication goes hand in hand
with some of the main maq
asid al-shari'a, which is to enhance
the socio-economic condition of humans, society, and alleviate
poverty (Al-Qura-D
aghï, 2011; Ash-Shubail
, 2015).
Al-Qaradh
awï (2008) also explains that there are several types
of maq
asid (underlying intents) that are related to m

al, including
wealth circulation and distribution (Al-Qaradh
awï, 2008;
Alkhan, 2016). As literature suggests that microfinance helps the
establishment/enhancement of businesses and wealth circulation
and distribution (Ahmed, 2002), this may also support the notion
that the objective behind microfinance is similar to a number of
key maq
asid al-sharia. As this suggestion is based on literature,
the empirical section (section 4) investigates whether the practice
of Islamic microfinance actually contributes to serving maq
asid
al-shari'a as described in literature.
2.3. Shari'a (Islamic law) ruling for microfinance
One of the central and main prohibitions in Islamic finance is
the engagement in riba (commonly referred to as interest or
usury) (Ayub, 2007). The term riba means “an addition, how-
ever low in number, over and above the principal of a loan or
Please cite this article as: Alkhan, A. M., & Hassan, M. K., Does Islamic microfinance serve maq
asid al-shari'a?, Borsa Istanbul Review, https://doi.org/10.1016/
j.bir.2020.07.002
3
debt” (Alkhan, 2016, p. 52). According to Ayub (2007), there is
no difference of opinions between Shari'a scholars pertaining to
the prohibition of riba. Since microfinance generally deals with
the engagement in riba through microloans, conventional
microfinance may in essence contravene Islamic financial prin-
ciples (Ahmed, 2002). However, if Shari'a rulings are legislated
in a manner to achieve specific and general maq
asid al-shari'a,
including wealth circulation, socio-economic enhancement of
societies, and eradication of poverty, why should conventional
microfinance be prohibited if it has similar objectives?
We may suggest that although conventional microfinance
has similar objectives and implications with some of the main
maq
asid al-shari'a, the method of conventional microfinance
contravenes Shari'a rulings. Still however, why is riba unan-
imously and unequivocally prohibited even though it may be
used as a means to achieve maq
asid al-shari'a through con-
ventional microfinance?
Researchers have mainly argued that the prohibition of riba
is largely prohibited due it resulting in a negative distributive
justice and equity effects (Alkhan, 2016; Khan, 1986; Visser &
McIntosh, 1998). The argument includes that a riba-based
system makes the rich richer, and the poor poorer.7 This may
be even truer in microfinance relative to normal financings,
since microfinance clients are usually the poor, who are also
usually charged with high interest rates (Hassan, Kayed, &
Oseni, 2013). Below is an example of this argument:
“Modern microfinance schemes, even in some Muslim
countries, are dominated by interest-based products that can
further impoverish low-income individuals. These interest-
based schemes, originally meant to provide access to credit
for the poor, may end up further impoverishing the, espe-
cially when the capital of interest increasing with every
passing day. The impact of high interest-rates on micro-
finance schemes will definitely be counterproductive.”
(Hassan et al., 2013, p.333)
The quotation above may indicate that although micro-
finance initially aims to enhance the socio-economic condition
of the borrower, interest-based microfinance schemes may
actually have an opposite affect. This argument may further be
strengthened since financial experts have suggested putting a
cap or ceiling on microfinance interest rates, due to a rise in
interest rates (Hassan et al., 2013).
Pro-interest advocates have argued that as the running costs
of microfinance are high, microfinance institutions must
charge high interest rates (Hassan et al., 2013). Even though
microfinance institutions may receive concessional funds to
finance their lending, pro-interest advocates have maintained
their argument that as concessional funds are not permanent
sources of finance, microfinance institutions must still rely on
high interest rates (Hassan et al., 2013). Although this argu-
ment justifies the need to charge higher rates to
7
These points may be considered as some of the maq
asid (objectives) as to
why Shari'a (Islamic law) prohibits riba (commonly referred to as interest or
usury).
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A.M. Alkhan, M.K. Hassan / Borsa Istanbul Review xxx (xxxx) xxx
mathematically achieve a return to cover running costs, it does
not seem to address the challenges that may arise from high
interest rate microfinance lending and its possible negative
implications. Therefore, this section supports the notion set
forth by Hassan et al. (2013) that conventional microfinance
may in reality be counterproductive.
2.4. Islamic microfinance
It was explained in the previous section (section 2.3) that
conventional microfinance contravenes Shari'a rules and
principles, mainly due to charging usury or interest on
microloans (Ahmed, 2002). Islamic microfinance refers to
microfinance schemes that conform to Shari'a principles. Is-
lamic microfinance may also be defined as:
“[T]he process of providing small-scale financial services,
based on Shari'ah concepts, to the poor who may be
excluded from formal financial services, without putting
any burden on the parties either in the form of interest or
undue benefits” (Hassan et al., 2013, p.330).
A lot of literature indicate that the first modern Islamic
finance initiative was in the 1960s in a remote village of Mit
Ghamr in Egypt, thereafter detailing the continuation of
modern Islamic banking by mentioning the establishment of
Dubai Islamic Bank in 1975, Kuwait Finance House in 1977,
Bahrain Islamic Bank in 1979, onwards (Hassan et al., 2013).
