Islamic social finance efficiency and eco-system: Islamic finance in action

Abstract

The potential and prospects of Islamic finance are the issue that is currently generating the most discourse among professionals, governmental bodies, and financial experts. The objective of the article is to assess the efficiency of Islamic social finance and suggest potential improvements in the current financial framework. The focus is on assessing the economic and social outcomes of integrating Islamic finance principles into micro businesses, as a means to promote economic development and involve communities in solving social issues. Moreover, the authors explore how social initiatives aimed at supporting micro-businesses can lead to cost savings for public resources. The paper seeks to develop an optimal eco-system design for countries with dual financial system based on conventional and Islamic by utilizing an analysis approach based on Kazakhstani implementation case. The establishment of a social financial ecosystem offers Islamic finance an advantageous role in promoting societal benefits. This is achieved through regulations that encompass not only civil law and human frameworks but also the principles of Islamic Law. Such arrangements enable the development of a sustainable and prosperous financial system and equally nurture a society that prioritizes social welfare and philanthropy. Furthermore, based on the findings from this study, enhancing the societal functions of Islamic finance can address various social challenges present within communities with vulnerable populations, and may serve as a viable solution for reducing government expenditure on targeted social assistance programs. Additionally, this study provides recommendations for institutional support of the Islamic social finance eco-system integrated into the financial system of the country.