College of Business
Effat University
Jeddah- Saudi Arabia
The Awareness of Micro Finance in Saudi Arabia and its
Impact
By:
Maha AlRajhi
A Dissertation submitted in Partial fulfillment of the requirements of the degree
Bachelor of Finance
Supervised By: PhD, Tahar Tayachi
Spring 2016
0
College of Business
Effat University
Jeddah- Saudi Arabia
The Awareness of Micro Finance in Saudi Arabia and its
Impact
By:
Maha AlRajhi
A Dissertation submitted in Partial fulfillment of the requirements of the degree
Bachelor of Finance
Supervised By: PhD, Tahar Tayachi
Spring 2016
1
CERTIFICATION OF OWN WORK
I hereby declare that this dissertation report submitted is my own work and effort and that has
not been submitted to any other institution for any award. Where I have acknowledge all sources
of information.
Student ID
Student Name
Signature
Date
S12203666
Maha AlRajhi
October 25,2016
2
CERTIFICATE OF APPROVAL
We hereby grant the approval of this dissertation report. The student has compiled the
dissertation work as per the requirements of the University.
Supervisor Name:
Signature ……………………….
Name of the Department Chair:
Signature ………………………..
3
ABSTRACT
This dissertation is based on micro financing in Saudi Arabia. It discusses and highlights the fact
that despite being a wealthy state, Saudi Arabia has less fortunate and penniless individuals are
present and at large scale. Along with this, micro financing and its origin are also highlighted. In
this dissertation, micro finance and relevance of some of its aspects to the Islamic financial
system is also discussed. Lastly, the effectiveness of micro business, how it gained fame worldwide and how it influences the lives of the poor is also highlighted.
4
ACKNOWLEDGMENT:
I would like to thank my advisor Dr. Tahar Tayachi for his assistance in providing supervision
and giving me excellent guidance and insight.
I would like to thank my friends and family who have encouraged me for working on this
particular dissertation.
5
Table of Contents
ABSTRACT......................................................................................................................................4
CHAPTER 1 - INTRODUCTION ....................................................................................................8
1.1 Background: ........................................................................................................................................ 8
1.2 Research Questions: ......................................................................................................................... 10
1.3 Aim and Objectives: ......................................................................................................................... 10
1.4 Scope of the Study: ........................................................................................................................... 10
1.5 Limitations: ....................................................................................................................................... 11
CHAPTER 2 - LITERATURE REVIEW ....................................................................................... 12
2.1 Islamic Microfinance: ....................................................................................................................... 12
2.2 Saudi Arabia’s Microfinance: ........................................................................................................... 13
2.3 Micro finance and poverty: ............................................................................................................... 14
CHAPTER 3 - METHODOLOGY ................................................................................................. 16
3.1 Research hypothesis scope:............................................................................................................... 16
3.2 Research methodology: ..................................................................................................................... 17
3.2.1 Quantitative research: ............................................................................................................... 17
3.2.2 Primary research method: ......................................................................................................... 18
3.2.3 Secondary research method: ..................................................................................................... 18
3.3 Collection of research data:............................................................................................................... 19
CHAPTER 4 – FINDINGS AND DISCUSSION ............................................................................. 20
4.1 Findings: ............................................................................................................................................ 20
4.2 Discussion: ........................................................................................................................................ 30
CHAPTER 5 – CONCLUSION AND RECOMMENDATIONS ..................................................... 31
5.1 Conclusion: ........................................................................................................................................ 31
5.2 Recommendations: ........................................................................................................................... 32
REFERENCES ............................................................................................................................... 33
APPENDICES ................................................................................................................................ 35
Questionnaire: ........................................................................................................................................ 35
6
List of Tables
Table 1: Percentage of the respondents for question 1……………………………….….. 20
Table 2: Percentage of the respondents for question 2……………………………….…... 21
Table 3: Percentage of the respondents for question 3…………………………………… 22
Table 4: Percentage of the respondents for question 4…………………………………… 23
Table 5: Percentage of the respondents for question 5……………………………….….. 24
Table 6: Percentage of the respondents for question 6……………………………….….. 25
Table 7: Percentage of the respondents for question 7……………………………….….. 26
Table 8: Percentage of the respondents for question 8……………………………….….. 27
Table 9: Percentage of the respondents for question 9……………………………….….. 28
Table 10: Percentage of the respondents for question 10…………………………….….. 29
7
CHAPTER 1 - INTRODUCTION
1.1 Background:
Microfinance is a business along with the noble cause regarding the path of financial inclusion
by helping and supporting individuals and building communities. On the other hand, Sharia law
in the context of finance is very clear about charging interest on loans. Additionally, The Qur'an
forbids usury, or Riba, in four diverse revelations which are based on the belief that money is
only a matter of exchange and has no value in itself. Moreover, Islam has not yielded to pressure
from the marketplace and has established its stance that charging interest on loans that are
extorting and violating Islamic laws. However, by eliminating usury from a trade, the Qur'an
declares the practice of commerce as a respectable profession (Alarifi, et, al. 2012).Also, the
importance of the partnership trading has motivated financial mediator to find creative ways to
help Muslims regarding loans without the violation of Islamic law.
