Scope: Islamic microfinance aims to provide small loans and financial services to low-income individuals who typically lack access to formal banking services, in a Shariah-compliant manner.

Process: Unlike conventional microfinance, Islamic microfinance avoids interest (riba) and typically uses structures like Qard Hassan (interest-free loans), Murabaha (cost-plus financing), and Mudarabah (profit-sharing). Islamic microfinance institutions also often include financial literacy training and community support.

Challenges: Islamic microfinance institutions face high costs, as interest-free loans can be riskier and less profitable. The challenge is to balance financial sustainability with community support and Shariah adherence.

Examples: Institutions like FINCA in Jordan, Akhuwat in Pakistan, and Islami Bank Microfinance in Bangladesh provide small-scale Shariah-compliant financing solutions to underserved populations.