This report provides a comprehensive Islamic finance framework for financial inclusion, identifies the major challenges hindering the adoption of artificial intelligence, and recommends policy solutions to leverage Islamic finance to enhance financial inclusion. The report highlights how microcredit has been the main instrument for developing capital-strapped microenterprises and for poverty alleviation. However, empirical evidence suggests that a heavy cash outflow burden on microenterprises stifles growth during microenterprise evolution. Therefore, access to credit is not enough to resolve the poverty crisis and the success of microenterprises.
The report recommends a holistic solution for financing small and medium enterprises with two pillars for providing easy access to capital more efficiently. The first pillar is forming a sustainable and inclusive policy framework consisting of a staggered approach that maps the need for microentrepreneurs at different business development levels to achieve financial inclusion. The second pillar is developing a financial infrastructure that recognizes access to capital as a need of the economy. The report is a valuable resource for anyone interested in the intersection of AI, Islamic finance, and social impact.
