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Using mudharabah (profit-sharing partnership) in supporting refugee microenterprises and microfinance programs: Prospects and challenges
AuthorKachkar, Omar Ahmad
MetadataShow full item record
CitationKachkar, O. A. (2019). Using mudharabah in supporting refugee microenterprises and microfinance programs: Prospects and challenges. Handbook of Research on Theory and Practice of Global Islamic Finance içinde (xx-xx. ss.). xx: IGI Global.
This chapter examines the prospects and challenges of using the mudharabah (profit-sharing partnership) instrument to extend microfinancing to refugees in microenterprise support programs. According to the literature, many Muslim refugees voluntarily exclude themselves from microfinance programs due to the element of interest that is strictly prohibited in Islam. Mudharabah as a Shariah-compliant mode of finance represents one potential instrument that complies with the religious teachings of Muslim refugees and could assist in the financial inclusion of many of them. Despite the inherent risks of mudharabah such as moral hazard and adverse selection, some successful stories are remarkably encouraging. This chapter is proposing a model for a microenterprise support program based on mudharabah. It further concludes that mudharabah is a viable mode of finance provided that best practices in implementing mudharabah as well as microfinance programmes are well adopted and observed.