It initiatives work and result in the elimination of poverty, more job opportunities, improvement
and growth in the economy, and women empowerment. Moreover, every individual is an
entrepreneur at the core; they are equipped with ideas and vision that enable them towards new
heights. In addition, every individual has potential, and he is creative that he can accomplish
desired goals (Alzalabani & Nair 2013)
Furthermore, with the presence of all that talent, potential and creativity, acquiring the desired
result are often hindered due to less financial resources. It is evident that financial resources are
as necessary as there is a dire need of creativity and potential (pleming 2013). It is also noted that
due to the minimum and less financial resources many talented individuals do not get
opportunities, thus, they become unable to achieve their dreams and not only this, this world left
unaware of the talented and creative individual.
Several exhibitions and conferences regarding Microfinance are being held which aims to change
the unfortunate circumstances of talented individuals. Also, targeting people who do not have
access or who are no able towards conventional facilities of banking. Moreover, microfinance
8
can be considered as tailored and customized which is made according to the criteria and culture
of any society, including potential reaching towards low-income families or individuals and the
underprivileged and women in communities (Alarifi, et, al. 2012).
In addition, it works with the help of door to door services towards the groups or persons who
need financial support. Yousuf &Lawton (2012) suggests that it also breaks some of the
constitutional boundaries that impede financial resources from reaching towards the needy
individuals of the society. Along with this, it is focused on creating self-employment and
entrepreneurship, which undoubtedly contributes towards equality of finance within communities
which is also the foremost principle of a secure and balanced society.
Saudi Arabia is considered as wealthy country worldwide but it has higher and undeclared issues
regarding poverty. According to Adewale & Hassan (2014) it is observed that almost 10 million
Saudis are living under the poverty line. Moreover, the small and medium level enterprises have
potential regarding growth in Saudi Arabia. Currently, this department contributes to less than
40% of the GDP.
Moreover, their performance can be enhanced by the offered microfinance products. In addition,
the case of Grameen Bank which is a great success in Bangladesh has brought attention
regarding the idea of microfinance worldwide in order to empower women and alleviating
poverty. This approach brings offer for the outside banking factors to gain benefit from the
banking services and products.
Furthermore, Twairesh (2014) pinpoints that Microfinance is a program that extends loans which
are smaller to penniless individuals regarding self-employment work that produce income, and
this income enables them to take care of their families. In addition, the World Bank is actively
and highly encourages the microfinance products in a manner to erase poverty and improve the
standard of living in developing countries.
On the other hand, Grameen Bank is situated in a Muslim country, this Nobel Prize winning
bank provides products that are based on interest, which is prohibited in Islam. It is may be
stated that Islamic Microfinance is a good option regarding the elimination of poverty in Muslim
countries. Such considerations and present scenarios of poverty in Saudi Arabia and
9
microfinance suggest that it needed to explore the perception of the Saudi SMEs on how the
economic concept of microfinance regarding the entrepreneurial development and growth can be
improved in Saudi Arabia (Rahman, et, al. 2012).
1.2 Research Questions:
QNO: 1, What is the primary purpose of Micro finance?
QNO: 2, Do people need to be aware of the concept of Micro finance?
QNO: 3, Is micro financing helpful concerning poverty in developing countries?
1.3 Aim and Objectives:
The main aim of this study is to focus upon the awareness of the microfinance in Saudi Arabia
by analyzing its impacts there. The objectives of this study could be:
•
To analyze the impacts of the microfinance in Saudi Arabia;
•
To determine that how the awareness among the people could be helpful for them in
bringing betterment in their living conditions;
•
To determine what steps could be required by the developing countries in order to
increase the awareness regarding the microfinance among the people.
1.4 Scope of the Study:
The scope of this research is to consider the developing countries; their economic conditions and
the role of the microfinance in supporting their people.
10
1.5 Limitations:
It is considered that all the aspects of the research are identified. Moreover, there are limitations
regarding time, since it is a vast topic, and a significant amount of data will be required but due
to a shortage of time, a lot of articles, books and newspapers might not be analyzed. Along with
this, due to the same reason, questionnaires cannot be distributed to a larger population because
the analysis of the survey also requires time.
