Proposing an Islamic Microfinance Model for Financial Inclusionin North Macedonia

Abstract

North Macedonia is a Western Balkan country with significant portion of Muslim population andat the same time the highest poverty rates, rates of unemployment, and lowest scores for financialinclusion of the poor and SMEs. Despite the high percentage of Muslims whose religiosity has beenon an upward trend since the breakup with the communist regime, there is no financial institutionthat works under the Shariah principles leaving the Muslims obeying Islamic provisions out of thefinancial services. This paper analyzes the challenges of the microfinance industry and points out analternative solution seen in introducing and developing Islamic microfinance. The main objectiveof the chapter is to examine the possibilities for the introduction of Islamic microfinance and topropose a model for North Macedonia. For that purpose, qualitative methods, literature review,and case studies were employed. The desk-based research consists of analysis of relevant literaturereviews, reports, and websites of significant institutions such as the UN and World Bank. A casestudy of a conventional microfinance foundation in North Macedonia and two Islamic microfinanceorganizations in neighboring countries provide essential suggestions for proposing an Islamicmicrofinance model appropriate for the Macedonian context. Islamic microfinance has the potentialto contribute toward socio- economic development and to improve financial inclusion in NorthMacedonia.