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Moving Towards Community Driven Islamic Finance

Abstract

Contemporary Islamic Finance is seen by many as operating in the ‘push’ mode, with incumbent players pushing their version of products in the market, rather than working in a ‘pull’ mode, where society’s requirements would drive industry evolution. The Islamic finance industry has been criticized because the profit aspect of running operations overshadows the altruistic aspect of Islamic Finance (IF) and easily marketable solutions are more common than socially relevant products to benefit the wider communities. The paper has assessed and provided an account of the current scenario and made certain proposals on how IF can move to the next level by capitalizing on various opportunities available at hand. Different models including microfinance, crowdfunding, blended finance, ‘mutuals’, and takaful ¯ are reviewed in this light, identifying business models more suited to social needs. In conclusion, it is important that Islamic finance has to move beyond its current practice by developing other non-banking institutions as this will help in responding to the unique needs of human societies in general and Muslim communities in particular.

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