11
CHAPTER 2 - LITERATURE REVIEW
2.1 Islamic Microfinance:
Microfinance has been considered as an instrument to develop the economy, to build
entrepreneurs and to eliminate poverty. Along with this, it will create small and medium
entrepreneurs. After the successful and remarkable experiment of Grameen Bank, which was
built by Dr. Muhammad Yunus in 1976 who won the Noble prize as well in 2006. The idea of
Microfinance gained the attention of the financial world. The primary principle of Grameen
Bank was that the offered loan is better than charity as these penniless individuals have
underutilized skills and with the help of these loans they can utilize skills to minimize poverty. It
also helps in raising the standard of living in the state. Another principle of Grameen Bank is that
it is based on crystal clear trust with no guarantor and that the borrower needs to join a group to
receive the loans together (Alzalabani & Nair 2013).
According to Adewale & Hassan (2014) this concept minimizes the risk of the bank, and a
borrower should be unable to repay the loan, all the group members will have to leave the
membership of the bank. This will benefit and helps the bank to manage the risk within the
groups as anyone does not want to be grouped with a risky member who may not be able to
return the loan. Also, the conventional microfinance is primarily focused towards the elimination
of poverty by helping and supporting less fortunate and micro entrepreneurs. However, the
Islamic Microfinance is entirely based on family and can be used for micro-entrepreneurs
Furthermore, microfinance institutes and Islamic microfinance institutions that provide Islamic
products have increased throughout the years; their reach is possible, but still small; as only 1
million out of 650 million are surviving on less than two dollars a day (Pleming, 2013). It is
because it focuses on providing Murabaha products (mark-up scale) that determine cost more,
regarding the conventional products in microfinance. Yousuf &Lawton (2012) suggests that this
is the primary reason that institutes of Islamic microfinance are able to offer their services to
lesser clients. Further, Islamic microfinance is not limited to only less fortunate; the
microfinance institutions could provide their services and products to MSMEs for further
12
growth, development, and finance regarding their needs such as small projects and utilities which
endorse the concept of Islamic Microfinance in its framework regarding developing SMEs
socially and financially.
Moreover, it is evident that to help one another is an Islamic good deed and it should be merged
with Islamic banking purposes concerning broader goals. Twairesh (2014) pinpoint that it is not
wrong for large companies if they are effective and do not lead towards the concentration of
power and wealth. It is observed that the adoption of the policy that discourages big enterprises
when they are inevitable and encouraging SMEs as it is possible would be more conducive
regarding the realization of (Maqasid) aims.
This approach would have numerous advantages besides reducing concentration regarding
wealth and power. It would be conducive more, concerning towards social health because
ownership of companies focused to increase the sense of self-respect, independence, dignity
among owners. According to Adewale & Hassan (2014) Maqasid Al-Shariah has primarily the
purposes of law considering the perspective of Islamic Microfinance. Further, Maqasid AlShariah has essentially three categories that are discussed by different scholars; they are
Necessities, Needs, and Embellishment. The category of necessities is based on five elements
such as religion, life, lineage, property, and intellect. These features are relevant to each factor of
microfinance. For example, to ensure the security of borrowers in any case borrowers cannot
repay the loan. The authors only accentuated on the relative indispensability of the Islamic
microfinance for equality of outcomes, wealth redistribution, and entrepreneurial development
precisely because it primarily focuses on both the spirit of financing to the under banked.
2.2 Saudi Arabia’s Microfinance:
In 2006, the Kafalah program which was initiated by the Saudi Industrial Development Fund
(SIDF) this program performed the function of the guarantor to banks for providing credit for
SMEs and also have managed to guarantee and offer almost 3.59 billion Saudi Riyals (950
million US dollars approximately). The member of board of Jeddah Chamber of Commerce and
Industry, Abdullah Marei Bin Mahfouz, in an interview with Zawya, has said that the banks are
reluctant to lend due to insufficient guarantees regarding market and feasibility studies. MSMEs
need financial help for growth and testing business models on a larger board. Yousuf &Lawton
13
(2012) suggests that however, due to higher risks and low reach, banks and financial institutions
are usually reluctant to lend to the SMEs. Also, less than two percent of Saudi banks are entirely
financing SMEs as compared to over 14 percent in non-gulf countries.
