Uncovering apt policy for refugee self-reliance is intricate. Refugee entrepreneurship is often hailed as the way forward for such an objective as it deciphers ‘Canvas Ceiling’. However, the lack of financing for unfeasible and unbankable refugee entrepreneurs prevents this from materialising. This article proposes Islamic blended microfinance for refugee entrepreneurship, integrating state support, the private sector, the philanthropic funds, and Islamic values. Our model differs as it is developed through the lens of the competing logic discussed in the institutional theory. Understanding competing institutional logic is crucial as blended finance involves various agents with distinct moral preferences that are often overlooked by policymakers. We test our model in the spatial context of Indonesia, the home of microfinance and blended Islamic finance. The findings outline that the logics of the three agents and religion (Islam) can converge in contextuality and temporality dimensions. A key to attaining this equilibrium is to meticulously design the payoff between the private sector with market logic and the philanthropic institutions with universal community logic, making them contingent on the state of the economy.
Policy Implications
- Given that a significant proportion of global refugees originate from the Muslim world, Islamic finance should focus more on providing alternative financing for empowering refugees. A viable financing structure for refugee entrepreneurship must address the classic trade-off between sustainability and outreach.
- By integrating funds from the private sector, philanthropic organisations, and government support, Islamic blended microfinance offers potential solutions. However, any policy-oriented proposal should address the competing institutional logic issue amongst the institutions involved in the process.
- The logic of the three agents and religion (Islam) converges in the dimensions of contextuality and temporality, where the private sector is adjusting towards not only material sustainability but also outreach. This makes blended finance an appropriate mechanism for financing development.
- The refugee financing payoff should facilitate risk-sharing between the private sector and philanthropic organisations in both favourable and adverse economic conditions. Integration with philanthropic instruments like waqf and zakat also enhances refugees' entrepreneurial skills and provides an insurance mechanism.
Photo by Andreea Ch