Supply of Islamic Microfinance in Central Asia: The Case Study of Tajikistan and Kyrgyzstan

Abstract

This research examines the prospect of offering Islamic microfinance and its potential for growth in Kyrgyzstan and Tajikistan. Through structured interviews and surveys, the knowledge, motivation and intention of managers of conventional microfinance institutions regarding the supply of Sharīʿah-compliant microfinance products are investigated. The research employs both qualitative and quantitative approaches. The results are based on a survey of 35 and 12 conventional microfinance institutions in Tajikistan and Kyrgyzstan, respectively. In addition, long interviews with four officers of microfinance institutions provide further insight. Despite the lack of full knowledge of Islamic microfinance, an overwhelming number of respondents demonstrated a strong interest in supplying Islamic microfinance. This interest was motivated by respondents’ readiness to market Islamic microfinance products as new financial products; it was also based on the perception of latent demand for the Islamic method of microfinance. High cost, legal barriers, and the difficulty of financing are reported as the main obstacles to providing Islamic microfinance. Several policy options are discussed.