ABSTRACT
Ensuring sustainability has been one of the major challenges facing Islamic microfinance institutions (MFIs). Diversifying sources of funding through innovative instruments would go a long way in ensuring financial sustainability of the Islamic MFIs. This study explores the viability of SRI sukuk as a fundraising mechanism to enhance sustainability of the Islamic MFIs as well as to promote financial inclusion in the Muslim countries. It also aims to identify the associated issues and challenges in implementing the SRI sukuk for microfinance purpose. The paper uses qualitative research method through a thorough review of existing literature, archives, and library research related to the area of SRI sukuk, microfinance, and their related issues. The study finds that the SRI sukuk has high potentials to be developed as an innovative Shari’ah-compliant mechanism based on the successful experiences of the European Bank for Reconstruction and Development in issuing the first microfinance bonds and the Malaysian experience in issuing the SRI sukuk to develop socially-related projects, including the educational and green energy sectors. This study provides important inputs to the relevant stakeholders in implementing new financial tools to develop the social sector, especially Islamic microfinance in improving financial access and empowering the poor to become economically independent.
