Applications of Awqaf and Islamic Microfinance in a Post-Soviet Secular State: A Hypothetical Model of Awqaf-Based Credit Unions

This paper examines the applications of Islamic Finance in Azerbaijan, a secular post-Soviet state in which Islamic financial institutions (including microfinance) have emerged and developed, and in which the waqf institution has been revived. The potential of these institutions has not been utilized and conventional Western mechanisms are taking the lead. Despite huge oil revenues, there is still a problem of access to financing and credit for poor and rural communities. Lack of financing contributes significantly to the level of poverty and the gap between the wealthy and poor. Interest-based microfinance and even informal usury result in exploitation of the poor, while credit unions lack enough financial resources for addressing existing challenges. This paper argues that the revival of the institution of awqaf, its development, and role in poverty reduction through introduction of the “community capitalism” model is undiscovered. In this paper we propose and thoroughly analyze a hy