ISLAMIC MICROFINANCE AND MSME SUSTAINABILITY: EVIDENCE FROM EMERGING MUSLIM ECONOMIES
DOI:
https://doi.org/10.54783/26sf4b57Keywords:
Islamic microfinance, MSME sustainability, emerging Muslim economies, financial inclusion, Sharia-compliant financingAbstract
Islamic microfinance has emerged as a strategic instrument for promoting inclusive economic growth and strengthening the sustainability of micro, small, and medium-sized enterprises (MSMEs) in emerging Muslim economies. Despite its growing relevance, scholarly understanding of how Islamic microfinance contributes to long-term MSME resilience remains fragmented across regions and institutional settings. This study aims to systematically examine the relationship between Islamic microfinance mechanisms and MSME sustainability through a literature review approach. The research synthesizes prior studies drawn from reputable academic databases focusing on financing models, institutional practices, and sustainability outcomes in selected emerging Muslim economies. The review identifies that Sharia-compliant instruments such as qard al-hasan, murabaha, mudaraba, and musharaka have significantly supported business continuity, capital access, and entrepreneurial development. Islamic microfinance institutions have played an important role in reducing financial exclusion among underserved business communities. The findings further reveal that MSME sustainability is strengthened when financial services are integrated with training, mentoring, and digital innovation. Regulatory inconsistency, limited capitalization, governance weaknesses, and low financial literacy remain persistent constraints across many jurisdictions. The study highlights the need for stronger collaboration among governments, financial institutions, and development agencies to enhance the scalability of Islamic microfinance ecosystems. Islamic microfinance represents a viable pathway for advancing sustainable MSME growth and socioeconomic development in emerging Muslim economies.
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