Motivations and Challenges of Entrepreneurs Seeking Islamic Microfinance Schemes

Motivations and challenges of entrepreneurs seeking
Islamic Microfinance schemes: Experiences from the
Sylhet Region of Bangladesh
Table of Contents

1. Table of Contents
Research Aim.............................................................................................................................4
2. LITERATURE REVIEW...................................................................................................4
1. Entrepreneurial motivations in seeking Islamic Microfinance as an alternative source
of capital to the interest schemes in commercial banks in Bangladesh.................................4
2. Key challenges entrepreneurs experience in seeking Islamic Microfinance support
within the Sylhet Region of Bangladesh................................................................................5
3. RESEARCH METHODOLOGY.......................................................................................7
1. Research philosophy.......................................................................................................7
Research approach.................................................................................................................7
2. Research method.............................................................................................................8
3. Research strategy............................................................................................................8
4. Data collection................................................................................................................9
5. Type of Interview............................................................................................................9
4. REFERENCES.................................................................................................................11

INTRODUCTION
Microfinance is banking service that provided to low income or unemployed people
who would have no other access to the financial services. It permits the people to take small
business loans safely in such a manner that is more consistent with the ethical lending
business practices. The microfinance is category related to the financial services that
targeting the people who have lack access to the conventional banking and its related
services. There will be discussion about the Entrepreneur’s Intention to Obtain Islamic
Microfinance Schemes.
Microfinance institutions (MFIs) are the financial institutions for low income citizens to
provide small loans to engage them in working accomplishments (Hassan and Sanchez,
2009). Microfinance is an economic revolution and financial initiative to develop low-income
community in the financial standard through self-employment (Gustina & Ihsan, 2010). It
stipulates the products and services to the underprivileged society extending to traditional
financial institutions (Dhaoui, 2015). Microfinance has been a useful financial tool in the
developing countries to set out services through traditional banking or non-bank financial
institutions that are subject to regulation and licensed by the government. The financial
institutions provide adequate services to reach significant scale to client and donor support to
mobilize saving and to attract private capital. Islamic bank in Bangladesh has been offering
banking services including micro-financing to poor people to make sustainable socio-
economic situation. Islamic banks contribute in the emergence of fundamental socio-
economic grow citizen of the country. Rural Development Scheme (RDS) has been
established focusing on disadvantaged people of the society banks under the general
investment funds. The two main objectives of the fund are; to help agricultural farming
community and off-farming entrepreneurship in the rural areas; to empowered self-employed
entrepreneurs’ especially women and youths. This modes of financial products emerged from
the principle of Grameen Banks microcredit except it eliminates the interest (riba) replaced
with profit and loss sharing principle (Abu-Hurayra, 2015). Under this financial model bank
does not provide the cash agreed with loan amount; instead, they facilitate the raw materials,
services or income-generating activities (Pramanik et al., 2015). Evidence shows such
financial model of Sariah banking helping entrepreneurs to generate income and potential
output of harvest resulting in socio-economic empowerment (UNDP, 2012; Riwajanti, 2013).
Islamic banking of microfinance could strengthen the original concept of financing as it
purged the interest (riba) and possible social conflict among the group member due to the
incapable of repayment of a group member. As a result, it has created a sustainable scope of

ethical financing to alleviate poverty. Given the lack of a sufficient range of short term
investment in the Islamic money market, Shariah-microfinance can use the liquidity at a
lower cost to finance micro-enterprise in the rural area. Bank can invest income in
microfinance that generated from non-permissible sources such as income from treasury
operations and late-payment fine. And, also in Islamic banking context bank can use Zakat
and Waqf for microfinance programme (Hassan and Ashraf, 2010).
Research Aim
To explore the motivations, experiences and key challenges of entrepreneurs from the
Sylhet Region of Bangladesh seeking Islamic Microfinance support.
Research Question
What are the motivations and key challenges entrepreneurs seeking Islamic
Microfinance support experiences from the Sylhet Region of Bangladesh?
Research Objectives
• To identify the entrepreneurial motivations in seeking Islamic Microfinance as an
alternative source of capital to the interest schemes in commercial banks in
Bangladesh.
• To explore the key challenges entrepreneurs experience in seeking Islamic
Microfinance support within the Sylhet Region of Bangladesh
• To examine how Islamic Microfinance schemes are possibly contributing in any
way(s) towards the sustainable development, through alleviation of poverty, in the
Sylhet Region of Bangladesh.
2. LITERATURE REVIEW
Literature review is defined as the survey of scholarly sources related to specific
subject area. It is helpful in enhancing the understanding about the Islamic microfinance
as it is alternative capital source to interest schemes in the commercial banks in
Bangladesh. The main focus on literature review is to attain the objectives by using
secondary sources of data for an instance articles, internet sources and others.
1. Entrepreneurial motivations in seeking Islamic Microfinance as an alternative
source of capital to the interest schemes in commercial banks in Bangladesh
According to JULIA KAGAN (2021)), Micro finance is banking service that provide
the low income to the unemployed people and provide effective financial services. It is
category of the financial services that targeting people and also small businesses which l\have
lack of the access to conventional banking. Entrepreneurship is wider concept that is used to