Islamic Finance 

Why should the Muslim world care about women-led social enterprises?

| 23 February, 2018 | General
 Neslihan Cevik
Why should the Muslim world care about women-led social enterprises?
Photo: Asmaa Megahed, 30 years old, who's known as "Ousta Asmaa", a carpenter and designer, works inside her workshop in Cairo, Egypt February 27, 2017. Picture taken February 27, 2017. Ousta Asmaa, who started working in this profession by helping her husband in his workshop sends a message to women "That they shouldn't pay attention to those who comment negatively on the work traditionally for men, forget them. Women can do any business no matter how difficult. Do anything you love, do not give up for anyone who wants to discourage you, there are many men saying that women can’t do anything just "cooking and cooking", but women can do the impossible". REUTERS/Amr Abdallah Dalsh

The Islamic Development Bank (IDB) will soon be reviewing nominees for the 2018 Women’s Contribution to Development Prize that recognizes and rewards women’s participation in development. Since 2006, the prize has introduced to the world Muslim women who tackle complex development problems with original solutions.

Past individual winners include Runa Khan, who in 2008 won for the very first floating hospital ship in Bangladesh, Laila Mandi, who won the prize in 2015 for her work leading a research team that invented a soil brick that cleans wastewater for agriculture irrigation, and last year the award for institutions went to Palestine’s Dunya Women’s Cancer Centre that is the only clinic in the West Bank to specialise in gynecological and breast cancer.  

This year’s prize, to be announced in April, is a great opportunity to emphasize women’s role not only as beneficiaries of development waiting rescue but also as benefactors of development. It is also an opportune moment to delve into what women’s development work can do for the Muslim world. Social entrepreneurship particularly provides the best angle for such an inquiry.  

Social enterprises generate revenue by solving social, and increasingly environmental, problems, and a growing body of evidence suggests that women may be better at both.


Reinvestment - For one, women are more committed to invest new revenue into development causes. A World Bank report released in 2012 tracked this connection cross-nationally and found that both in emerging and developed markets women’s increased income led to a variety of positive development outcomes, such as increased years of schooling, especially for girls, greater nutrition and health care expenditure, and improvement in children’ human capital.

Democratizing development - Second, women-led enterprises democratize development by spreading benefits towards a broader population. A World Bank study from the mid-2000s revealed that in the Middle East and North Africa (MENA), women were more likely to hire fellow women and at higher levels, thus boosting female labor participation. This trend has continued: according to an OECD working paper published in 2014 women-run social enterprises seem to attract a fair share of women collaborators or colleagues. Not only that, women also play a key role for inclusive, green and smart growth, spreading wealth beyond themselves.

Women’s entrepreneurship also comes with unique benefits in economic growth and profitability. There are several reasons for this.

Photo: Palestinian woman Faeda Yamak makes artificial wood from environmental residues to be used as alternative to natural wood for heating purposes and to support women employment, in the West bank village of Beita, near Nablus November 15, 2016. Picture taken November 15, 2016. REUTERS/Abed Omar Qusini

Better management – Calculations by the OECD working paper, covering 25 Muslim-majority countries ranging from Morocco to Kazakhstan moreover documented that compared to men, women-led enterprises are more likely to engage in participatory management, which in turn leads to greater innovation and  organizational identification.

New markets – Female social entrepreneurs take the lead in being the first to provide a kind of service or product in their region, country or worldwide, facilitating therefore new markets and new employment.

Profitability - Finally, according to a study released in February 2016 by the Peterson institute for International Economics of almost 22,000 firms from 91 countries, companies with more women at their top levels become more successful and profitable. In fact, for profitable firms, a move from no female leaders to 30 percent representation increased the net revenue margin by a stunning 15 percent.

What these findings suggest is clear:

  1. In the Muslim world, social entrepreneurship can be the next viable non-state solution to address development issues left unattended by weak public institutions with shrinking budgets.
  1. Female social entrepreneurship may indeed be the best shot to reap the benefits social enterprises can offer to the Muslim world.


However, a number of barriers exist.

In the predominantly Muslim Middle East and North Africa, women entrepreneurs’ share is far lower than in other emerging markets and women are faced with greater obstacles than men to start businesses. Stereotypical gender norms and roles continue to impede female education, labor participation, and access to financial resources in most Muslim-majority countries, in turn hampering the growth of a pool of high-performing, high-quality women-led social enterprises. 

So what’s next? Is there a long wait until the gap closes and the pool grows?

Not necessarily. The Muslim world might already have a unique and fast-track solution: Islamic finance.

