ABSTRACT
Despite its popularity in predominantly Muslim countries such as Bangladesh, microfinance has few champions in the burgeoning Islamic banking industry. Although some microfinance programs have attempted to introduce shari‘a-compliant financial products, these have had only limited success. In many cases, the cost of maintaining an Islamic window at a microfinance institution has been much higher than expected. Moreover, the development and delivery of these products have generally been highly subsidized by donor or government funds. As such, current Islamic microfinance programs, even if they show limited success, do not appear capable of expanding to reach the tens of millions of unbanked Muslims. To do that, they would need to become profitable and represent a viable business proposition for Muslim and non-Muslim investors.
