Micro Entrepreneurs Experiences with Islamic Banks of Pakistan

Abstract

This paper investigates micro entrepreneurs’ financing experiences with the Islamic Banks of Pakistan. To accomplish this research objective, a survey of 150 micro-entrepreneurs was conducted in three major cities of Pakistan namely Rawalpindi, Lahore and Peshawar. The result of our survey revealed that majority of the entrepreneurs’ income is not sufficient to meet their basic needs. The underlying reasons are large number of dependents, lack of education and lack of access to better sources of income. The results of this study suggest that micro entrepreneurs do not have formal access to micro financing either from the Islamic banks or conventional banks. Further high interest rates in conventional banks are also discouraging micro entrepreneurs. The majority of the respondents also feel that neither Islamic banks nor the government of Pakistan are encouraging lower income micro-entrepreneurs. The results showed that a majority of respondents who applied for financing in Islamic banks were rejected. The results highlight that there is a strong need for Islamic banks to look into their existing business model and diversify their products that can cater needs of micro-entrepreneurs to bring social justice in the society.

Keywords

• micro-entrepreneurs
• islamic microfinance
• justice
• perception