Unlocking Islamic finance for women’s economic empowerment

Women’s economic empowerment is key to realizing women’s rights and gender equality. It incorporates women’s equal participation in existing markets, access to and control over assets, opportunities for decent work and raised self-agency and participation in economic decision-making at all?levels.

Empowering women in economy and closing gender gaps are both key enablers to and established targets of the SDGs and women have a critical role to play across all of these goals. SDG 5 ‘Gender equality’ is known as the standard-bearer gender goal because it is dedicated to achieving women’s empowerment but SDG 1 ‘No poverty’, SDG 2 ‘Zero hunger’, SDG 3 ‘Good health and well-being’, SDG 8 ‘Decent work and economic growth’ and SDG 10 ‘Reduced inequalities’ also incorporate women’s economic?empowerment.

As a key part of the 2030 Agenda, women’s economic empowerment is also critical for inclusive economic growth. Women’s economic empowerment raises productivity, diversifies economy and promotes income equality. For instance, raising female employment rates in?OECD?countries to match that of Sweden could boost GDP by over?US$6 trillion.

Increasing women’s and girl’s educational attainment can also contribute to women’s economic empowerment and fosters inclusive economic growth. Improving access to education and providing women and girls with upskilling and re-skilling opportunities to keep up with rapid technological developments and digital transformations are critical for women’s income-generation opportunities and participation in the formal labor market, as well as promoting economic growth. According to the?OECD, increased educational attainment accounts for about 50% of the economic growth in?OECD?countries over the past?50 years.

Enhancing employment and leadership opportunities for women also benefit companies’ organizational effectiveness and promote growth. For instance,?McKinsey and Co?estimates that companies with three or more women in senior management positions demonstrate higher organizational performance in all?dimensions.

Unpaid care work is also essential to maintaining a functional economy, but is often disregarded. According to the?United Nations Research Institute for Social Development, if women’s unpaid work was assigned a monetary value, it would constitute between 10% and 39% of?GDP.

Islamic social finance for women’s economic empowerment

Islamic social finance, which refers to “the provision of financial services to the vulnerable members of society to achieve socioeconomic welfare”, is an underutilized but important source of financing for women’s economic empowerment.

Among Islamic social finance instruments, Islamic microfinance,?Zakat?and?Waqf?have been applied to promote the socioeconomic empowerment of women across the Muslim and non-Muslim worlds (Muhammad, A. D., Maidoki, M. L., & Sani, U. B. (2018). ‘The role of Islamic social finance in empowering youth and women in Sokoto State of Nigeria’, Journal of Islamic Monetary?Economics?and Finance). Islamic microfinance in particular has been recognized as an important instrument for realizing women’s long-term empowerment goals by offering a range of products and services.

Islamic microfinance offers financial products which could benefit women, such as charity-based financing (Qard Hasan), trade-based financing (Murabahah?and?Salam), profit- and loss-sharing financing (Mudarabah?and?Musharakah) and rental-based financing (Ijarah).

Islamic microfinance institutions can also enable women to access financial services that assist in establishing and developing businesses, improving skills and accessing education, forming women cooperatives and taking civic action to improve communities.

Islamic microfinance institutions should also expand their services into non-financial services to support women’s development and well-being by adopting a holistic approach, such as by providing training and women-specific capacity-building programs.

Fatma Cinar is the Islamic Finance Portfolio Lead,?Istanbul International Center for Private Sector in Development?(IICPSD),?United Nations Development Programme. She can be contacted [email protected].