An Analysis of the Joint Liability Model in Bangladesh: Lessons for the Islamic Microfinance Institutions

As a powerful tool for eradicating poverty, microfinance enables the underprivileged to rise up the social and economic ladders, contribute to society, and lessen their vulnerability. As a novel financial tool, Islamic microfinance can also help the impoverished escape the cycle of poverty. Bangladesh has millions of people who are living in abject poverty because of their inability to use formal financial services. Hence, to improve the conditions of the poor, a good number of microfinance institutions have come forward with a variety of microfinance products. Most significantly, different microfinance institutions like the Grameen Bank and the Islamic Bank Bangladesh Limited (IBBL) have started their microfinance programmes that have achieved immense success in Bangladesh. This study aims to analyse the lessons the Islamic microfinance institutions (IMFIs) can take from the success of the Grameen Bank and its joint liability model. Using the systematic literature review (SLR) approach, this study does a comparative analysis between the operations and success of the joint liability model of Grameen Bank and the Rural Development Scheme (RDS) of IBBL. It also offers some useful recommendations for the IMFIs generally so that they can enhance their impact on the poor and vulnerable people through Islamic microfinance schemes. The outcomes of this study can be vital for practitioners and entrepreneurs who want to start the operations of new IMFIs, specifically in Bangladesh.