The Role of Islamic Microfinance in Women's Economic Empowerment: Evidence from Bangladesh and Indonesia

Abstract

This research explores the impact of Islamic microfinance institutions (IMFIs) on the economic empowerment of women in Bangladesh and Indonesia. Unlike conventional microfinance, IMFIs operate under Sharia law, which prohibits interest (riba) and emphasizes risk-sharing and ethical investment. Using a quasi-experimental design, the study compares a sample of women who are clients of IMFIs with a control group of non-clients. Data was collected through structured surveys measuring indicators of economic empowerment, such as income levels, asset ownership, and decision-making power within the household. The findings suggest that IMFIs have a positive and statistically significant effect on women's economic empowerment, particularly in terms of increasing household income and enabling participation in income-generating activities. The study also finds that the group-based lending model and the emphasis on Islamic values foster a strong sense of community and social support among women. The paper concludes with policy recommendations for scaling up Islamic microfinance as a tool for inclusive and culturally sensitive development.