Setting the Future Research Agenda for Islamic microfinance: Establishing the Evidence Base for Impact and Sustainability Dr Mohammed Kroessin Global Microfinance Advisor ISLAMIC RELIEF WORLDWIDE

Islamic microfinance research Agenda Why research? An emerging research agenda How can IMFIs drive research? The way forward

Islamic microfinance research Why research? -What is research? -Academic / IF fiqh -Market research -R&D / product development -Knowledge generation -Pure knowledge: academia -Applied knowledge: product development

Islamic microfinance research An emerging research agenda What do we know: –I-MF in academia: very little interest in I-MF (Habib Ahmed) –I-MF R&D: some internal product development & innovation (Grameen- Jameel etc.) –I-MF market research: slowly emerging (IRTI, Kuwait Finance House, CGAP etc.)

Islamic microfinance research An emerging research agenda Knowledge gaps (what don’t we know) Sustainability - Outreach / impact

Islamic microfinance research An emerging research agenda Significance of knowledge gaps: “Sustainability”

Islamic microfinance research An emerging research agenda Significance of knowledge gaps: “ Sustainability in the I-MF context” –Social non exploitative financing modes Ethical vs. Sharia complaint –Environmental Renewable resources (energy, raw materials, pollution) –Economic Financial viability

Islamic microfinance research An emerging research agenda Research questions about “Sustainability” –Uptake of I-MF (0.5% of global MF is Shari’ah compliant, CGAP survey 2008) Economic behaviour of clients Socio-political analysis Effectiveness of marketing strategies

Islamic microfinance research An emerging research agenda Significance of knowledge gaps I: Impact/Outreach –I-MF still relatively small (IBBL RDS in Bangladesh 500k clients) –Business models not easily scalable –Outreach: depth vs. breadth –Impact

Islamic microfinance research An emerging research agenda Significance of knowledge gaps II: Impact/Outreach –Evidence for social impact vs. rhetoric “In the development NGO sector internationally there has be an increasing recognition of the weakness of institutional learning and accountability and a growing gap between the rhetoric of agencies and the reality of what they achieve” (IMP-ACT).

Islamic microfinance research An emerging research agenda Research questions: Impact/Outreach –What is the impact of I-MF products that are in economic terms very similar to conventional products (i.e. Murabaha, Qard Hassan with 15% mark-up/fee as compared to conventional MF with 15% interest)? –How can we measure the impact especially of the salient features of I-MF, i.e. equitable financing? –How can I-MF make a difference in particular contexts, i.e. Is asset-based financing or P/L better mitigating against external economic shocks etc?

Islamic microfinance research How can I-MFIs drive research? building partnerships with academia –privileged access to data –encourage research –engage in critical debate

Islamic microfinance research How can IMFIs drive research? Case study: El Shaarani Centre for Islamic Business and Finance partnership with IR - At Aston Business School, Birmingham: - Shared research agenda - Looking for a market niche - Looking to be relevant to industry and society (Research Assessment Exercise) - Research on client behaviour (marketing) and comparative impact assessment

Islamic microfinance research The way forward -consortium-based research allows smaller I-MFIs to contribute by pooling resources -Global players (e.g. IRTI, WCMP) to take lead on global issues - bridge competitive ‘industry’ -conceptualise and operationalise research - knowledge exchange

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