However, it may be worth mentioning that the first modern
Islamic finance initiative in Mit Ghamr in Egypt was in fact an
Islamic microfinance scheme (Hassan et al., 2013). This in
itself proves that the first launched thought or project of
modern Islamic banking and finance has its roots in Islamic
microfinance. Therefore, Islamic microfinance may have been
the reason behind the expansion of the later established Is-
lamic banking and finance institutions. The later established
Islamic banks however were not necessarily Islamic micro-
finance institutions, but rather Islamic retail/wholesale banks.
Islamic microfinance, the suggested real cause behind the
expansion of modern Islamic banking, may have been a
missing component within the expansion of Islamic finance, as
claimed by Abdul Rahman (2007) back in 2007. Since then
however, we have witnessed several initiatives that have taken
place to establish the new concept of Islamic microfinance. An
example of this includes Family Bank in the Kingdom of
Bahrain, which was established in 2010, who adopted the
Grameen model of microfinance but converted it into a Shari'a
compliant manner (Hassan et al., 2013).
One may ask, how can micro financings be provided to
clients in a Shari'a compliant manner and without charging
interest? Islamic microfinance products have included the Is-
lamic financial products generally used in Islamic banking in-
dustry, such as qardh hasan (benevolent loan), mur
abaha (cost-
plus sale), ij

ara (lease), salam (forward sale), mudh

araba (trust
partnership), mush
araka (joint venture partnership), amongst
others (Hassan et al., 2013). These Islamic banking products
may be considered as alternatives to the prohibited interest-
based products used in conventional banking.
Please cite this article as: Alkhan, A. M., & Hassan, M. K., Does Islamic microfinance serve maq
asid al-shari'a?, Borsa Istanbul Review, https://doi.org/10.1016/
j.bir.2020.07.002
It may be concluded from this section that Islamic micro-
finance may provide an alternative to conventional micro-
finance schemes. Further literature comparing the affects of
these Islamic microfinance products in comparison to the
interest-based conventional microfinance products has on so-
ciety may also prove beneficial. Theoretically, these Islamic
microfinance schemes may not have the same negative effects
that conventional microfinance may have on society by
charging high interest rates.
2.5. Literature summary
Although the objective of conventional microfinance is
confronting the challenge of poverty, which in turn serves
maq
asid al-shari'a, the engagement in riba may end up being
counterproductive. Islamic microfinance may offer a suitable
substitute, since literature tends to suggest that it has same
objective as conventional microfinance however without
engagement in riba. Therefore, it may be suggested that Is-
lamic microfinance may actually contribute to serving
maq
asid al-sharia without being counterproductive.
As presented throughout the review of literature, we find
that many of the objectives and implications of microfinance
are similar to a number of main maq
asid al-shari'a relating to
an Islamic economy and m
al. Table 1 helps illustrate this
matter more clearly:
Table 1 may represent a summary of the theory behind the
objectives and implications of microfinance and maq
asid al-
shari'a. Thus, in accordance with the literature provided
throughout section 2, we may conclude that if Islamic
microfinance - in practice and reality - contributes to the
following five key factors (displayed in Table 2), then this may
support the notion that Islamic microfinance contributes to
serving some of the key maq
asid al-shari'a related to an Is-
lamic economy and m
al:
As witnessed in section 3 (research methodology section),
the key factors displayed in Table 2 were used as a base to
generate analysis questions for the empirical enquiry. Section
3 describes the research methodology in more detail.
3. Research methodology
This paper uses a qualitative methodology. A qualitative
methodology can be used to undertake specific procedures and
accomplish the research aims set out for a project (Dawson,
2002; Munro, 2006). Literature suggests that qualitative
research involves a holistic approach through discovery
(Creswell, 1994). Although literature indicates that qualitative
research may be argued as being less valid than quantitative
research, Gray (2009) argues that qualitative data can be a
powerful source of analysis.
8
This objective or implication is also similar to the third maq
asid al-shari'a
(objectives of Islamic law) category provided by Al-Ghazali and Abï (2008),
which is to protect and preserve the intellect of creation.
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A.M. Alkhan, M.K. Hassan / Borsa Istanbul Review xxx (xxxx) xxx
Table 1
Objectives of microfinance and maq
asid al-shari'a.
Main Objectives or Implication of Microfinance
Alleviate/Reduce Poverty (Morduch, 1999)
Enhance the economy (Robinson, 2001)
Enhance social condition of society (Rhyne, 2001)
Helps with wealth distribution and circulation (Ahmed, 2002)
Enhanced educational levels 8 (Abdul Rahman, 2007)
Table 2
Key Factors of maq
asid al-shari'a.
Key Factors
1. Reduction and/or alleviation of poverty
2. Enhancement of the economy
3. Enhancement of the social conditions of society
4. Contributes to wealth circulation and distribution
5. Enhancement of intellectual/educational levels of society
Furthermore, one of the most common ways to engage in
qualitative research involves using a case study (Denzin &
Lincoln, 2005). According to Yin (2003), a case study
partially enables researchers to analytically generalize certain
theories. A case study also includes investigating primary (and
secondary) data relating to the subject within the context of a
research (Hartley, 2004).
