Factors Affecting the Acceptability of Islamic Micro-Finance in Emerging Economy

  • Muhammad Akbar Ali Ansari Department of Commerce, The Islamia University of Bahawalpur, Pakistan
  • Ali Junaid Khan Institute of Business Management & Administrative Sciences, The Islamia University of Bahawalpur, Pakistan
  • Nadia Hanif Department of Economics and Business Administration, Division of Administrative and Management Science, University of Education, Lahore, Pakistan
  • Tanveer Ahmed Department of Environmental Management, National College of Business Administration & Economics, Lahore, Pakistan
Keywords: Islamic microfinance, Emerging economy, Shariah-based, Pakistan


Purpose: Microfinance institutions impose a very high interest rate only to enhance the wealth of owner of the institution and stockholders. However, Islamic microfinance is the opposite of traditional microfinance; it is a form of interest-free financing dedicated to societal well-being. The research's primary objectives are to identify public knowledge of Shariah-based microfinance and ascertain the factors that contribute to the acceptance of Islamic microfinance in Pakistan.

Design/Methodology/Approach: This study investigated the significance of shariah-based microfinance in Pakistan, which is based on the Islamic financial system, and used a quantitative descriptive technique to estimate the factors.

Findings: There are several factors that give to the acceptability of Islamic banking. The most important variables are: cost-benefit analysis, business support, product and service quality, religious obligation, awareness and knowledge, trust and reputation. After an examination of all the acceptability factors, it was found that each factor has an effect on the acceptability of Islamic microfinance in Pakistan.

Implications: The study has various implications for policymakers wishing to promote Islamic microfinance at the national and international level.


Download data is not yet available.

Article Analytics Summary


Ahmad, H. (2007). “Waqf-based Microfinance: Realizing the social role of Islamic Finance”,

Paper written for the International Seminar on “Integrating Awqaf in the Islamic Financial Sector” Singapore, March 6-7,

Al-Ajmi, J., Hussain, H.A. and Al-Saleh, N. (2009). Clients of conventional and Islamic

banks in Bahrain : How they choose which bank to patronize, International Journal of Social Economics, 36 (11), 1086-1112

Almossawi, M (2001) ‘Bank selection criteria employed by college students in Bahrain: an DOI: https://doi.org/10.1108/02652320110388540

empirical analysis’, International Journal of Bank Marketing, 19:3, 115-25.

Amin, H., Abdul Rahman, A.R., Sondoh Jr, S.L., & Chooi Hwa, A.M. (2011).

Determinants of customers' intention to use Islamic Personal Financing, Journal of Islamic Accounting and Business Research, 2(1), 22-42. DOI: https://doi.org/10.1108/17590811111129490

Arebgeyen, O. (2011) .The Determinants of Bank Selection Choices by Customers:

Recent and Extensive Evidence from Nigeria International, Journal of Business and Social Science Vol. 2, No. 22.

Ashrafi, H. (2017). Micro Credit as a Poverty Alleviation Tool in Turkey: A Case Study Analysis of Turkish Grameen Micro Credit Project. Asian Business Review, 7(1), 5–50. DOI: https://doi.org/10.18034/abr.v7i1.9

Baber, H. (2019). E-SERVQUAL and Its Impact on the Performance of Islamic Banks in Malaysia from the Customer’s Perspective. Journal of Asian Finance, Economics and Business, 6(1),.vol6.no1.169 169175.https://doi.org/10.13106/jafeb.2019 DOI: https://doi.org/10.13106/jafeb.2019.vol6.no1.169

Bos, J. W., and M. Millone. 2015. Practice What You Preach: Microfinance Business Models DOI: https://doi.org/10.1016/j.worlddev.2014.12.018

and Operational efficiency. World Development 70

Brandsma, J., & Burjorjee, D. (2004). Microfinance in the Arab States: Building DOI: https://doi.org/10.1055/s-2004-816005

inclusive financial sectors. United Nations Capital Development Fund, United States of America.

Butt, I., Ahmed, H., Altaf, M., Jaffer, K. and Mahmood, J. (2011). Barriers To Adoption

Of Islamic Banking In Pakistan, Journal of Islamic Marketing,2(3), 259-273.

Burki, H.B and Chen, G. (2006). Microfinance Performance in Pakistan 1999-2005.

