Challenges Faced by the Model of Islamic Microfinance for the Development of Micro Entrepreneurs and SMEs in Rural Pakistan

Latest studies indicate that rural credit institutions have not been successful enough, as was anticipated initially, in achieving their goals of social and economical growth and development as they are being plagued by various organizational structure and operational management constraints. Therefore, with the efficient implementation of the models of Islamic Microfinance and effective provision of skills and innovative ideas in the emerging financial market of today can assist in the development of the micro entrepreneurs of the rural areas who will then directly contribute towards the growth of the small and medium enterprises. Firstly, this research paper endorses the model of the Islamic Microfinance having comprehensive dimensions and regulatory framework for achieving social, financial, humanitarian and religious objectives of the micro entrepreneurs and SMEs which are being neglected by the traditional micro finance institutions. Secondly, the study will discuss some of the critical challenges, issues and hurdles that the Islamic models face during the development process due to the shortcomings of the current practical approaches adopted. The findings of this study are purely theoretical, based on extensive literature review depicting the true image and status of Islamic Microfinance and its models in rural Pakistan. It is postulated that proper realization and execution of the model of Islamic Microfinance has the capacity to restructure and redesign the socio economic conditions of the rural emerging entrepreneurs enabling SMEs to engender a culture of financial and operational self sufficiency.