The Role of Islamic Finance in Enhancing Financial Inclusion in OIC Countries

The core principles of Islam lay great emphasis on social justice, inclusion, and sharing of resources between haves and haves not. Islamic finance addresses the issue of “financial inclusion” or “access to finance” from two directions —one through promoting risk - sharing contracts which provide a viable alternative to conventional debt-based financing, and the other through specific instruments of redistribution of the wealth among the society. Use of risk-sharing financing instruments can offer Shariah -compliant Microfinance, SME financing and micro –insurance to enhance the access to finance. And redistributive instruments such as Zakah, Sadaqat, waqf, and qard-al-hassan complement risk-sharing instruments to target poor sector of the society to offer a comprehensive approach to eradicating poverty and to build a healthy and vibrant economy. Instruments offered by Islam have strong historical roots and have been applied throughout the history in various Muslim communities. The pap