A Critical Study on the Sustainability of Islamic Microfinance through Micro-Takaful in Bangladesh

This study critically evaluates and assesses the sustainability of Islamic microfinance institutions (IMFIs) in Bangladesh through integration of Micro-Takaful addressing a critical gap in both academic literature and financial practice. Despite Bangladesh’s significant progress in Islamic banking, the microfinance segment continues to struggle with structural vulnerability that threatens both institutional sustainability and clients’ welfare. The purpose of this study is to incorporate Micro-Takaful with IMFIs to promote sustainability by providing a conceptual framework focusing on institutional resilience and client protection simultaneously. This research adopts mixed-method approach by considering abductive approach. The whole research has been conducted using secondary data. In Qualitative phase, documentary content analysis and thematic analysis has been done by NVivo. And in Quantitative phase, Pearson’s correlation analysis has been done by SPSS through collecting the financial data from the reports of the secondary sources of data. The findings reveals that IMFIs in Bangladesh face multiple barriers that undermining their sustainability and mission drift. Also, the Micro-Takaful industry represents untapped potential with few operational models and limited integration with existing IMFI networks. So, the study proposed a framework by establishing risk pooling mechanisms that will protect institutional portfolios by covering client obligations. This research contributes to both theoretical discourse and practical policy by demonstrating that Micro-Takaful integration is a fundamental realignment with the ethical foundations of Islamic Microfinance. The research’s originality lies in its explicit focus on the dual objectives of institutional resilience and client protection.

Islamic finance; SDG 1 (No Poverty), SDG 8 (Economic Growth), Islamic Microfinance

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