This paper uses an Islamic microfinance window based in
Kyrgyzstan as a case study. This is referred to as a “single/
holistic” type of case study (Gray, 2009). To respect their
privacy, the research refers to this institution as Islamic
Microfinance Company A (hereafter IMCA).
3.1. About Kyrgyzstan
The Kyrgyz Republic (or Kyrgyzstan) is one of twelve
Commonwealth of Independent States (CIS) countries
(Encyclopedia, 2018). Statistics indicate that in 2018, the popu-
lation of Kyrgyzstan was around 6.15 million people (World
Population Review, 2018). The other eleven countries are
Russia, Belarus, Ukraine, Armenia, Azerbaijan, Kazakhstan,
Moldova, Tajikistan, Turkmenistan, Uzbekistan, and Georgia.
According to literature, around 83% of the population in
Kyrgyzstan are Muslims, followed by 15% Christians. Along
with other CIS countries, Kyrgyzstan was formerly part of the
Soviet Union (Britannica, 2018). When the Soviet Union
collapsed in 1991, Kyrgyzstan was one of the countries estab-
lished as part of the CIS (Department of State, 2018).9
According to the Asian Development Bank (ADB), 32.1%
of the Kyrgyz population lived below the national poverty line
in 2015, followed by 25.4% in 2016 (Asian Development
9
The Kyrgyz Republic shares its borders with four countries, namely
Kazakhstan on its north, Uzbekistan on its west, Tajikistan on its south, and
China on its east (World Atlas, 2018).
10
An official statistic for the percentage of population below the poverty line
in 2017 could not be located at the time of conducting this research.
Please cite this article as: Alkhan, A. M., & Hassan, M. K., Does Islamic microfinance serve maq
asid al-shari'a?, Borsa Istanbul Review, https://doi.org/10.1016/
j.bir.2020.07.002
5
A Number of Main Maq
asid Al-Shari'a of an Islamic Economy and M
al (Wealth)
Alleviate/Reduce Poverty (Ash-Shubail
, 2015)
Enhance the economy (Al-Qura D
aghï, 2011)
Enhance social condition of society (Al-Qura D
aghï, 2011)
Wealth distribution and circulation (Al-Qaradh
awï, 2008)
Enhance intellectual levels of society (Al-Qura D
aghï, 2011)
Bank, 2018)10. If one were to calculate these percentages
with an average population of six million people for indicative
purposes, we may conclude that those living below the na-
tional poverty line may vary between 1.5 and 2 million people
in recent years. This may be considered as significantly high
when discussing the pivotal issue of poverty. Ali et al. (2013)
argued that conventional finance failed in providing inclusive
growth to the world economies, and discussed the potential
role of Islamic finance in playing a significant role to address
these challenges using Kyrgyzstan11 in one of its case studies.
It may be concluded that launching Shari'a compliant micro-
finance may be a good initiative in the Kyrgyz market.
3.1.1. Islamic finance and microfinance in Kyrgyzstan
Relative to the international Islamic financial market, the Is-
lamic financial industry in Kyrgyzstan may be considered as new
and quite young. The first fully-fledged Islamic bank established
in Kyrgyzstan was Echo Islamic Bank in 2007, followed by
conventional banks/institutions who established Islamic win-
dows in recent years such as 2016 and 2017 (National Bank of
Kyrgyzstan, 2018). Empirically investigating contemporary Is-
lamic microfinance data from Kyrgyzstan may be valuable in
terms of contribution to knowledge. This may be especially true
since evidence suggests that not a lot of CIS countries have
adopted the concept of Islamic microfinance in the past
(Obaidullah & Khan, 2008).
3.2. Method of data collection
Methodological scholars suggest that one of the main ap-
proaches to qualitative research in terms of data collection and
analysis is conducted through interviews (Flick, 2006; Gray,
2009). As such, the researchers traveled to Kyrgyzstan to
conduct face-to-face interviews with key personnel working
closely within the Islamic microfinance operational settings.
Specifically, interviews were conducted with two key in-
dividuals: one is the Head of Internal Shari'a Control depart-
ment at IMCA, and the other is the Head of Islamic Window
department at IMCA. This was because the Head of Internal
Shari'a Control, due to the nature of the job, would closely be
linked to all the Shari'a aspects of the Islamic microfinance
operations. On the other hand, the Head of the Islamic Win-
dow department would have all the data and information
pertaining to the actual operations (for example, amounts of
11
The other case study was Tajikistan.
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A.M. Alkhan, M.K. Hassan / Borsa Istanbul Review xxx (xxxx) xxx
finances disbursed), in addition to other data that may be
beneficial for this research project. This way, the researchers
would gain access to data that are retrieved directly from se-
nior IMCA staff working closely with the Islamic micro-
finance operations, which may add to the authenticity to the
data collected. This data may also be considered as crucial
data retrieved through the interviews, since this data did not
seem to be available publicly or in other published research.
This also strengthened the argument for interviews to be the
main data collection method for this research.