Pakistan: USAID-funded WHAM (Widening Harmonized Access to Microfinance) Project, Pakistan Microfinance Network and Network and Shore Bank International Ltd.

Burns, N. and Grove, S.K. (1993). the practice of nursing research conduct, critique & utilization (second edition), Philadelphia: W.B. Saunders.

Christen, R.P. (1998): Keys to financial sustainability: Strategic issues in microfinance .M.S

Kimenyi, R.C. Wieland and J.D.V. Pischke. Aldershot, England, Ahsgate.

Cicic M., Brkic N. and Agic E. (2004). Bank Selection Criteria Employed by Students in a

Southeastern European Country: An Empirical Anal ysis of Potential Market Segments’ Preferences; University of Sarajevo.

Comrey, A. L., & Lee, H. B. (1992). A first course in factor analysis (2nd ed.). Hillside,

NJ: Erlbaum.

Dhumale R., Sapcanin A. (1999). “ An Application of Islamic Banking Principles to

Microfinance” Technical Note, A study bt yhe Regional Bureau for Arab States, UNDP, in cooperation with the Middle East and North Africa Region, World Bank.

El-Komi. M, Croson. R. (2012). Experiments in Islamic microfinance: Journal of Economic DOI: https://doi.org/10.1016/j.jebo.2012.08.009

Behavior & Organization, JEBO-2985; No. of Pages 18

Frasca, A. (2008). "A Further Niche Market: Islamic Microfinance in the Middle East

and North Africa", Center for Middle Eastern Studies & McCombs School of Business University of Texas, Austin.

Gait, A. and Worthington, A. (2008). An empirical survey of individual customer, business

firms and financial institution attitudes towards Islamic methods of finance, International Journal of Social Economics, 35(11), 783-808.

Gait, A. and Worthington, A. (2009). Libyan Business Firm Attitude towards Islamic DOI: https://doi.org/10.2139/ssrn.1370752

Methods of Finance. Social Science Research Network. [Online]. Available at http://ssrn.com/abstract=1370752.

Gefen, D. 2000. E-commerce: the role of familiarity and trust. Omega, 28, 725-737. DOI: https://doi.org/10.1016/S0305-0483(00)00021-9

George, J. F. 2002. Influences on the intent to make Internet purchases. Internet Research, DOI: https://doi.org/10.1108/10662240210422521


Gerrad, P. & Cunningham, J. B. (2001) Islamic Banking: A Study in Singapore.

International Journal of Banking Marketing, Volume 15 – 6, pp 204-216.

Gerrard, P., & Cunningham, J.B. (2001). Singapore undergraduates: how they choose which DOI: https://doi.org/10.1108/02652320110388531

bank to patronize. International Journal of Bank Marketing, 19 (3), 104–114.

.Gholami, R., Ogun, A., Koh, E. and Lim, J. 2010. “Factors affecting e-payment adoption in DOI: https://doi.org/10.4018/jeco.2010100104

Nigeria”. Journal of Electronic Commerce in Organizations (JECO), 8, 51-67

Goud, B. (2007). "Islamic Microfinance" Institute of Halal Investing, U.S.A.

Gupta, D. (2014). ”The impact of micro finance on rural households and its role in rural

development and poverty alleviation-an analysis of north eastern villages of U.P India”, International Journal of Management (IJM), Vol. 5, pp.145-151.

Hamid, A. and Masood, O. (2011). “Selection criteria for Islamic home financing : A DOI: https://doi.org/10.1108/17554171111155357

case study of Pakistan”, Qualitative Research in Financial Markets, 3 (2), 117-130.

Haque, A., Osman, & Ismail, A. Z. (2009). “Factor Influences Selection of Islamic Banking: A

Study on Malaysian Customer Preferences”. American Journal of Applied Sciences, 6(5), 922-928.

Haron, S, Ahmad, N and Planisek, SL (1994) “Bank patronage factors of Muslim and non- DOI: https://doi.org/10.1108/02652329410049599

Muslim customer”, International Journal of Bank Marketing, 12:1, 32-40.

Hedayatnia, A., Eshghi, K. and Avenue, G. (2011). “Bank Selection Criteria in the

Iranian Retail Banking Industry”, International Journal of Business and Management, 6 (12), 222-231.