The director for MENA Mouayed Makhlouf, at the International Finance Corporation (IFC),
suggested a concept regarding risk management to handle the SMEs. It is not possible to observe
every case on large scale finance for SMEs, and it will greatly help to grow SMEs and as well as
the economy In addition, the Kafalah program in Saudi Arabia, which has complete support from
banks and the government is a good option to be used in Risk Mitigating and also incorporating
it with Islamic microfinance (Alarifi, et, al. 2012). Further, some of the banks that are involved
in this support are Riyadh Bank, The National Commercial Bank (NCB), Samba Financial
Group, Rajhi Bank and Saudi Hollandi Bank.
The program of these banks is explained in SIDF as to overcome the economic hurdles faced by
Small and Medium Enterprises (SMEs) in providing the guarantees that are required by the
lenders. The SMEs Financing Guarantee Program has been developed with a view to cover a
percentage of lender’s risk concerning an event of default which is guaranteed by the enterprise
to repay the loan. It is completely formed to promote domestic commercial banks to finance
SMEs which are viable but are unable to offer the guarantee records which are required to prove
their merit for finance. Due to the reasons mentioned above 33 percent of Saudi nationality
holders in Saudi Arabia are living under the poverty line which creates an opportunity for
innovation of micro-financing in Saudi Arabia (Pleming 2013).
2.3 Micro finance and poverty:
Numerous recent studies regarding the influence of microfinance on poverty or income have
relied on micro-level testimony focused on household data or entrepreneurial. Also, due to the
inadequacy of secure and stable macro data on microfinance, macro-level knowledge of the
influence of microfinance on poverty is insufficient. However, recent works are also present and
state that reviews the connection between the macro economy and microfinance activities and or
enforcement (Alarifi, et, al. 2012). Additionally, the momentum of these studies is either to
estimate the environmental context in which microfinance functions, or examine the possible
effect of microfinance on significant macroeconomic variables, such as gross local product or
14
inequality. The findings of an important link between the operations of microfinance institutions
(MFIs) and the macro economy collaborate with the recent evidence based on household data
sets which state that microfinance has a poverty reducing effect the influence of microfinance on
poverty has come under profound investigation in recent randomized evaluations of
microfinance.
Yousuf &Lawton (2012) suggests that some have, in fact, questioned the consequences
concerning poverty reduction, advancement of gender equality, and the decrease in child
mortality. Also, a contradictory view is that microfinance is oversold obtaining credibility. Not
only this, these studies are flawed in a few terms, but also a fraction of misleading. However, as
stated above numerous studies points out the effects of microfinance are robust in poverty as
elaborated: The objections for empirical macro considerations of microfinance include:
recognizing a suitable measure of microfinance projects regarding ‘availability’ or ‘intensity’,
determining the outcomes of ‘performance’, noticed the ‘presence’ along with ‘scale’ of
microfinance on macro pointers; and analyzing the robustness of adequate measures associated
to microfinance (Alzalabani & Nair 2013).
15
CHAPTER 3 - METHODOLOGY
The methodology chapter describes the research approach, research tool and the hypothesis of
the awareness of microfinance in Saudi Arabia and developing countries.
3.1 Research hypothesis scope:
The research questions are based on the importance of the microfinance that how its awareness
could impact on Saudi Arabia as a developing and Islamic country. The Saudi Arabia population
is increasing every day; new youngsters are knocking at the door to accommodate in private and
government sectors. However, the country’s economy is very healthy to adopt diversification to
create job opportunities in different sectors. Microfinance can work well in Saudi Arabia to
enhance the economy of the country as the banks are going very strict and making it difficult for
the people to get easy loans, thus Microfinance will create great impact on the Saudi Arabia's
GDP. Especially small entrepreneurs will get privilege when Microfinance institutions provide
small loans to such businesses at flexible rates. The impact of microfinance will create booming
influence to SMEs because they require sufficient funds to start their small business. Banks have
tightened the strings and from here microfinance institutions come up as the encouraging
organizations from where people can get enough loans to gear themselves up and start generating
revenue which will ultimately impact on Saudi Arabia’s economy.
All these positive impact of microfinance will show its capacity once the people get the
awareness of how to get the advantage from microfinance. Generally, microfinance institutions
provide loans to the poor households so they can meet basic needs and protect themselves from
any risks. Women are in great beneficial side if they get themselves acquainted with the criteria
and effective use of microfinance. Microfinance provides capital to the women like those women
who are doing business through social media marketing and thus it is empowering women and
promoting gender-equality. In Saudi Arabia there are some projects running to aware the women
regarding the benefits of microfinance and encourage them to start their own projects.
Microfinance awareness to the Saudi Arabians can increase the financial security by giving
16
enough capital stability to the people, allowing them to better their lives, invest in education and
ultimately manage their life.
