CREATING SUSTAINABLE LIVELIHOOD OPPORTUNITIES FOR THE B20 COMMUNITIES THROUGH ISLAMIC MICROFINANCE PRODUCTS AND SERVICES

It is crucial to establish sustainable livelihoods and distribute wealth in order to ensure inclusion across rural and urban regions as well as between various ethnic groups. Microfinance, as one of the social finance instruments, could help the underprivileged gain access to capital. Islamic microfinance, unlike conventional microfinance, avoids riba and is based on Shariah principles. The government of Malaysia categorises families according to their income, and it utilises this data to create policies targeted at bridging the income gap between the B40 and higher income groups as well as between rural and urban populations. In ensuring that all citizens, particularly B20 communities, have access to Islamic finance, the development of Islamic microfinance products based on profit and loss sharing is critical. Debt-based, interest-free loans and equity-based Islamic microfinance are available. The majority of debt-based instruments are based on tawarruq or commodities murabahah, with qardhul hasan being utilised for interest-free loans. However, equity-based instruments such as musyarakah and mudharabah are not used by any microfinance institutions. Specifically, musharakah mutanaqisah model is seen as a potential product that can be applied in Islamic microfinance. This paper proposes that Islamic microfinance through musharakah mutanaqisah as a viable mechanism for creating sustainable livelihood opportunities, especially for the lower B20 communities.