Johnson, D. S. 2007. Achieving customer value from electronic channels through identity DOI: https://doi.org/10.1002/dir.20091

commitment, calculative commitment, and trust in technology. Journal of interactive marketing, 21, 2-22.

Kamal, N., J. Ahmed and A.K. Khalid (1999), “Islamic Banking: A study of customer

satisfaction and preferences in Jordan.” International Journal of Bank Marketing, 17: pp.135-150.

Kaburi. S. N, Ombasa.B.B & Omato. D.N. (2011). ” An overview of the role of Micro

finance in radicating poverty in Kenya; A Lesson to be to be learnt from the emerging economics”, International Journal of Arts and Commerce, ISSN 1929-7106.

Khan, M. A., & Rahaman, M. A. (2007). “Impact of Microfinance on Living Standards,

Empowerment and Poverty Alleviation of Poor People”: A Case Study on Microfinance in the Chittagong District of Bangladesh. Master Thesis. Umeå School of Business (USBE), Sweden.

Khan, Muhammad, Akram. (1994). Rural development through Islamic Banks. Leicester:

The Islamic Foundation.

Khavul, S. (2010). “Microfinance: Creating Opportunities for the Poor?”, Academy of DOI: https://doi.org/10.5465/AMP.2010.52842951

Management Perspectives.

Ledgerwood, J. (1999) Microfinance Handbook. Sustainable Banking with the Poor. An DOI: https://doi.org/10.1596/978-0-8213-4306-7

Institutional and Financial Perspective, the World Bank, Washington D.C.

Liu, T. C. and Wu, L. W. 2007. Customer retention and cross-buying in the banking industry:

an Integration of service attributes satisfaction and trust. Journal of Financial Services Marketing, 12, 132-145.

Lewis, J. D. and Weigert, A. 1985. Trust as a social reality. Social forces, 63, 967-985. DOI: https://doi.org/10.2307/2578601

Muhammad, H. (2020). Islamic Corporate Social Responsibility: An Exploratory Study in Islamic Microfinance Institutions. Journal of Asian Finance, Economics and Business, 7(12), 773–782. https://doi.org/10.13106/jafeb.2020.vol7.no12.773 DOI: https://doi.org/10.13106/jafeb.2020.vol7.no12.773

Ngehnevu & Nembo. ( 2010). The Impact of Micro Finance Institutions (MFIs) in the

development of Small and Medium Size Businesses (SMEs) in Cameroon: A case study of CamCCUL.

Noipom. T (2014). Can Islamic Micro-financing Improve the Lives of the Clients: Evidence

from a Non-Muslim Country: Kyoto Bulletin of Islamic Area Studies, 7 (March 2014), pp. 67–97.

Nunnally, J. C. (1978). Psychometric theory (2nd ed.). New York: McGraw-Hill.

Nunnally, J. C., and Bernstein, I. H. (1994). Psychometric theory. New York: McGraw Hill.

Otero, M. (1999) Bringing Development Back into Microinance. Journal of

Microinance, Vol. 1, No. 1, 8-19.

Patel, S. (2004). “Takāful and Poverty Alleviation”, International Cooperative and Mutual I

nsurance Corporation (ICMIF), London.

Pavlou, P. A. (2003). Consumer acceptance of electronic commerce: Integrating trust

and risk with the technology acceptance model. International journal of electronic commerce, Vol. 7, 101-

Philip Gerard and Cunningham, J. B (1997) ‘Islamic banking: A study in Singapore, DOI: https://doi.org/10.1108/02652329710184433

International Journal of Bank Marketing, 15:6, 204-16.

Polit, D. and Hungler, B. 1997. Essentials of nursing research: methods, appraisal, and

utilization (4th ed). J.B. Lippincott Company: Philadelphia, Pennsylvania, USA.

Rahman, M.M. (2010). “Islamic micro financing programme and Its Impact on rural poverty DOI: https://doi.org/10.32890/ijbf2010.7.1.8402

alleviation”, International Journal of Banking and Finance, Vol. 7, pp. 119-138.

Robinson, M. 2001. The Microfinance Revolution; Sustainable Finance for the Poor. Vol.1 DOI: https://doi.org/10.1596/0-8213-4524-9

Washington. World Bank.

