Introduction developing Malaysian economy is Micro-enterprises. According to


One of the biggest pivotal roles in developing Malaysian economy is
Micro-enterprises. According to the economic census, Micro-enterprise in
Malaysia is accountable for 77 percent of total Small and Medium Enterprises
(SMEs), and 78.7 percent of the business establishments (Economic Census,
2011). The graphical statistics of the census (2010) also indicates that Micro
and SMEs contribute about 65 percent of total employment in Malaysia
(Department of Statistics, 2012). In the year 2011, Census of Establishment and
Enterprises revealed, nearly 19.7 percent of SMEs were women-owned businesses.
By the size of establishment, about 87.9 percent the women-owned SMEs were
micro enterprises that are owner operator. Small-size establishment makes up
11.3 percent and medium-size establishments account for 0.8 percent (Census,
2011). Simultaneously, the Malaysian government has embarked on more initiatives
to establish, promote and nurture women entrepreneurs, to come forward and
explore businesses as an opportunity for employment and earnings, in line with
the Fourth Thrust of the National Key Result Area (NKRA, 2012).

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Data analyses show that Micro and
small enterprises mainly depend on their own internally generated funds, and
only 16.2 percent of micro establishments indicated that they rely on financial
institutions for financing” (Economic Census, 2011). It is obvious therefore;
one of the major problems of operating these micro enterprises is obtaining
credit facilities, due to lack of significant laws and administrative
procedures, limited access to institutional credit, imperfect market
information and seldom opportunities for skill development and low level of
R&D are stressed by literature (Saleh & Ndubisi, 2006; Shahinpoor, 2009; Nawai and Shariff, 2011; ZahidMahmood, Abbas &
Fatima, 2017). Interestingly, a
very limited studies realized the importance of women participation in Islamic
microfinance schemes, and its repercussion effect on their socio-economic
development, which is the main gap this study attempts to address. Past
literature state that women in developing countries do not have easy access to
credit for their entrepreneurial activity, although it was identified as the highest
rate of women participation in the informal sector of the developing economy (Akanji
2006; Iganiga, 2008). In fact, very limited studies in Malaysia, thus far have
focused on women entrepreneurs of micro-enterprises, exceptional being one
study conducted by Haneef et al. (2013) in Kuala Selangor. Whereas, women play
a pivoted role in generating income for their family, whilst upgrading their
socio-economic standards. This directly and indirectly contributes to
Malaysia’s GDP and overall to the nation’s economy. This study aims to evaluate
the elements that motivate participation in Islamic microfinance schemes by
women entrepreneurs of micro-enterprises in Malaysia and its impact to their
socio-economic changes. The scope of the research addresses micro-enterprises
owned by women in urban as well as rural locations of Malaysia.


Literature Review

Microfinance has evolved as an economic
development approach intended as a provision of a broad range of
financial services such as savings, credit, insurance and payment services to
the poor or low-income group who are excluded from the normal banking
facilities (Ledgerwood, 1999). It is a development approach that provides
financial as well as social intermediation (Samer, Majid, Rizal, Muhamad
& Rashid, 2015; Schmidt, 2010).
Formal financial institutions restrain in providing financial services
especially credit, which is encouraged to evolve the micro-financing program (Wulandari
& Kassim, 2016). The
microfinance program was initiated with the objective to provide credit
facility to the poor people without collateral requirement (Hossain,
2012). Pischke (2002) argued
that microfinance typically targets borrowers who do not have access to formal
financial markets.


Adequate Knowledge of Islamic Micro Finance (AKI)

Prusak (1999)
describes knowledge the important human factor in increasing the development of
small human trait or attribute, distinguishing it from businesses. It is
believed that access to credit information is the only way human can obtain
knowledge and act accordingly.  De Long, Davenport and Beers (1997)
claimed that knowledge is “information combined with experience, context, interpretation,
and reflection.”  Ruggles (1997) carried the definition farther by
describing it as an activity and “process of knowing.” The term activity brings
up the notion of action. Duffy (2001) describes knowledge as familiarity with
facts, which one may have learned through study, observation or personal
experience. The human can achieve or perceive knowledge while computers can
only have information. Polanyi (1958) asserts that knowledge is the full utilization
of information and data, coupled with the potential of people skills,
competencies, ideas, intuition or investigations, whereas information is the knowledge
that is communicated.

Islamic microfinance intends for economic growth and success of
socio-political systems, based on the Islamic principles which include the same
principle of profit and loss sharing applied to trade, business, investing and
mortgages (Hassan, 2014; Rahman, 2010; Saad & Anuar, 2009). A difference is
found in the lending mechanism of Islamic microfinance which differs from conventional
microfinance due to the prohibition of riba
(interest). Unlike conventional microfinance, Islamic microfinance offers an
interest-free way to give small loans to people who are poor and in need
(Rozzani, Mohamed & Yusuf, 2016). Qard’l-hasan
(benevolent loan) is an Islamic financial instrument, which is one of the key
components of extending loan, where the lender lends loan on a goodwill basis
and the borrower is only required to pay the exact amount borrowed without
additional charges or interest (Kachkar, 2017). The Islamic principles clearly
encourage Muslims to provide qard’l-hasan,
or benevolent loans, to “those who need them”.