Since the microfinance scope is very vast people need to aware of the advantages and challenges
in the microfinance sectors. Developing countries can make greater use of microfinance by
arranging conferences, seminars and lectures. These platforms are great to debate on
microfinance. In developed countries, finance specialists and economists are playing their part in
developing the countries. Seminars and lectures are providing an opportunity for youth to
understand the market requirement and become entrepreneurs. There is great space on a
governmental level and private level to provide the knowledge of the microfinance. Conferences
and seminars should be arranged by the government and invite the specialists and experts to
discuss the issues and benefits of microfinance in the context of global market and local market.
Then these experts should arrange microfinance programs in cooperation with private sectors and
deliver lectures to new generations and small firms. Such activities would mobilize the
microfinance e-learning and would spread the advanced microfinance activities throughout the
country.
3.2 Research methodology:
There are three types of researches which researchers utilize during their research work, these
are: qualitative method, quantitative method and mixed research method.
3.2.1 Quantitative research:
Quantitative research method is a demonstration of the research by collecting numerical data and
its analysis by using mathematically based methods. In other terms the main purpose of the
quantitative research approach is the quantification of data. Such kind of research allows the
researcher to generalize the specific sample result to an entire population of interest and assess
the various views, considerations and opinions in a given sample. Quantitative research is highly
technical and deep research work which utilizes rigid techniques to conduct the research like
online or on-spot questionnaires and interviews (Kaczynski, et, al. 2014). Quantitative research
relies on responses to compose questions for the participants, which are different from qualitative
research which allows limitless reaction and response from the participants. This research
approach is significant because it provides huge and solid base of insight on which the
17
concluding action is suggested. While conducting the research, researchers sample out a large
number of cases so that these cases can effectively represent the population of interest.
Both methods have great significance in different fields; however, the selection of the method
depends on the nature of the research, type of information which is needed in the research
context and access to the resources such as time and money.
3.2.2 Primary research method:
Primary research data are the first hand research data obtained from original sources not
collected from any other sources. The primary research method is conducted by the distribution
of questionnaires, taking interviews, ethnographic research and longitudinal studies, observation
and life histories. It plays a very important in explicitly and implicitly defining the research. The
collection of primary data covers all the required study, which can directly relate the main
content of the research topic.
Primary research method comes under the qualitative and quantitative data. Researchers can
conduct the primary research by applying easy and accessible tool because research has the
control to deal with the topic and describe it by using his unique analytical skills (Flaherty, et, al.
2015).However, it may be costly in preparing and carrying out the research. Researchers have to
perform the research early because it takes longer time than secondary research method.
3.2.3 Secondary research method:
The secondary research method is also considered as second hand research because the data is
collected from existing sources like journal, books, articles and internet database. The main
source of secondary research is a digital library and online websites like Science Direct,
Emerald, EBSCO Host, and Social Science Research Network (SSRN). The secondary method
uses both qualitative and quantitative nature.
The secondary research method leads to saving cost and time which are unlike from the primary
research method. It is cost and time effective because it requires less resource and creates an easy
way to conduct longitudinal studies. Researchers have the opportunity to get access to the
historical data and incorporate with research topic which may enhance the significance of the
secondary research. The secondary research approach can add value or add information to other
research methods like focus groups and telephone surveys. There are usually no limits while
18
conducting research except authentic research article or other authentic source. At the same time
it is also acting as the great limitation as the researcher should be concerned about the
authenticity of the data. Apart from articles and books, secondary data can be collected from the
published information of the government or agencies that compile news, information and media.
3.3 Collection of research data:
Since the topic of this study “the awareness of microfinance” is vast and it deals with the
opportunities for individuals who have low income, lots of information is required concerning
the aims and objectives of this study. It was decided to collect data from primary and secondary
sources and questionnaires were used and distributed to 100 individuals to realize the awareness
of micro financing among individuals. Moreover, data that is gathered from secondary sources is
reliable, and the substantial amount of information can be gathered from different published
articles, books, newspapers and e-books. Also, published articles and books are essential for
conducting reliable data.
For this study, published articles were taken and analyzed to recognize each and every single
aspect of microfinance. Through published articles it can also be explained that how many
studies have been done on this topic recently and what information can be gathered from them
and if those articles have any limitations that can be covered in this article. The significance of
online published article is that there are the variety of articles is available on the internet and in
those articles, there are chances that new and unique and information can be gained.
