Islamic Micro Finance Services in Ethiopia: Performances and Implications for Financial Inclusion and Poverty Alleviation

International Journal of Commerce and Finance, Vol. 6, Issue 2, 2020, 159-169

11 Pages Posted: 23 Nov 2020

Date Written: October 2, 2020

Abstract

Deprivations are a worldwide incident affecting people both in developed and developing countries. The study examines the performances Islamic micro finance institutions and their implication for financial inclusion and poverty alleviation in Ethiopia. Descriptive method of research is used to understand the general overview and performance of both conventional and Islamic micro finance institutions and observe the role of Islamic micro finance institutions towards ensuring financial inclusion and reducing poverty in the country. A survey was conducted on interest free micro finance windows in the existing conventional micro finance institutions in different parts of the country. The results revealed that most of the institutions provide murabaha which is a popular form of financing small entrepreneurs and businesspersons. However, the main challenges of interest free micro finance system are unavailability of clear and detailed legislation from the regulator National Bank of Ethiopia (NBE), shortage of trained and knowledgeable workforce related to interest free micro finance services, immense and arduous administrative cost of the system and clients’ nonconformity with some Sharia principles like failure to deliver the item to the institution after they acquired it from the market on behalf the micro finance institutions.

Keywords: Financial inclusion, micro finance institutions, Islamic financing, poverty alleviation

JEL Classification: E51, G21, I32

Suggested Citation

Ali, Abdu Seid, Islamic Micro Finance Services in Ethiopia: Performances and Implications for Financial Inclusion and Poverty Alleviation (October 2, 2020). International Journal of Commerce and Finance, Vol. 6, Issue 2, 2020, 159-169 , Available at SSRN: https://ssrn.com/abstract=3705194

Abdu Seid Ali (Contact Author)

Istanbul University ( email )

34459 Istanbul
Turkey

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