Islamic microfinance (IMF) mechanism is
increasingly popular, especially among the developing countries of the world for
alleviating poverty (Rahman, 2010). The Islamic banking and finance industry as
a whole is anticipated to contribute US$ 2.5 trillion worth of assets by 2015
(BNM, 2013). And it is a continually growing sector due to its ethical
principles and prohibition of ‘riba’
(interest). Islamic microfinance totally follows the Islamic concept which is a
form of socially responsible investment. Investors who use their wealth for
Islamic microfinance projects only involve themselves in halal projects which benefit the community at large, and trade and
industry projects to develop a country’s economy.

With the concept of Islamic social
responsible principles of caring, IMF enables not just with the solution to
help poor but also provide them with microfinance enabling them to take
financial access (Haneef et al., 2013). The present study therefore, examines
women entrepreneurs’ knowledge of IMF schemes as a motivating factor towards
participation in Islamic microfinance. Based on the discussion, this study
proposes the following hypothesis.

H1:      There is a significant
positive relationship between adequate knowledge on Islamic micro finance and
women entrepreneurs’ participation in Islamic microfinance.


Easy Access to Credit Facility (EAC)

Getting an easy
access to credit facility is an important factor in increasing the development
of small businesses (Nawai and Shariff, 2013). It is believed that access to
credit facilities actually allows the poor to overcome liquidity constraints
and invest more (AL-Sharafat, Qtaishat & Majdalawi, 2013).  Brehanu and Fufa (2008) conducted a
microfinance study in Somalia and asserted that access to financial services by
smallholders is normally viewed as one of the barriers limiting their benefits
from credit facilities. Similarly, Coyle (2006) identified accessing
microfinance services as a key element for SMEs to succeed in building valuable
capabilities competent of creating employment and contributing to poverty
alleviation in developing countries.

The world data of microfinance shows that a small credit to the lenders
may help the micro-enterprises to grow further (Woller and Pearsons, 2002;
Khandker, 2005). Hartarska and Nadalnyak (2007) indicated that the existence of
Microfinance Institutions actually alleviated micro businesses’ financing
constraints. However, in order to achieve greater financial inclusion,
development and sustainability of microfinance is equally important, ensuring all
economic sectors, regions and communities across that must have access to a
full range of financial products and service (Hossain, 1988; Mead &
Liedholm, 1998; Shu-Teng, Zariyawati, Suraya-Hanim and Annuar, 2015). Therefore,
Islamic microfinancing is the right way to provide an easy, faster and
convenient financing facility to micro entrepreneurs, specifically those owned
by women entrepreneurs, who are in need of financial aid to operate and sustain
their businesses.

There are numerous constraints to microenterprises developments. Saleh
and Ndubisi (2006), found that Malaysian SME faces constraints due to poor of
technological capabilities, limited skilled human capital resources, and ICT
penetration. The study also identified the high level of bureaucracy in
government agencies and difficulty in obtaining funds from financial
institutions and government as main obstacles faced by SMEs. Among all the most
critical has been lack of access to credit. In order to sustain the enterprise,
working capital is crucial and to enable it to improve its performance. In
fact, Leaman, Cook, and Stewart (1992), highlighted that development of a small-scale
enterprise is highly reliable on the accessibility to capital. Based on the
discussion, this study proposes the following hypothesis.

H2:      There is a significant
positive relationship between easy access to credit facility and women
entrepreneurs’ participation in Islamic microfinance.


Attitude (ATD)

Attitude is
defined as the readiness to experiment and the motivation to take action toward
object classification in a predictable manner (Smith et al., 1956). Prentice
(1987) asserted that attitude comprises cognitive, affective and behavioral
factors that are multidimensional. Ajzen and Fishbein (1977) described attitude
as the degree to which an individual assesses behaviour as favourable or
unfavourable. In this regard, attitude reflects the impact of cognitive and
affective factors that lingers in one’s personal experience concerning the
attitude, and also represents the willingness to respond accordingly (Ajzen
& Dasgupta, 2015). In the context of the present study, a motivating
attitude is described as the desire to develop the business or improve skills.

Several studies were undertaken in Malaysia in regards to the economic
impact of microfinance programmes. The first study was an impact assessment
study conducted by Kasim in 1988. The main aim of his study was to evaluate the
effectiveness of Amanah Ikthiar Malaysia (AIM), in increasing, the household
income of the poor, who were involved in the pilot phase of this programme. The
study found nearly 70 percent of the AIM members who were involved in this
study achieved a significant increase in their monthly household income, from
an average of RM142 to RM220 per month (Kasim, 2000). In 1990, the
Socio-Economic Research Unit (SERU) of the Malaysian Prime Ministers Department
again, conducted an impact assessment study on AIM microcredit programme (SERU,
1991). SERU took samples from the poor employed in the rice and rubber sectors
in Kedah alone. The result revealed that the monthly household income of its
members increased more than doubled, from RM198 to RM457. Interestingly, this
study was also able to uplift 249 poor households from poverty. In 2005, the
internal research conducted by AIM itself revealed that the AIM participants
were able to enjoy an increase in income of 186 percent; from RM326 to RM932
per month after having received the loan from AIM.

