Islamic Social Finance and Financial Inclusion: A Case Study of BSN Micro-i Madani in Malaysia

Abstract

This paper examines BSN Micro-i MADANI, an Islamic microfinance product, within Malaysia’s broader Islamic social finance ecosystem and the MADANI policy agenda. The study adopts a documentary analysis approach, drawing on policy frameworks, institutional documents, product disclosure materials, and relevant scholarly literature to analyse the product’s Shariah structure, design features, and alignment with financial inclusion objectives. The analysis finds that while tawarruq-based microfinance enables scalable Shariah-compliant cash financing for micro-entrepreneurs, its debt-based nature, flat-rate pricing, and formal eligibility requirements may limit accessibility for ultra-poor and informal segments. Beyond the case of BSN, the paper highlights broader implications for the design of Islamic microfinance products in Malaysia, particularly the need to align commercial microfinance instruments with Islamic social finance objectives and Maqasid al-Shariah. By proposing a Two-Tier Islamic Social Finance–Microfinance Model, this study offers a conceptual framework that can inform policymakers, Islamic financial institutions, and zakat and waqf authorities in structuring inclusive, tiered financing pathways for diverse micro-entrepreneur segments. The paper contributes to the literature by advancing an integrated perspective on Islamic social finance and microfinance that is applicable beyond a single institution.