Islamic social finance instruments as financing mechanism for female entrepreneurs in Comoros : an exploratory study

Abstract

Islamic Social Finance (ISF) comprises of financial instruments rooted in Shariah principles, including zakat and waqf. These instruments are designed to promote social justice, economic equity, and community welfare. Recognised as essential tools for sustainable development, ISF has gained popularity for its potential to alleviate poverty, reduce inequality, and foster inclusive economic growth, particularly in Muslim countries. However, in Comoros, where female entrepreneurs face challenges in accessing loans, such as collateral requirements, high interest rates, and short repayment periods, the role of ISF in supporting female economic empowerment remains unexplored. This research addresses the limited financial inclusion of female entrepreneurs in Comoros by examining Islamic social finance instruments, particularly zakat and waqf, as a financing mechanism for female entrepreneurs in Comoros. It also analyses the challenges faced by female entrepreneurs, assesses the extent to which zakat and waqf are utilised, explores their potential as financing tools, and subsequently proposes a financing model based on zakat and waqf. Employing a qualitative methodology, the study utilises three different data collection methods. Structured interviews with 32 female entrepreneurs shed light on their experiences and the challenges they faced in accessing loans in Comoros. Additionally, three focus groups comprising zakat and waqf experts offer an indepth understanding of these instruments and their potential in fostering inclusive economic development. A semi-structured interview with the Kadi of the largest city further contextualizes the discussion on waqf. Findings reveal that female entrepreneurs in Comoros face several challenges, including collateral requirements, high interest rates, stringent loan conditions, business type restrictions, and short repayment periods. Consequently, many female entrepreneurs rely on family or friends as their primary source of loans. Furthermore, while zakat and waqf are widely recognised in Comoros, their potential to contribute to socioeconomic development remains underutilised, as their application is largely confined to consumption purposes. This can be explained by a lack of awareness and the absence of structured frameworks for productive use. As a result, many female entrepreneurs turn to informal sources such as family and friends for financial support. However, the study demonstrates that zakat and waqf have the potential to serve as viable financing tools for female entrepreneurs, offering an alternative financial solution that aligns with their faith. Finally, this research proposes a financing model that integrates zakat and waqf funds with Mudarabah and qard contracts to facilitate access to financing for female entrepreneurs while addressing the challenges they faced. This research contributes to the literature by proposing a contextspecific financing model that uses zakat and waqf with Mudarabah and qard contracts to enhance financial access for female entrepreneurs. It emphasizes the transformative potential of Islamic social finance in promoting gender-inclusive economic development in Comoros and similar contexts.