Islamic Microfinance in Crisis Countries

Islamic microfinance sectors emerging across the Muslim world exhibit considerable diversity owing to the context, the profile of the stakeholders, the manner of engagement with Islamic jurisprudence and the levels of institutionalization. There is growing consensus that Islamic banking to the poor could foster development “under the right application.” ² Yet, while the authenticity of specific Islamic microfinance products is often contested, the dynamics that create distinctive microfinance initiatives are mostly ignored. It is this interplay between the local, national and international microfinance actors that negotiates the Islamic design, content and delivery of microfinance services. Microfinance products are not always part of economic planning: they could well be generated by spaces or pragmatism within the development discourse. This chapter will focus on Afghanistan—and contrast with the Indonesian experience—to consider how particular political, economic and legal dynamics create opportunities for microfinance institutions (MFIs) to negotiate and play a significant role in the design and the delivery of microfinance products.