What potentials does Islamic micro-credit have?

Abstract

PurposeThis paper aims to investigate the role of demographics and sector type in determining consumer preferences of Islamic micro-credit products, namely,MusharkaandMurabha, versus conventional micro-credit financing in Egypt.Design/methodology/approachThis research is a quantitative study that uses surveys on 1,125 current micro-credit consumers in Cairo and Upper Egypt using multi-staged cluster sampling technique. Descriptive and inferential analyses were used to explain results.FindingsThe study revealed the potential ofMusharkamode of financing among micro-credit borrowers in Egypt, specifically in the manufacturing sector, followed by the trade sector. Although previous researches showed correlations between income, age and other demographic factors with consumer financing choices, the current research indicated no significance for consumer demographics in determining preferences of Islamic micro-credit contracts in Egypt. However, the sector type showed high potential in determining consumer choices of Islamic micro-credit contracts.Research limitations/implicationsThis paper advances knowledge in the domain of consumer behavior, specifically in bottom of the pyramid and subsistence markets that are under researched.Practical implicationsThe results highlighted are important for micro-finance institutions, NGOs and policy makers, as they delve deeper into the consumer preferences for Islamic financial products and attempt to present innovative solutions toward poverty eradication.Originality/valueThis research is one of the few attempts to study and explain consumer preferences toward Islamic micro-credit products in Egypt, and the role of sectors in determining consumer choices for specific Islamic micro-credit contracts.