Face-to-face interviews were conducted with both in-
terviewees on 30 January 2020, at the headquarters of IMCA
in Bishkek, Kyrgyzstan. The reason for conducting the in-
terviews at the headquarters of IMCA in Kyrgyzstan was to
gain an intense contact within the field or real-life setting,
where methodological scholars have also explained that
engaging in a real-life setting is a beneficial characteristic
involved in qualitative research (Miles & Huberman, 1994).
Additionally, Gray (2009) claims that interviews may be a
useful tool since interviewees may enjoy talking about their
work rather than solely filling in questionnaires.
The interviews conducted were semi-structured. Semi-
structured interviews are often used in qualitative research
(Gray, 2009). This is because the researchers wanted to ask the
interviewees specific questions to obtain the data, while
simultaneously remaining flexible since other general infor-
mation arising from the interview may be significant to the
research. Dawson (2002) explains that this semi-guided
interview process with room for flexibility is conducted
through semi-structured interviews. Semi-structured in-
terviews may also allow interviewees to reflect upon events
through discussion rather than solely writing down responses
(Gray, 2004), which may be more beneficial since the project
has a philosophical aspect to it. Thus, the interview questions
were designed in a manner to allow the researchers to obtain
data on specific information, while however leaving room for
informal discussions to arise throughout the interview process
to obtain other information that may be relevant to the
research. Specifically, in order to obtain the data from IMCA
with regards to Islamic microfinance (while leaving room for
flexibility throughout the interview/discussion), the following
questions were posed to the interviewees:
1. When did you start your Islamic microfinance operations?
2. How many Islamic microfinance clients did you have as of
2019?
3. Do Islamic microfinance clients mainly obtain Islamic
micro financings for personal use or income generating
activities?
4. What is the total amount of finance disbursed for Islamic
microfinance purposes?
5. Can you provide examples on whether the practice of Is-
lamic microfinance at IMCA serves certain social causes?
6. What are the main Islamic financing products IMCA uses
for its Islamic microfinance operations?
7. Does IMCA finance suppliers as well, or solely individual
clients?
Please cite this article as: Alkhan, A. M., & Hassan, M. K., Does Islamic microfinance serve maq
asid al-shari'a?, Borsa Istanbul Review, https://doi.org/10.1016/
j.bir.2020.07.002
a. If IMCA finances suppliers, do you have access to
their financials? If so, have you analyzed the sup-
pliers' performance pre and post obtaining financing
from IMCA?
8. Can you provide examples on why/how IMCA finances
clients through on product over another (for example: such
as ij
ara financing as opposed to mur
abaha financing?)
9. What is your overall view on the practice of Islamic
microfinance at IMCA, and its advantages/disadvantages
on Kyrgyzstan socially and economically?
As the above displays the research method used to collect
the data, the following section displays the research method
used to analyse the data.
3.3. Method of data analysis
Having obtained the data through interviews, a suitable
research method needed to be adopted in terms of analysis.
Qualitative content analysis is an approach to documents
where the researchers play an imperative role in constructing
the meanings within the texts (Bryman, 2004). A qualitative
content analysis includes “recognizing the significance for
understanding the meaning of the context in which an item
being analyzed (and the categories derived from it) appeared”
(Bryman, 2004, p. 542). During the review of literature,
certain crucial categories were emerging, which were
considered as key aspects that need to be investigated when
analysing whether the practice of Islamic microfinance serves
maq
asid al-shari'a or not (please refer to section 2.5 for
clarification on what the key aspects are). Qualitative content
analysis involves a theory-guided approach of analysis using
categorical system (Kohlbacher, 2006). The categories that
emerged as a result of the review of literature (displayed in
section 2), resulted in five key factors that needed to be
analyzed to help fulfill the aims of this research project. To
elaborate, in line with the five key factors set out in section 2.5
(literature summary section), the following questions were
produced that may help analyse whether Islamic microfinance
contributes to serving maq
asid al-shari'a:
As also indicated in the literature summary section, Table
3 above represents the categorical system established as
analysis questions that are used to analyse whether the
practice of Islamic microfinance contributes to serving
maq
asid al-shari'a or not. The following empirical section
Table 3
Analysis questions.
No. Analysis Questions
1 Does Islamic microfinance help reduce or alleviate poverty?
2 Does Islamic microfinance help enhance the economy?
3 Does Islamic microfinance help enhance the social condition of
society?
4 Does Islamic microfinance contribute to wealth circulation and
distribution?
5 Does Islamic microfinance contribute to the intellectual/educational
enhancement of individuals in a society?
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A.M. Alkhan, M.K. Hassan / Borsa Istanbul Review xxx (xxxx) xxx
uses the above displayed questions to analyse the informa-
tion obtained from interviews to investigate this matter
further.
4. Empirical data and analysis
As explained in the previous section (section 3), this
empirical section provides the empirical data obtained from
the interviews, and qualitatively analyses the data in accor-
dance with the analysis questions displayed in section 3.2. The
following sections (4.1e4.5) display the data and analysis,
while concludes (in section 4.6) by providing an empirical
analysis and summary.
4.1. Analysis question one: does Islamic microfinance
help reduce or alleviate poverty?
