Economic Empowerment through Islamic Microfinance: Application to Refugee Settings
Creators: name: Parakkuth, Shafeeque Ali Cheriya
Publisher: name: Manara - Qatar Research Repository
Year: 2024
Subjects: classificationCode: 50
subject: Philosophy and religious studies

description: Large number of people around the world are being forced from their homes by terrifying conflicts and natural disasters. As a result, millions of refugees around the world have had their lives devastated and countless families are being pushed deeper into poverty every day. Emergency support and immediate lifesaving aid delivery could help in short run, but it is not at all adequate and sustainable in the longer run. Hence, in the refugee settings, it is important to identify sustainable solutions such as social and economic empowerment through job creation and income generation activities. Most of the refugee crises happen in countries where the followers of the Islamic faith are in majority. We hypothesize that effective and sustainable solutions to the crises could perhaps be originated better from the cultural and ethical values of the refugees. This presumption presents a test case for the relevance of Islamic social finance institutions in general and microfinance specifically. The purpose of this thesis is to explore the possibilities of adapting Islamic social and microfinance into complex situations such as refugee camps while also reviewing the nature and practices of Islamic microfinance. The methodology of this thesis consists of critical review and examination of existing literature, refugee settings and experiences. The study witnessed few experiences but mostly limited and short-lived as well as focused only on one or two financial contracts mainly Murabaha mode of financing. The experiments show that the practice in refugee camps is highly risky due to a number of reasons including geographical, political, and legal and other unsolvable obstacles. Yet, the demand is increasing due to the increased volume of refugees around the world and their idleness inside the camps. On the other hand, United Nations, international humanitarian and charitable organizations including Zakah and Waqf institutions spend sizeable amounts of funds to assist the refugees. The main purpose of this thesis is to connect these two realities and understand how Islamic social and microfinance can provide long-term and sustainable solutions for the growing international refugee crises. The results indicate that Islamic social and microfinance has significant potential to address the refugee crisis but the practices are relatively few. This study addresses the refugee phenomena attempting to provide sustainable solutions through effective Islamic social and microfinance practices over the <i>three response</i> <i>phases </i>of a typical refugee crisis:1. The first phase of a typical refugee setting covers <i>emergency response</i> for rehabilitation where aid delivery such as food, medics and temporary shelter are provided for immediate assistance and lifesaving activities. In this phase, refugees are extremely vulnerable due to the immediate after effects of the crisis. The core objective of the support intervention in the phase is to stabilize the refugee mentally, economically and socially. As a main pillar of Islamic social finance, the not-for-profit compassion institutions such Zakat, Waqf, Sadaqat, etc. should be activated and institutionally organized to respond to this phase.2. The <i>second phase of a</i> <i>typical refugee setting is reconstruction</i>, economic recovery while continuing aid delivery. In this phase, refugees are mentally prepared to face the crisis and started to erase the bad memories as well as they are provided with settlements that are more constructive. During this phase Islamic microfinance could respond through continuing compassion together with introducing declining profit and loss sharing (PLS) business models such as Mudharabah risk sharing to encourage refugees to utilize their human capital and available financial resources from compassion institutions while not shifting entire risks to them. The core objective of this intervention should be hands on business incubation and development of entrepreneurial risk taking attitude and the required skills. As these attitudes and skills are developed, institutional involvement can gradually be reduced transferring management and ownership of businesses to refugees.3. The <i>third phase of a typical refugee setting</i> <i>is focused on community restoration</i> such as long-term housing, education, resettlement and long-term care. In this phase, refugees are expecting solutions that are more permanent. In this phase, Islamic microfinance has wide variety of options to assist refugees to take over businesses as usual by themselves. As per the capacity and availability of resources, the specialized microfinance institutions can introduce various Islamic microfinance business models based on different contracts such as Musharakah, Mudharabah, Murabaha, Salam, Istisna while providing additional services such as Takaful and savings. By addressing the refugee crisis with adequate and comprehensive response strategy, Islamic microfinance can provide self-empowering solutions to refugees blending it with external supports and aid delivery. Islamic microfinance can help refugees to develop and increase their human capacity through training and learning while respecting their dignity and human values.<br>