Giving and Receiving: Faith and the Sustainability of Institutions Providing Microfinance Services for Development

Abstract

Topic: This review explores the important issue of the ‘institutional sustainability’ (IS) of faith-based development organizations (FBDOs) providing microfinance services to the poor in the developing world. IS has often been equated with the financial self-reliance of microfinance service providers, with income from credit charged on loans as well as other fees being used to pay for the service. While the approaches and tensions inherent in the attainment of IS by microfinance providers seeking to help the poorest in society have been well explored in the literature, there has been no specific analysis of FBDO providers and the special challenges they may face. Methodology: This paper is based on a review of the literature using a combination of search terms such as ‘microfinance’, ‘development’, ‘institutional sustainability’, ‘financial self-reliance’ and ‘faith’, with a special emphasis on the literature published between the 1990s and 2023. Results: One of the main findings is that Christian and Hindu FBDOs providing microfinance largely follow the financial self-reliance conceptualization of IS applied by secular providers and apply much the same set of responses regarding the setting of interest rates and other charges and the management of repayment amongst their client base. However, FBDOs of the Islamic faith take a broader perspective on IS and include the need for spirituality and religious development amongst their clients. Future directions: This paper makes a number of suggestions for future research, including (1) the reasons why religious development and spirituality do not appear to be strong issues for Christian and Hindu FBDOs relative to their Islamic counterparts; (2) the potential for inter-faith collaboration between FBDOs and secular providers, between FBDOs of different faiths as well as FBDOs from versions of the same faith (e.g., Protestant and Catholic); and (3) whether FBDOs are more naturally predisposed and able to engage and collaborate with the informal microfinance sector than secular microfinance providers.