Having started its Islamic microfinance operations in
2017, evidence suggested that IMCA had 294,930 Islamic
microfinance transactions by 31 December 2019. According
to the data provided by the Head of the Islamic Window
department at IMCA, it seemed that around 10% of the
Islamic microfinance transactions were returning clients.
Thus, it seems that the Islamic micro financing projects
benefited around 265 thousand citizens in Kyrgyzstan.
Considering the short span of time since the launch of Is-
lamic microfinance operations by IMCA, the number of
citizens who may have benefited from this scheme may be
considered as considerably significant. Furthermore, it
seemed apparent from the data provided that many of the
clients did not previously have access to financings (whether
conventional or Islamic), who further did not have a
recorded credit history. This may further represent a sig-
nificant portion of financial inclusion, where citizens who
may not have had access to credit were now able to obtain
Islamic financings for various purposes.
However, evidence tended to suggest that many of the
clients might have obtained micro financings for personal use
rather than income-generating activities. Therefore, these cli-
ents may have not necessarily improved their financial con-
ditions as a result of these financings, but rather benefited from
a service that seemed to have not been available to them
previously. On the other hand, evidence tends to suggest that
many other clients have improved their financial condition by
obtaining Islamic micro financings. This seemed to be mainly
through selling a purchased commodity from IMCA in the
market as an income generating activity. Therefore, although
improving the financial condition of Kyrgyz citizens could not
be verified to clients who obtained Islamic micro financings
for personal use, evidence tends to suggest that it improved the
financial condition of Kyrgyz citizens who obtained Islamic
micro financings for income generating activities.
Please cite this article as: Alkhan, A. M., & Hassan, M. K., Does Islamic microfinance serve maq
asid al-shari'a?, Borsa Istanbul Review, https://doi.org/10.1016/
j.bir.2020.07.002
7
4.2. Analysis question two: does Islamic microfinance
help enhance the economy?
According to the data provided by the Head of Islamic
Window department at IMCA, as of 31 December 2019,
IMCA disbursed around USD 66 million through Islamic
microfinance transactions. This may also present evidence for
a notable amount that was dispersed (as opposed to no amount
being dispersed). Also, considering the mandatory tax laws in
Kyrgyzstan (according to the data collection process; stood at
2%), evidence further tended to suggest that as a result of
income generated by IMCA, significant tax amounts were
being paid to the tax authorities. Thus, these amounts may be
considered as one of the contributions for enhancing the
economy.
Furthermore, as mentioned in the previous section of
analysis question one, many clients obtain Islamic micro fi-
nancings for income-generating activities. Evidence suggested
that many clients approaching IMCA for financings initially
engaged in business activities through a self-employed and
unofficial status. Thus, without a registered business license,
such clients may have not necessarily paid taxes on any in-
come generated. However, as a prerequisite for disbursing an
Islamic microfinance amount for income generating activities,
IMCA requires all clients to register with the tax authority
before approving any financial disbursements. Thus, many
clients also ultimately contribute to the economy by paying a
specific percentage from their income to the tax authorities,
thereby contributing to the state budget.
Furthermore, evidence suggested that IMCA deals with
various suppliers to provide the commodities financed for
clients. Due to Kyrgyzstan not necessarily being currently a
developed country, many suppliers also seemed to have not
initially registered with the tax authorities in Kyrgyzstan.
IMCA also required all suppliers to register with the tax au-
thorities prior to signing master agreements with them. Thus,
evidence suggested that all the products sold by these suppliers
are now formally registered with the tax authorities. This may
further represent an enhancement to the Kyrgyz economy
through tax contributions to the state budget.
Additionally, as the products used by IMCA mostly
represent asset-backed financings (such as mur
abaha), this
indicates that the disbursed financed amount of around USD
66 million was pumped into the economy in Kyrgyzstan,
through business transactions such as buying and selling. This
may represent a significant contribution to the enhancement of
the economy. Furthermore, this seems to be contributing to the
real economy, a concept that seems to be imperatively dis-
cussed by a number of economists. Thus, it may be concluded
from this section that the practice of Islamic microfinance may
have contributed and played an influential role in enhancing
the Kyrgyz economy.
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A.M. Alkhan, M.K. Hassan / Borsa Istanbul Review xxx (xxxx) xxx
4.3. Analysis question three: does Islamic microfinance
help enhance the social condition of society?
The previous two sections displayed how the Islamic
microfinance practice in Kyrgyzstan may have reduced
poverty and enhanced the economy in Kyrgyzstan. By default,
and due to the fact that the social condition of society may be
interlinked with both analysis questions one and two displayed
previously, the social condition of the society in Kyrgyzstan
may have also been enhanced through a somewhat domino
effect. However, we shed light on further evidence that seems
to specifically suggest that the practice of IMCA may have
been enhancing the social condition of society in Kyrgyzstan.
Due to the nature of Kyrgyzstan as a country, many sup-
pliers operate from villages they reside in. To elaborate,
Kyrgyzstan has two main cities where businesses usually
operate from, which are Bishkek and Osh. The majority of
other business transactions seem to operate from various vil-
lages throughout Kyrgyzstan. In essence, evidence tended to
suggest that it seemed difficult for the villagers to largely
operate in terms of income-generating activities, especially
when compared to the two main cities of Bishkek and Osh.