Furthermore, in order to observe the awareness of microfinance among different countries and
most importantly, to understand the concept and the origin of microfinance, books related to
banking and finance has been analyzed to collect authentic information in this regard. Besides
this, newspapers were also used to observe the awareness and popularity of microfinance among
common people. In newspapers, such implementation for low earners usually highlighted.
Therefore, due to such qualities of secondary data, it was considered the essential step for this
study.
19
CHAPTER 4 – FINDINGS AND DISCUSSION
4.1 Findings:
The responses of the questionnaire are analyzed below:
1- Micro financing is a kind of noble cause.
Table 1: Percentage of the respondents
Options
Strongly Agree
Agree
Neutral
Disagree
Strongly disagree
Responses in percentage
50%
30%
20%
0%
0%
0.6
50%
0.5
0.4
30%
0.3
20%
0.2
0.1
0%
0%
0
1
2
3
4
5
6
In response to first statement, 50% participants strongly agree, 30% agree while 20% remain
neutral that micro financing is a kind of noble cause. The participants who are aware of the
20
concept of micro financing are considered it as a noble cause. The participants who stayed
neutral are probably not aware of it.
2- The primary purpose of micro financing is to help un fortunate individuals or families.
Table 2: Percentage of the respondents
Options
Strongly Agree
Agree
Neutral
Disagree
Strongly disagree
Responses in percentage
50%
40%
10%
0%
0%
60%
50%
50%
40%
40%
30%
20%
10%
10%
0%
0%
Disagree
Strongly
disagree
0%
Strongly Agree
Agree
Neutral
For second statement, 50% participant strongly agrees that micro financing help less fortunate
individuals and families. With the help of micro financing less fortunate can live in better
condition and participants agree on that.
21
3- In developing countries, micro financing and its awareness is most needed.
Table 3: Percentage of the respondents
Options
Strongly Agree
Agree
Neutral
Disagree
Strongly disagree
Responses in percentage
60%
40%
0%
0%
0%
Responses in percentage
70%
60%
60%
50%
40%
40%
30%
20%
10%
0%
0%
0%
Neutral
Disagree
Strongly
disagree
0%
Strongly Agree
Agree
In response to this statement 60% respondent strongly agrees while 40% stays agree that its
awareness is needed in developing countries. Though the micro financing is known to many
but awareness regarding it is still required in developing countries.
22
4- Micro financing is according to the concept of Islamic Shariah law.
Table 4: Percentage of the respondents
Options
Strongly Agree
Agree
Neutral
Disagree
Strongly disagree
Responses in percentage
40%
40%
20%
0%
0%
Responses in percentage
45%
40%
40%
40%
35%
30%
25%
20%
20%
15%
10%
5%
0%
0%
Disagree
Strongly
disagree
0%
Strongly Agree
Agree
Neutral
For fourth statement, 40% participants’ stays strongly agree, same ratio agrees to this
statement that it is according to the concept of Islamic Shariah law while 20% remain neutral.
Also, agreed participants are aware of its effectiveness while neutral ones are not that its
concept is according to Islamic Shariah law
23
5- The concept Micro financing generates from Islamic Shariah law.
Table 5: Percentage of the respondents
Options
Strongly Agree
Agree
Neutral
Disagree
Strongly disagree
Responses in percentage
40%
30%
30%
0%
0%
Responses in percentage
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
40%
30%
30%
0%
Strongly Agree
Agree
0%
Neutral Disagree Strongly
disagree
For this statement, graph indicates that 40% strongly agree while 30% agree that micro financing
is generated from Islamic Shariah law while 30% remains neutral. Additionally, people promote
it due to the same reason.
24
6- The impact of micro finance will be positive in developing countries.
Table 6: Percentage of the respondents
Options
Strongly Agree
Agree
Neutral
Disagree
Strongly disagree
Responses in percentage
70%
0%
20%
10%
0%
Responses in percentage
80%
70%
70%
60%
50%
40%
30%
20%
20%
10%
10%
0%
0%
0%
Strongly Agree
Agree
Neutral
Disagree
Strongly
disagree
70% participants strongly agree that micro financing will be positive for developing countries
while 10% disagree and 20% remain neutral to this statement. Also, such programs are necessary
for long term success particularly in developing countries.
25
7- Due to intense situation of poverty in developing countries, micro financing should be
start there on urgent basis.
Table 7: Percentage of the respondents
Options
Strongly Agree
Agree
Neutral
Disagree
Strongly disagree
Responses in percentage
60%
20%
20%
0%
0%
Responses in percentage
70%
60%
60%
50%
40%
30%
20%
20%
20%
10%
0%
0%
Disagree
Strongly
disagree
0%
Strongly Agree
Agree
Neutral
In response to seventh statement, 60% respondent strongly agrees that micro financing must be
started on an urgent basis in developing countries due to intense poverty while 20% agree and
20% remain neutral to this statement. It is foremost to start micro financing to avoid miserable
conditions of individuals.