However, very limited studies were conducted in Islamic microfinance
thus far, focusing specifically on women entrepreneurs. Islamic microfinance is
rooted in a desire for economic growth and prosperity of socio-economical
systems based on Shari’ah principles. 
Karim et al. (2008) asserted that the demand for microfinance products
by the Muslims are based on Shari’ah compliant
led to the emergence of Islamic microfinance as a new market niche. They
argued, Islamic microfinance has the potential to expand financing to an
explosive level world-wide. Ahmed (2002) conducted a study to provide empirical
evidence from three Islamic microfinance institutions (IMFIs), in Bangladesh.
The study found IMFIs appear to have performed even better than Grameen Bank,
which is the largest conventional MFI operating in Bangladesh (Hossain, 2012).
Based on the discussion, this study proposes the following hypothesis.

H3:      There is a positive relationship
between attitude and Islamic microfinance participation by women entrepreneurs
of microfinance.


Influence of Friends
and Family (IFF)

Sernovitz (2009)
pointed out that people love to talk about products and services that they have
bought and used. Albarq (2014) and Thorsten, Kevin, Gianfranco, and Dwayne
(2004) added that psychologically, consumers will not truly trust
advertisements by the producers themselves, but will rather trust people who
repeatedly talk about a product. Positive
word of mouth by friends and family members plays a crucially psychological
role in getting one to perceive differently any notion about a particular job,
based on the experiences of others they trust. The influence of social group
pressures and expectations onto one’s intention depends whether to perform or
not that particular behaviour. Social groups consist of families, friends,
colleagues and so on.

A research done by Alam and Sayuti
(2011) found that support from social group members positively influences the person
towards performing or getting involved in some new activities. This
is consistent with Karijin et al. (2007), in which their study also discovered
the similar findings. On top of that, Affendi et al. (2014) found that there is
a positive significant correlation between the influence of
friends and family members and human intention in involving into something.
This is perhaps Malaysia is a collectivistic society that people are expected
to conform to the social groups that they are belong to. Pertaining to
influence of friends and family (IFF), Abd Aziz and Wahab (2013) also exposed
the similar findings that perceived behavioural control does have significant
relationship with individual’s intention. Based on the discussion, this study
proposes the following hypothesis.

H4:      There
is a significant positive relationship between the influence of friends and
family and women entrepreneurs’ participation in Islamic microfinance.


Theoretical Foundation

The gap identified in the literature review assert that
there are factors which motivate IMF participation. These factors would be
unique to the respective society, culture and economics of the country
understudy. Hence, Gender and Development (GAD) Theory (Boserup, 1970) is
identified as the most appropriate theory to address the present research.
Therefore, the theoretical framework of this research is derived from the GAD
theory. The GAD theory advocates an emerging and innovative approach to address
women’s diversity within development programs while examining the power
relations that disabled women from advancing. It is evident therefore financial
aid for women owned micro-enterprises is vital. Firstly, because majority of
the women owned SMEs are micro-enterprises. But those micro-enterprises rely
mainly on their own internally generated funds for operating their businesses.
Probably they may grow “big”, if they are given sufficient financial aid. On
the other end, based on the above statistics it is obvious, there is a huge
untapped market for IMF organisations to promote their micro financing schemes
to the needy women entrepreneurs.



The population for this study were the women owners of
micro-enterprises. The study was conducted in various regional branches of
Amanah Ikthiar Malaysia, located mainly in central and southern regions of
Malaysia. First, the list of women entrepreneurs operating micro-enterprises in
various branches was obtained from Amanah Ikthiar Malaysia’s main office in
Bandar Sri Damansara.  Subsequently the
questionnaires were distributed to 20 AIM’s regional branches respectively,
which agreed to participate in the survey.

In this research,
one (1) industry experts and five (5) scholars in Islamic microfinance were
interviewed to finalize the questionnaire items. It was than administered to 35
samples of the study as a pilot study. The respondents were requested to
comment on the identified motivators whether these apply to them or not. The
questionnaire was finalised based on the suggestions and were then distributed
via simple random sampling technique (Babbie,
2010; Kothari, 2004) among 400 respondents, located in Central
and Southern regions of Peninsular Malaysia.
A total of 341 questionnaires were returned. After the
initial screening process, 12 questionnaires found incomplete with more than 15
percent missing information, thus, excluded from the further process as
suggested by Hair et al., 2016. Finally, a total of 329 questionnaires were
found valid for further analysis.