However, the primary data collection process revealed that
IMCA helped the villagers by facilitating services to help
them sell their respective products through Islamic micro-
finance operations. Thus, many villagers who may not have
had access to potential buyers seem to now have a larger
market share in terms of business operations. This may also
indicate that their social status (especially in a business
perspective) may have enhanced through Islamic microfinance
practices in Kyrgyzstan.
Furthermore, an interesting type of transaction that seemed
evident was that IMCA provided a number of benevolent loans
(qardh hasan) to various entities that enhance the social con-
dition of society. Two main examples that may be noteworthy in
this regard were a kindergarten school and a medical hospital.
Thus, by retrieving benevolent loans, these two entities may
have enhanced their social enhancing services by gaining ac-
cess to finance without paying any additional amounts. We may
thus further conclude that the practice Islamic microfinance
may have enhanced the social condition of the society in
Kyrgyzstan not solely through profit generating Islamic
microfinance schemes, but also through benevolent loans.
4.4. Analysis question four: does Islamic microfinance
contribute to wealth circulation and distribution?
The literature indicated that although the conventional
microfinance practice may have similar goals to that of Islamic
microfinance, the interest based methods used in conventional
finance may somewhat be counter productive. For example,
the literature suggested that a segment of this counter pro-
ductivity might be due to the necessity of charging high in-
terest rates. Thus, these pure cash based and interest-lending
mechanisms may lead to the lack of wealth circulation or
distribution, where the rich seem to get richer, and the poor
Please cite this article as: Alkhan, A. M., & Hassan, M. K., Does Islamic microfinance serve maq
asid al-shari'a?, Borsa Istanbul Review, https://doi.org/10.1016/
j.bir.2020.07.002
seems to get poorer. In short, overburdening clients in debts
with high interest rates may be counterproductive.
In this regard, evidence tends to suggest that IMCA mainly
deals with three Islamic financing products. Namely, these are
mur
abaha, service-ij
ara, and istisna. In chronological order,
the primary data collection process revealed that the majority
of executed transactions were mur
abaha, followed by service-
ij
ara and istisna.
The mur
abaha represents IMCA purchasing commodities
from a supplier through spot payments, and thereafter selling
the commodities to clients through credit. This may strengthen
the argument that this Islamic financing product has contrib-
uted to wealth circulation and distribution due to various in-
dications. First, a large number of clients did not seem to be
able to purchase such commodities directly from the suppliers
on their own. Thus, IMCA may have contributed to wealth
circulation and distribution by purchasing the relevant com-
modities from suppliers, therefore increasing the suppliers’
sales and turnovers, in addition to providing clients the ability
to purchase such commodities through credit. To clarify this
argument, three main points are displayed below:
- Evidence tended to suggest that a large number of sup-
pliers noticeably increased their cash flows; and
- Clients initially unable to purchase relevant commodities
were provided the opportunity to do so, while solely minor
cases of default existed e thereby representing the ability
of the majority of clients to pay their debts; and
- IMCA retrieved their principle amounts in addition to
margin profits.
The above may somewhat present a picture of how the
practice of Islamic microfinance contributed to wealth circu-
lation and distribution. It may be imperative to note that since
conventional microfinance solely represent and interest based
method of financing, the argument of counter productivity of
conventional microfinance may somewhat be clarified when
compared to Islamic microfinance. Although both conven-
tional microfinance and Islamic microfinance seem to have the
general goal of combating poverty, Islamic microfinance may
lead to stronger results due to the methods used in Shari'a
compliant microfinance.
On a separate note, the same argument may also be pre-
sented for both the service-ijara and istisna’ products. This is
because evidence tended to suggest that service-ijara products
provided by IMCA mainly related to three services, which
were travel, medical, and educational services. Thus, various
travel agency-related entities, medical providers, and educa-
tional institutions were also the recipients of various incomes,
thereby increasing their cash flows. Likewise, istisna’ financ-
ings were provided to clients who sought specific construction
works for various reasons, where construction companies were
also recipients of various incomes, thereby increasing their
cash flows. All in all, this may represent a clear wealth cir-
culation and distribution between clients, suppliers, and fi-
nanciers (where the state budget through tax payments may
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A.M. Alkhan, M.K. Hassan / Borsa Istanbul Review xxx (xxxx) xxx
have simultaneously also increased) due to the practice of
Islamic microfinance.
It may thus generally be suggested that the practice of Is-
lamic microfinance in Kyrgyzstan contributes to wealth cir-
culation and distribution in Kyrgyzstan, thereby possibly
serving one of the key maq
asid al-shari'a. This may be
especially true when comparing the same with conventional
microfinance, which seems to solely represent an interest-
based financing mechanism that may not necessarily
contribute to wealth circulation and distribution, but rather
contain the wealth to a specific segment of society.
4.5. Analysis question five: does Islamic microfinance
contribute to the intellectual/educational enhancement
of individuals in a society?
Many key points may be raised with regards to Islamic
microfinance contributing to the enhancement of the intellec-
tual/educational enhancement of individuals in the Kyrgyz
society.
