Financing Microenterprises: Creating a Potential Value-Based Hybrid Model for Islamic Microfinance

The main purpose of this paper is to examine the relevance of Islamic microfinance in the light of ongoing erosion of confidence in the viability of current financial system, full of speculatory finance in the prevailing global financial market. For example, the sub-prime crisis of 2007-2008 in the US with its effects all over the world was mainly due to the inadequate market discipline which in turn enhanced more and more lending, high leverage and finally led to bank failures and economic slowdown. The critics of this financial meltdown basically relate it to the interest-based financing mechanism. The paper tries to find the possibility of Islamic (Interest-free) Microfinance as a remedy for this financial instability in this context. The paper mainly focuses the Indian scenario where a large section of Muslim population does not have access to Microcredit due to both religious and political factors. Therefore, at this juncture an attempt is made to find the prospect of microfinance from an Islamic perspective which is imperative for adopting an economic system concerned with fulfilling human needs and creating opportunities for the poor. Besides, the concerned paper suggests a “Potential Value Based Hybrid Model for Islamic Microfinance,” by outlining the features as well as the shortcomings of conventional Microfinance.