Browsing by Author "Fofana, Ibrahim Vamba"

The current legal and regulatory framework of microfinance in Liberia is structured on the conventional microfinance system, which offers interest-bearing loans and focuses mainly on women. This system does not satisfy the needs of the greater number of the poor in the country and Muslims in particular. This phenomenon inherently calls for a reform of the legal and regulatory framework of Islamic microfinance as a vibrant tool to alleviate poverty in the country. This research therefore aims to examine the possibility of introducing the Islamic microfinance system within the extant laws of Liberia, after evaluating the lessons learned from the legal and regulatory framework of the Islamic microfinance in Bangladesh and Indonesia. The research employed a qualitative research methodology and used an inductive method in data analysis. The data collected and analysed from Islamic and conventional sources. The Islamic sources include the Qur‘Én, Sunnah, TafsÊr, commentaries of the Sunnah, books of Islamic jurisprudence, books on Islamic microfinance, journal articles, theses and conference proceedings. The conventional sources cover the constitutions of the three jurisdictions studied in this research and relevant statutes, law books, textbooks on microfinance, journal articles, newspapers and online materials on Liberia, Bangladesh and Indonesia. Findings of the research reveal that there is no legal and regulatory framework for Islamic microfinance in Liberia and that this has deprived Muslims who are particularly excluded from the conventional microfinance sector. The research has also found that Liberia has a lot to learn from the legal and regulatory framework of Islamic microfinance in Bangladesh and Indonesia respectively. Therefore, the research recommends setting up a body to regulate Islamic microfinance in Liberia in consultation with the Central Bank of Liberia (CBL) as well as setting up a SharÊÑah Committee to ensure that the modes of Islamic microfinance institutions are truly SharÊÑah compliant. The research further proposes the enactment of a special law for Islamic microfinance and establishing the SharÊÑah Advisory Council for Islamic microfinance in Liberia. The research further suggests having diversified sources of funding like zakÉh and waqf for Islamic microfinance institutions in Liberia. The findings conclude that the Islamic microfinance system is a viable alternative to the conventional microfinance system in the country, because it appeals to both Muslims and non-Muslims in Liberia. But, it requires a robust legal and regulatory framework to effectively operate in the country.

The widespread of Conventional and Islamic based microfinancing and their vital roles in poverty alleviation is undeniable. However, the heart of the matter is that, the Conventional microfinancing has some characteristics that are not in line with the Sharriah principles as it charges interest and focuses mainly on women. Generally, the study starts with a brief introduction of Conventional and Islamic microfinancing together with their concepts, developments, objectives and characteristics. It also discusses the differences between microcredit and microfinancing. Moreover, the study examines the differences between the Islamic microfinancing and Conventional one. For the practices, the study focuses on Grameen Bank of Bangladesh and Amanah Ikhtiar Malaysia (AIM) of Conventional microfinancing. Whereas, for Islamic microfinancing the focus is on Islami Bank Bangladesh Limited (IBBL), SME Bank of Malaysia and EONCAP Islamic Bank Berhad of Malaysia. Furthermore, the study shows that, the applicable contracts of Islamic microfinancing may be divided into two systems. The first one is charitable based-microfinancing system that includes qard hasan contract. The second is profitable based-microfinancing system that includes salam, mudarabah, musharakah, and bay mu’ajjal contracts. At the same time, the study indicates that there are various existing Sharriah compliant contracts that can be useful for Islamic microfinancing institutions (IsMFIs) such as, ijarah, musaqat and muzaraah contracts. Hence, the study also shows that Islamic microfinancing does not charge interest and or focus on mainly the family head as recipient of the loan. It shows that, the zakah and waqf funds can be used for income generation for IsMFIs and for mitigation of the risk. It shows that the kafalah group-based concept can be used as an alternative to collateral, while the service charge can be used as a substitute to interest provided that charge should be of the exact amount of administrative cost. Nonetheless, due to limited resources and time limitation, the study excludes the discussion on the application of Islamic microfinancing in Yemen, Indonesia and other Muslim countries. This study applies qualitative research method and it is theoretical in nature.