Rosenberg, Richard. (2002). Microcredit Interest Rates (Occasional Paper No.1). Washington:


Roussea, D. M., Sitkin, S. B., Burt, R. S. and Camerer, C. 1998. Not so different after all: A

cross-discipline view of trust. Academy of management review, 23, 393-404.

Saad, N.M. (2012). “Microfinance and Prospect for Islamic Microfinance Products: The Case

of Amanah Ikhtiar Malaysia”, Advances in Asian Social Science, Vol. 1, No. 1,

Schreiner, M. and Colombet, H.H. (2001) From Urban to Rural: Lessons for Microfinance DOI: https://doi.org/10.1111/1467-7679.00138

from Argentina. Development Policy Review, Vol. 19, No.3, 339-354.

Segrado, C. (2005). “Case study; “Islamic microfinance and socially responsible

investments”.[Torino: University of Torino] Available at: http://www.gdrc.org/icm/islamic-microfinance.pdf.

Sekaran, U. (2003), “Research method for business: A skill-building approach (4th Edition),

New York, John Wiley & Sons.

Sirdeshmukh, D., Singh, J. and Sabol, B. (2002). Consumer trust, value, and loyalty

in relational exchanges. The Journal of Marketing, 15-37.

Smolo (2007) Micro-Crediting in Islam: Islamic Micro-financial Institutions,. Malaysia:

International Islamic University.

Santandreu, E. M., Pascual, J. L., & Rambaud, S. C. (2020). Determinants of repayment among male and female microcredit clients in the USA. An approach based on managers’ perceptions. Sustainability (Switzerland), 12(5), 45–53. https:// doi.org/10.3390/su12051701 DOI: https://doi.org/10.3390/su12051701

Suh, B. and Han, I. 2003. Effect of trust on customer acceptance of Internet banking.

Electronic Commerce Research and Applications, 1, 247-263.

Shuttleworth, M., (2008). Quantitative Research Design. Retrieved from



Tara. N, Madiha. I & Rizwan. M. “Factors Influencing Adoption of Islamic Banking: A

Study from Pakistan”, Journal of Public Administration and Governance, ISSN 2161-7104, 2014, Vol. 4, No. 3.

Wilson, R. (2007) Making Development Assistance Sustainable through Islamic

finance. IIUM Journal of Economics and Management 15, No. 2: 197-217.

Writz, J. and Matilla, A.S. (2003). The effects of consumer expertise on evoked set size and DOI: https://doi.org/10.1108/08876040310501223

service loyalty. Journal of Service Marketing, 17 (7), 649-665.

Wright, G. (2000). Microfinance systems; designing quality financial services for the poor.

New York: Zed Books Ltd.

Yap, K. B., Wong, D. H., Loh, C. and Bak, R. 2010. Offline and online banking–where to

draw the line when building trust in e-banking? International Journal of Bank Marketing, 28, 27-46.

Yoon, S. J. 2002. The antecedents and consequences of trust in online‐purchase decisions. DOI: https://doi.org/10.1002/dir.10008

Journal of interactive marketing, 16, 47-63.

Wright, G. A. N., Mutesasira, L. K., Okpara, G. C., Palmer, B., Walls, M., Burgess, Z., & Hansen, N. (2019). Does microfinance reduce poverty? New evidence from Northeastern Mindanao, the Philippines. Small Enterprise Development, 12(1), 46– 61. https://doi.org/10.1016/j.jrurstud.2016.11.005 DOI: https://doi.org/10.1016/j.jrurstud.2016.11.005

Yusoff. M.N.H. and Yaacob, M.R. (2010). The Government Business Support in the New

Economic Model, International Journal of Business and Management, 5 (9), 60-71.

Zamore, S., et al. 2019. Geographic Diversification and Credit Risk in Microfinance. DOI: https://doi.org/10.1016/j.jbankfin.2019.105665

Journal of Banking and Finance 109.

How to Cite
Ansari, M. A. A., Khan, A. J., Hanif, N., & Ahmed, T. (2021). Factors Affecting the Acceptability of Islamic Micro-Finance in Emerging Economy. Journal of Business and Social Review in Emerging Economies, 7(4), 1011-1022. https://doi.org/10.26710/jbsee.v7i4.2071