Impact of islamic microfinance on quality of life: Maqasid Al-Shariah approach

Microfinance plays as one important instrument to achieve economic sustainability for the achievement of the 2030 Sustainable Development Goals. There is also growing awareness that Islamic microfinance offers a potential way to attain financial inclusion to promote better social well-being. Accordingly, this study aims to investigate the role of Islamic microfinance in improving the customer’s quality of life through use of the Maqasid Al-Shariah approach. The study employs primary data from Baitul Maal wat Tamwils and Islamic rural banks (BPRS) in the Jakarta, Bogor, Depok, and Tangerang areas. We disaggregate quality of life into several dimensions consisting of subjective wellbeing, health, education, wealth, and housing and sanitation which also represents the aspect of Maqasid Al-Shariah. Based on binary regression, our results show that Islamic microfinance significantly affects improvement in the dimension of subjective well-being, wealth, and housing and sanitation. The average amount of financing and duration of financing appear as important determinants in improving a customer’s quality of life. Overall, our results support the argument that Islamic microfinance males a positive contribution to promoting the preservation of Maqasid Al-Shariah.