26
8- As helping others is good deed in Islam, and micro finance in this regard is a good cause
for less fortunate
Table 8: Percentage of the respondents
Options
Strongly Agree
Agree
Neutral
Disagree
Strongly disagree
Responses in percentage
50%
50%
0%
0%
0%
Responses in percentage
60%
50%
50%
50%
40%
30%
20%
10%
0%
0%
0%
Neutral
Disagree
Strongly
disagree
0%
Strongly Agree
Agree
For this statement, 50% participants remain strongly agree while same ratio of participant remain
agree. For the purposes of help, micro financing is also welcomed and promoted by individuals.
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9- Micro finance is fruitful for penniless and as well as for young entrepreneurs.
Table 9: Percentage of the respondents
Options
Strongly Agree
Agree
Neutral
Disagree
Strongly disagree
Responses in percentage
50%
0%
0%
50%
0%
Responses in percentage
60%
50%
50%
50%
40%
30%
20%
10%
0%
0%
Agree
Neutral
0%
0%
Strongly Agree
Disagree
Strongly
disagree
In response to this statement 50% participant strongly agrees that micro financing is positive and
fruitful for less fortunate and entrepreneurs while 50% remain disagree to this statement. The
participants who are disagreeing to this statement are not considered it fruitful for everyone. It is
because of less awareness concerning the concept of micro finance.
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10- With the help of micro finance, a society can become stable and healthy.
Table 10: Percentage of the respondents
Options
Strongly Agree
Agree
Neutral
Disagree
Strongly disagree
Responses in percentage
40%
40%
20%
0%
0%
Responses in percentage
45%
40%
40%
40%
35%
30%
25%
20%
20%
15%
10%
5%
0%
0%
Disagree
Strongly
disagree
0%
Strongly Agree
Agree
Neutral
In response to last statement 40% respondent strongly agrees, 40% agree that micro financing
will help in the development of stable society while 20% participants remain neutral. To
maintain stability in a society, every individual must be stable and with the help of micro
financing this idea can become a reality.
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4.2 Discussion:
From the findings of primary resource-diverse responses of participants have been observed. It is
evident that every participant is not aware of the concept of micro-financing. Moreover, the
microfinance is linked with the Islamic Shariah law, and it has features that helped less fortunate
and entrepreneurs. Additionally, many participants did not provide the appropriate response and
remain neutral that indicates that people are not aware of microfinance and its concept. However,
this idea must become standard and every individual must become aware of its effectiveness,
particularly, in the developing countries due to the intense condition of poverty. For the
development of the firm and stable society, developing countries must consider the concept of
microfinance.
Furthermore, from the data of secondary sources, it can be analyzed that to eliminate poverty
conditions, many financial programs have been proposed, some of them proved to be a success
while others turn out to be a failure. Therefore, the concept of micro-financing is appreciated by
many analysts as they have observed its numerous benefits. Additionally, concerning the
conditions of serve poverty in developing countries or for the entrepreneurs, it will be a positive
and successful initiative. Moreover, from the secondary sources, it has also observed that to
maintain a firm and stable society empowerment of every individual is necessary. The concept of
micro financing encourages individuals and works for the betterment of the society.
In addition, penniless and less fortunate are in majority, particularly in developing countries
which impede the progress of those countries. Therefore, secondary data suggest that such
countries required these projects more often in order to earn long term success. Also, less
fortunate and penniless families are often not able to live on their own, with the help of micro
financing such families would become able to start any small business, and their conditions may
become stable.
30
CHAPTER 5 – CONCLUSION AND
RECOMMENDATIONS
5.1 Conclusion:
The study “awareness of micro finance” highlighted the aspect due to which banks started to
consider it as a crucial element in today’s society. Moreover, particularly in the developing
countries, the concept of micro finance has been seen prominently. Also, analyst, after keen
discussion, approved that micro finance is similar to Shariah law, and it does not violate Islamic
rules and regulations. It allows loans to Muslim individuals regarding the establishment of better
life style within the circle of Islam. Due to this quality of microfinance, it has gained favor by
numerous scholars and analysts. Though, criticism is also attached to it, but in lesser quantity.
