Academic journal article Asian Social Science

The Regulatory and Supervisory Framework of Microfinance: Some Evidence from Sudan

Academic journal article Asian Social Science

The Regulatory and Supervisory Framework of Microfinance: Some Evidence from Sudan

Article excerpt


Islamic microfinance is one of the essential unconventional branch of lending that uses by Islamic microfinance providers for financial and social inclusion to provide financial support for low-income people as well as the extremely poor. Through the in-bodied social inclusion tools, Islamic microfinance can best used to mitigate the negative impact of the extreme poverty. Since financing micro-borrowers and extremely poor are highly risk, the need for efficient and effective regulatory and supervision of microfinance frame work is very important. This research investigated Sudanese Islamic microfinance regulatory and supervisory framework. Despite of the exerted efforts by Sudanese government through providing favorable climate and the establishment of Islamic financial intuitions and establishing structured microfinance framework, the results showed that Sudanese microfinance regulatory framework is not providing best outreach. Despite the continuous increasing of the ceiling portfolio by the regulatory authority until reached 12% from 4% since the first issued rules in 2006, the actually utilization is insignificant at the end of the year 2013. This might be due to several reasons such as bad basic infrastructures, ineffective follow up by the regulator of the microfinance providers, Islamic microfinance deliberately ignoring the rural areas clients' because of the high risk, the framework lack of the building capacity tools for clients as well as for the microfinance providers staff. The results of this research gives strong policy implications for both to Islamic microfinance regulator and providers to carry on real revision and evaluation for the efficiency and effectiveness of the current operated microfinance frame work in Sudan. These results might be useful for Islamic microfinance regulators and providers in Muslims countries and interested providers in the West the benefit from the nullified factors that render the regulatory framework ineffective.

Keywords: Islamic microfinance, regulatory and supervision

1. Introduction

Recently Sudanese economic has weakened as indicated by the IMF report in 2014 (Note 1). The country economic growth was totally depending on exporting crude oil since the beginning of this century particularly after 1999. The country used to depend on mainly on agricultures and livestock before the oil. Sudan loosed 75% of its oil revenue due to the secession of the South in 2010 (Note 2). In addition to that, the internal and regional conflicts, heightened political tensions, are continuing to effect the economic growth, which eventually leads to the high unemployment and disadvantages among most of the citizens.

Sudan dominated the political instability from the independence in 1956. Since then the country exposure to three military cops. All the civil governments that attempt to rule the used to be the largest country in Africa were overthrown in an overnight by the military even before implementing their agendas. Other factor contributed to the unemployment and poverty is longest civil wars and the internal conflicts across the regions.

Civil wars (1955-2005) had great impact on the economic growth and created economic and political disorder. Sudan has the longest civil wars in the continent between the North and the South since 1955 until 2005 (Note 3). In addition to the ongoing internal conflicts between the North and Western Sudan since 2003, the country is fueling on the previous vulnerable areas due to the huge immigrations of people particular from rural inhabitants. More people left their farms and lost their livestock to live as refugees around the urban cities. Sudan has a history of high inflations and structure economic disorder particularly during the 1980th and the 1990th (Note 4). The country also among the poor and low income and highly indebted countries. Sudan economics growth was started to improve shortly after had started exporting the crude oil in 1999. …

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