Islamic Finance and Microfinance: An Insurmountable Gap?

Based on observations and interviews with microfinance practitioners in Bangladesh, I explore problematic perceptions of traditional scholars of Islamic law and the Islamic finance sector that may obstruct cooperation with microfinance institutions. However, suspicion and misunderstanding flow both ways. Microfinance is poorly understood by the Islamic finance sector, and arguments against the activities of microfinance institutions often mischaracterize them and do not take into account ground realities. The gap between Islamic finance and microfinance is not insurmountable – but given trends in the microfinance industry, may become so if not acted upon quickly.