Assessing the Performance and Scope of Islamic Microfinance in Thailand: Developments and Prospects

Abstract

Microfinance has become very important for inclusive finance and micro-based economic development and the rise of Islamic finance responds to this change in many parts of the world. In Thailand, the first Islamic microfinance institution was established in the Muslim populated Pattani Province in 1987 and several others followed over the years. Yet, very few studies have been conducted to systematically document the basic aspects of this endeavour. The aim of this study is to examine the development and prospects of Islamic microfinance (IsMF) and assess the perceptions of the customers on the products, impact, performance and scope in Thailand. In doing so, this study is one the first to provide an overview of IsMF industry in Thailand and identifies factors affecting demand for IsMF services. Importantly, it will analyse the impacts of various IsMF services of the socio-economy of the Thai society. The study also evaluates outreach and sustainability of the IsMFIs.
In an attempt to accomplish the aims of the study, a triangulation research method was employed. First, the questionnaire-based survey was administered to the customers of the IsMFIs in order to ascertain the factors affecting demand for products and impacts of IsMF. Secondly, a semi-structure interview was subsequently conducted with the customers in order to develop an in-depth understanding on demand for and impacts of IsMF. Thirdly, secondary data from financial reports of the IsMFIs were collected to compute relevant financial ratios, indicating outreach, sustainability, and efficiency and profitability of these IsMFIs.
The findings from the survey analysis reveal that the demand for IsMF services are driven by the needs in various life cycle events, affordability, awareness and exposure of IsMF regulations and procedures. In addition, IsMF services have enhanced the well-being of the poor and financially excluded in different aspects. The levels of impacts are influenced by the emerging needs, affordability and exposure factors in varying degrees. Interestingly, IsMFIs have achieved operational sustainability, reached considerable number of the client-base, and been profitable. The findings not only provide valuable information in terms of behavioural dimensions and customer preferences, they are also useful for the microfinance providers and government in considering the future development related to Islamic microfinance programmes.