As mentioned in the previous sections, since Islamic
microfinance may have contributed in reducing poverty,
enhancing the economy in general, and enhancing the social
conditions of society, this by default may also reveal a sense of
automatic enhancements or ability by the financed individuals
to seek educational services for themselves or dependents,
thereby enhancing their intellectual abilities.
More specifically however, evidence tended to suggest that
many of the disbursed service-ij
ara financings were done so
for educational purposes. An example brought forward in the
data collection process was a client who sought financing for
education in information technology (IT). Thus, these educa-
tional financing services may further strengthen the argument
that the practice of Islamic microfinance may have been
contributing to the enhancement of educational and intellec-
tual levels of society.
Furthermore, as previously indicated (in analysis question
three); an example was brought forth where IMCA provided
benevolent loans to a kindergarten school. This indicates that this
kindergarten school may have attained the ability to enhance its
educational services provided to young individuals, thereby
enhancing their educational and intellectual abilities. However, to
further elaborate in this regard, a question was posed to the in-
terviewees as to why IMCA specifically provided a benevolent
loan to this school rather than entities or service providers. An
interesting phenomenon was raised in this regard. It seemed that
the respected owner of this school was not only keen to provide
enhanced educational services to the respective students, how-
ever was also sending school teachers to certain hospitals (such as
an oncology hospital) to teach/educate patients (free of charge) as
a social objective. Thus, not only did IMCA help enhance the
educational/intellectual level of school students, but rather the
society as a whole, by educating patients unable to seek education
due to their medical status. To conclude, it seems that IMCA
played a noticeable role in contributing to the enhancement of
educational/intellectual level of the Kyrgyz society through so-
cial financings and Islamic microfinance practices.
Please cite this article as: Alkhan, A. M., & Hassan, M. K., Does Islamic microfinance serve maq
asid al-shari'a?, Borsa Istanbul Review, https://doi.org/10.1016/
j.bir.2020.07.002
9
4.6. Empirical analysis and summary
The review of literature section displayed in section 2 (and
particularly the literature summary section displayed in sec-
tion 2.5) suggested that in order to analyse whether Islamic
microfinance serves some key aspects of maq
asid al-shari'a,
there seems to be a number of key factors that might be needed
to take into account to analyse this matter. This included five
key factors, which was to analyse whether Islamic micro-
finance contributes to reducing poverty, enhancing the econ-
omy, enhancing the social condition of society, contribute to
wealth circulation/distribution, and contribute to the
enhancement of educational/intellectual levels of society. The
empirical data and analysis section qualitatively analyzed
whether Islamic microfinance contributes to serving maq
asid
al-shari'a by analysing these five key factors. In this regard,
the empirical data and analysis section suggests that there may
be a number of points that may require deliberation.
First, in the beginning of 2017, many Kyrgyz nationals
seemed to not have access to Islamic micro financings, while
many of them may not have had access to finance in general.
As of 2019, evidence suggests that around 265 thousand citi-
zens in Kyrgyzstan obtained Islamic micro financings. This
may suggest the imperative notion of financial inclusion, ac-
cess to Islamic microfinance rather than solely conventional
financings, and poverty reduction. A point that may require
further investigation is whether the individuals who obtained
Islamic micro financings for personal use rather than income-
generating activities enhanced their financial capabilities or
independence. This was considered as a limitation and is
further mentioned in the conclusion section. However, evi-
dence did tend to suggest that many of them did enhance their
financial status by obtaining Islamic micro financings for in-
come generating activities. Thus, this possibly indicated that
the Islamic microfinance practice in Kyrgyzstan might be
contributing to serving this key aspect of maq
asid al-shari'a.
Second, as of 31 December 2019, evidence tended to
suggest that around USD 66 million was pumped into the
Kyrgyz economy through Islamic microfinance practices.
Furthermore and as a result, both IMCA and various suppliers
also paid increased amounts of tax contributions. It seems that
the practice of Islamic microfinance in Kyrgyzstan seemed to
have also contributed in enhancing the Kyrgyz economy,
thereby indicating to also contributing to this key aspect of
maq
asid al-shari'a.
Third, as a result of the two points mentioned above, the
social condition of society may have been enhanced. Addi-
tionally however, the empirical enquiry revealed that a number
of imperative benevolent loans (qardh hasan) were provided to
entities serving various social causes, thereby possibly further
enhancing the social condition of society.
Fourth, due to the nature of Islamic finance generally being
practiced though business or trade activities rather than
interest-based financing mechanisms, the practice of Islamic
microfinance may have contributed to wealth circulation/dis-
tribution in Kyrgyzstan. This argument was strengthened
through empirical evidence since it suggested that wealth was
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A.M. Alkhan, M.K. Hassan / Borsa Istanbul Review xxx (xxxx) xxx
being circulated amongst consumers, suppliers, financier, and
even the state budget through tax contributions.
Fifth, as a result of all the previously mentioned points, the
educational and intellectual level of the society in Kyrgyzstan
may have enhanced through various domino effects. However,
a specific case was further noted where IMCA provided
benevolent loans to an educational entity not only to enhance
the educational services provided to children, but rather who
also send school teachers to a certain hospital to educate
children who are unable to attend educational classrooms due
to their medical conditions.