Moreover, Islam teaches peace and stability. In a society with significant poverty rate, the
development of peace is not possible. Therefore, considering this fact, microfinance enables
individuals with a loan so that they can start a small business. It helps in eliminating poverty in
society and makes it a better place to live. Along with this, microfinance is also fruitful for
entrepreneurs who are willing to improve their lives. It is evident that there are talented
individuals who want to work on their own, but their unfortunate conditions do not let them this
opportunity. Therefore, from micro financing, such individuals can also take advantage. Besides
this, microfinance also allows a loan to women who are a widow or single mothers in order to
eliminate hurdles from their lives.
Furthermore, many analysts stressed over the conditions of poverty in developing and under
development countries. The lifestyle of people is miserable, and they are below the poverty line
in many of those countries. Also, analysts agreed with the viewpoint that micro financing must
start there on urgent basis. Additionally, the data from questionnaire determines the exact
response. Therefore, it is evident that analysts and as well as individuals are also in favor of the
concept of micro-financing. However, there are individuals who are not aware of such concept,
but awareness in this regard is much needed.
On the other hand, those studies are included in this study states that the door to door services of
micro financing is fruitful and appropriate. Moreover, such facilities are necessary for those
31
unfortunate who are penniless and as well as are not educated enough to understand the criteria
of banking. Teams from banks that provide such services are making them aware of this
approach regarding loan so that they can change their state of lives. Additionally, the effort of
Grameen Bank proved to be fruitful and appropriate for every less fortunate in the world.
Lastly, from the data both primary and secondary, it has been determined that there are
individuals who are not aware of microfinance need to understand and for this purpose; seminars
and lecturers must be held in universities. However, the individuals who are aware of it are
agreed that the idea of microfinance must be implemented in developing countries on an urgent
basis to the life conditions of penniless individuals can improve and a stable society can promote.
5.2 Recommendations:
Since the concept of micro finance is favored by many. This study has highlighted the
effectiveness of micro financing and all of its aspects and it is to recommend to the further
researchers that further researchers, may research on the aspects that are not analyzed in this
study. In this study micro financing in Saudi Arabia has analyzed and further researchers may
take another developing or poverty affected country. For conducting data, questionnaires were
distributed to 100 participants and further researchers may conduct surveys from larger
population in order to realize the awareness of micro financing among individuals.
32
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(Eds). Handbook on Islam and Economic Life. Edward Elgar Publishing, UK. Pg
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Al-Filali, I.Y. and Gallarotti, G.M., 2012. Smart Development Saudi Arabia’s Quest for a
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Alzalabani, A. and Nair, R.D., 2013. Financial recession, credit crunch and Islamic banks: a case
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Kaczynski, D., Salmona, M., & Smith, T. (2014). Qualitative research in finance. Australian
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Plemi Pleming, S. (2013). Islamic Microfinance Challenge Seeks Innovative Approaches to
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Rahman, M.W., Luo, J., Ahmed, S. and Xiaolin, W., 2012. The synthesis of Grameen Bank
BRAC and ASA Microfinance approaches in Bangladesh.World Applied
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Twairesh, A.E.M., 2014. The Impact of Capital Structure on Firm's Performance Evidence from
Saudi Arabia. Journal of Applied Finance and Banking, 4(2), p.183.
33
Taylor, S. J., Bogdan, R., & DeVault, M. (2015). Introduction to qualitative research methods: A
guidebook and resource. John Wiley & Sons.
Yousuf Danish, A. and Lawton Smith, H., 2012. Female entrepreneurship in Saudi Arabia:
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34
International
Journal
of
Gender
and
APPENDICES
Questionnaire:
Name:
Age:
Gender:
Education:
Occupation:
Note: You are requested to fill this survey form. The information you provided to us would be
part of the research we are conducting regarding the awareness of Micro finance in Saudi Arabia.
Fill the questionnaire with appropriate answers.
S
Statement
NO
1-
Strongly Agree
Agree
Micro financing is a kind of noble
cause.
2-
The primary purpose of micro
financing is to help un fortunate
individuals or families.
3-
In developing countries, micro
35
Neutral
Disagree Strongly
Disagree
financing and its awareness is
most needed.
4-
Micro financing is according to
the concept of Islamic Shariah
law.
5-
The concept Micro financing
generates from Islamic Shariah
law.
6-
The impact of micro finance will
be
positive
in
developing
countries.
7-
Due
to
intense
situation
of
poverty in developing countries,
micro financing should be start
there on urgent basis.
8-
As helping others is good deed in
Islam, and micro finance in this
regard is a good cause for less
fortunate.
9-
Micro finance is fruitful for
penniless and as well as for
young entrepreneurs.
10-
With the help of micro finance, a
society can become stable and
healthy.
Thank you!
36