Photo: Malaysia's Bank Negara Governor Zeti Akhtar Aziz attends an Islamic Finance Services Board event in Kuala Lumpur, Malaysia, January 28, 2016. Governor Zeti served as the head Malaysia's central bank from 2000 to 2016. Picture taken January 28, 2016. REUTERS/Olivia Harris


Islamic finance has been gathering growing attention from the heavyweights of development in the conventional space, such as the World Bank, as a largely-untapped resource to finance the United Nations’ Sustainable Development Goals (SDGs), including Goal 5, which is gender equality.

Several industry players are signatories to the United Nations Global Compact, which is the world’s largest corporate sustainability initiative that helps companies align strategic operations with universal principles on human rights, labor, environment and anti-corruption, and to catalyze action in support of the broader SDGs. These include Singapore-based Shariah-compliant crowdfunder Ethis Ventures, UAE’s biggest bank by assets First Abu Dhabi Bank that offers Islamic products and services, and Bahrain’s Al Baraka Banking Group.

The emerging ties between Islamic finance and SDGs, which include gender equality, are by no means a stretch and there has already been a start to increase awareness for greater gender equality within Islamic financial institutions (IFIs), such as the Women in Islamic & Ethical Finance Forum (WIEFF) and the report “Women in Islamic Finance and Islamic Economy” published by Simply Sharia Human Capital in December 2016.

A fast-track solution would be channeling this ongoing wave towards female social entrepreneurship. Such a direction would play perfectly well into the core normative principles of Islamic finance, such as equity and risk sharing —indicating that like social entrepreneurship, Islamic finance considers economic activity not independently but in relation to creation of social value. Such a direction would also help to close the gap between Islamic principles and what is actually practised. While Islamic finance has had impressive growth, it has not performed equally well in achieving social goals.

There are now attempts to close this gap and improve Islamic finance’s score on social value creation. The United Nations Development Programme’s (UNDP) Istanbul International Center for Private Sector, along with the Islamic Development Bank recently launched the Global Islamic Finance and Impact Investing Platform (GIFIIP) to bridge Islamic finance with impact investment and to put principles of Islamic finance into action. Impact investments are made with the intention to generate social and environmental impact alongside financial returns.

This is where female social entrepreneurship can come into play. It can be the concrete link to connect Islamic finance and impact investment. After all, a growth in female entrepreneurship would address not only gender inequality, but it would also generate better social, economic, and managerial outcomes, as noted by the above studies, and thus face complex development issues with a greater effort.

Photo: Ciler Safkin, one of 75 women working with the home-cooked meal delivery service of Mamame, cooks in her kitchen in Istanbul, Turkey December 14, 2017. Picture taken December 14, 2017. REUTERS/Murad Sezer


There are various steps Islamic financiers can take to step up this momentum. Quick responses would include extending the use of Islamic finance from microfinance solutions to venture and angel investment funds specifically supporting women-led social enterprises or social enterprises that tackle gender inequality.

A more involved approach would be setting up incubators for women’s social entrepreneurship. These incubators can be set up on waqf assets, which would ensure sustainability of the incubator as the real estate cannot be used for purposes other than its original intends. Historically, waqf assets have hosted healthcare and educational centers, places of worship and inns for pilgrims. Incubators would be a contemporary and well-fitting addition.

Another innovative solution would be directing zakat to fund women-led social enterprises. A planned crowdfunding platform, Human Crescent, is attempting to channel zakat to support social causes including trafficking victims, refugees, and microfinance clients. Regardless of when this project will be launched, or if ever, the attempt itself is a telling sign that Islamic instruments can be mobilized to support women-led social enterprises or enterprises that deal with gender inequality.

However, underlying actionable solutions should be a new investment approach that would adopt a gender lens. This would push Islamic investors to no longer remain blind to gender inequality while providing them with a clear method or tool to assess social and environmental impacts of financial activity.

Finally, promoting female social entrepreneurship may bring an added benefit for the Muslim world.

In the post-Arab Spring, young women and men across the Middle East have been increasingly shifting away from political protest to community engagement as a way to rebuild their communities and solve development problems.

A meaningful support to female social entrepreneurship can have a significant spillover effect and channel this new youth-based momentum into scalable social enterprise-based solutions. In turn, it would also address youth unemployment and political alienation, yet another thorny issue facing the Muslim world.

Neslihan Cevik completed her PhD in Sociology at Arizona State University in the United States. Any opinions expressed in this article are her own.

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(Editing by Emmy Abdul Alim

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