To conclude this section, it seems the empirical data and
analysis suggest that the Islamic microfinance practice in
Kyrgyzstan seem to contribute to some of the key aspects of
maq
asid al-shari'a, including poverty reduction, economy
enhancement, enhancing social condition of society, contribute
to wealth circulation/distribution, and the enhancement of
educational/intellectual level of society. A point that may not
have been validated and required further investigation was
whether the clients who obtained Islamic micro financings for
personal use enhanced their financial status. This was thus
considered as a limitation and is therefore mentioned in the
conclusion section.
5. Conclusion
There seems to be a continued debate on whether Islamic
finance serves maq
asid al-shari'a, where Islamic finance seems to
be somewhat criticized for being delinked from the broader goals
of Shari'a. The empirical section concluded that evidence sug-
gests that the Islamic microfinance practice in Kyrgyzstan seems
to have noticeably contributed to serving some of the key aspects
of maq
asid al-shari'a.
For example, evidence suggests that the Islamic micro-
finance practice in Kyrgyzstan contributed to poverty reduc-
tion and economy enhancement. Also, the Islamic
microfinance practice in Kyrgyzstan seemed to have contrib-
uted to enhancing the educational/intellectual level of the so-
ciety in Kyrgyzstan through various forms. All in all, it
seemed that the empirical enquiry and evidence suggests that
generally, the practice of Islamic microfinance in Kyrgyzstan
might serve some of the key aspects of maq
asid al-sharia.
Having mentioned the above, we pose some questions that
may require deliberation: why does there seem to be a pessimistic
view regarding Islamic finance and its relationship with maq
asid
al-sharia? For example, was this Islamic microfinance institution
that was launched in Kyrgyzstan not supposed to establish this
entity? What about the large number of beneficiaries who were
able to obtain access to Islamic finance rather than solely con-
ventional finance? Even more so, what about the beneficiaries
who may have been completely excluded from any formal
financial service? Did this practice not provide them an oppor-
tunity to enhance their financial status?
What about access to education? Is not enhancing ones
education/intellectual capacity a key purpose of maq
asid al-
Please cite this article as: Alkhan, A. M., & Hassan, M. K., Does Islamic microfinance serve maq
asid al-shari'a?, Borsa Istanbul Review, https://doi.org/10.1016/
j.bir.2020.07.002
_
shari'a? To further add to this debate, what about health? Were
the respected beneficiaries not supposed to have Islamic
financing access to medical services? What were they sup-
posed to do? Were they supposed to seek conventional
financing or government funding? Even as a dhar
ura (neces-
sity), what if the methodology of conventional financing may
be counterproductive to them due to increase in interest pay-
ments every period they may be late due to financial inability?
Even more so, what if they did not have access to any form of
formal financing? What if the government is unable to provide
free medical services to all its citizens?
Regarding the economy, is not pumping a notable amount
of around USD 66 million a contribution to the economy?
What about the suppliers who were trading without formal
business licenses, are they not all now required to pay their tax
dues to the state budget? Additionally, did their income, cash
flows, and turnover not increase? Is not the nature of Islamic
finance in relation to trade, buying/selling, leasing, construc-
tion, and so forth, a contribution to the real economy? What
are entrepreneurs and shareholders required to do when
establishing a financing entity, are they required simply
establishing conventional institutions since there may be an
argument that Islamic finance does not serve maq
asid al-
sharia? Even if this was the case, what are the solutions
provided to enhance this aspect of Islamic finance?
We conclude that although a lot of researches criticize the
Islamic finance industry for not complying with maq
asid al-
shari'a, this paper supports the notion that Islamic microfinance, a
component of the Islamic financial industry, may contribute to
serving some of the key aspects of maq
asid al-shari'a. We further
shed light that the factors used for analysis in terms of serving key
aspects of maq
asid al-shari'a were derived from theories pre-
sented in classical Shari'a literature by arguably highly accom-
plished scholars such as Imam Al-Ghazali.
We conclude by noting that the empirical evidence in this
research seems to suggest that Islamic microfinance practices,
if adopted efficiently, may contribute to serving many key
aspects of maq
asid al-shari'a. We further advise other coun-
tries, especially in the CIS region, to establish financings en-
tities with similar Islamic micro financing methods that may
result in solving some key and critical economical challenges.
We lastly conclude by mentioning noteworthy limitations
that may affect the accuracy of the findings. First, the research
methodology may be considered as a limitation since quali-
tative researches may be considered as less valid than quan-
titative researches. Second, it may be difficult to generalize
based on a single case study. Third, at the time of conducing
this research, we were unable to specifically verify the finan-
cial improvement of clients who obtained financing for per-
sonal purposes rather than income generating activities, which
presented a limitation on the research. This may thus require
further investigation. We further recommend using this study
for comparative purposes when using other jurisdictions as
case studies. Our findings are presented keeping in mind the
limitations that may have existed on this research.
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A.M. Alkhan, M.K. Hassan / Borsa Istanbul Review xxx (xxxx) xxx
Funding
This research did not receive any specific grant from funding
agencies in the public, commercial, or not-for-profit sectors.
Conflict of interest:
We authors declare that we have no conflict of interest
regarding our submitted article.
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