ABSTRACT

Saudi Arabia, even as various could believe is a wealthy nation paradoxically has elevated-implicit poverty problem. Such poverty could be related to a small degree of commercial interest also its conventional variance in phrases of a monetary guide. While currently being supported internationally, a successful little and middle companies (SMEs) have large possible to assist alleviates poverty. In Saudi Arabia, the SME area presently added much below forty% of the GDP with a financing diffusion rate of most effective 2%. To improve their presentation, these organizations ought to gain from the use of microfinance inventions. The primary goal of this research is to obtain the estimation of SME owners concerning Islamic Microfinance in Saudi Arabia and discover its possibilities closer to encouraging the commercial hobby and therefore poverty discount. Facts have been received from semi-structured interviews performed with four CEOs or high level management employees of various classes of MSMEs in Saudi Arabia. Based on a qualitative evaluation, this has a look at located that low get entry to finance is appropriate to unreasonable necessities, and that the interviewees are conscious of Islamic finance however not Islamic microfinance. The research shows higher courting among banks and MSMEs to supplement the trade and boom output.

Chapter 1: Introduction

Background

Microfinance is the source of financial services for entrepreneurs and small businesses lacking access to banking and related services. The term includes three things, namely microloans, micro-savings, and microinsurance. Dr. Mohammad Yunus, a noble prize winner, pioneered the concept in developing country Bangladesh to help the financially marginalized start a business by providing them the necessary capital and thereby allowing them to work towards financial independence. Dr. Yunus’s experiment stated with offering small loans, which he himself funded, to women in his country who were making furniture using bamboo as raw material. These women used to depend on loans from local lenders on unfair and predatory terms for financing the expenses of production. The loans being very small in amount were not honored by the traditional banks, but these loans made significant changes in the lives of these small entrepreneurs. Taking the initiative forward, Dr. Yunus established Grameen Bank in Bangladesh and brought opportunities and risk-management tools at the doorsteps of these poor people, most of them are women, who, when given a chance, not only repaid the loan but also created a viable business model. The Grameen Bank now serves more than seven million poor women in Bangladesh.

A number of studies have shown that poverty persists due to the exclusion of the poor from the financial system. It is the financial exclusion that, in turn, prevents a large section of poor population from taking part in the development process. With no access to traditional financial system these poor people find it extremely difficult to reap the benefits generated by economic growth. They cannot build assets, educate their children, and secure themselves from financial shocks. It is this financial exclusion that pushes them further into the vicious cycle of poverty.    

The basic objective of microfinance is to alleviate poverty by removing this financial exclusion, create more jobs and develop self-reliance among the population belonging to the lower strata of the economy. Inspired by the model from Bangladesh, many developing nations have attempted to replicate the model, but have faced multiple difficulties in achieving the level of success that Grameen Bank did. The majority of issues included high cost of financing, women-only approach and focus on financing economically active people only leaving chronically poor and destitute aside.  

Although the movement of microcredit found its success in an Islamic country, most of the other Muslim dominated countries have not accepted the concept in its original form. The financial system in these countries follows Islamic finance which is based on the holy book Quran and Sharia law. The Sharia law specifically dictates not to charge any interest on loans and Quran forbids usury or Riba.

However, the requirements of the poor in Islamic countries are no different from that of non-Islamic states. They also need financial assistance in order to make expenses beyond their available means in mainly three categories of events: life cycle events, exigencies, and investment opportunities. In fact, poor people may need more than just credit. They require a gamut of financial services such as credit, savings, money transfer facilities and different forms of insurance (Obaidullah, 2008).   

Saudi Arabia is one of the wealthy Islamic nations in the world. However, the country is not devoid of its fair share of issues like poverty and unemployment. The Saudi government does not release statistics on poverty regularly. Hence, there is no concrete information on overall poverty rate of the country. According to some outside agencies, as of 2017, its poverty rate stood at 12.7 percent (Lee, 2018). Different media reports and private estimates state that there are between two to four million people in the country who live a life on below $530 a month, i.e. about $17 a day. The majority of poor are migrant workers. The World Bank projects an increase in poverty level in the country. Owing to increased poverty, begging is very common in slums and what is more astounding is that majority of beggars are women. The most recent finding by the World Bank states that in 2014 more than 80,000 children were not unable to attend primary school (Gillespie, 2018).    

Thus, there is scope for inclusion of poor people in the mainstream of the Saudi Arabian economy using concepts like microfinance.  But Saudi Arabia is a country driven by Sharia law, which forbids interest on loans. In this context it is important to study whether there can be an effective counterpart of the practices of microfinance which is interest-based, in Islamic finance which is Sharia-based.

Research Question

Q1. Is there an efficient counterpart of the interest-based microfinance system in the Islamic law?

Q2. Is the concept of microfinance helpful for poor people of Saudi Arabia?

Q3. How can they be made aware of it and an inclusive financial system developed?

Aims and Objectives

The objective of this study is three-folds:

• To find an efficient counterpart of the interest-based microfinance system in the Islamic law.
• To ascertain whether a concept like microfinance is at all helpful for poor people in Saudi Arabia?
• If yes, how can they be made aware of it. If no, what alternative system can be devised to ensure an inclusive financial system.

Scope of the Study

The scope of the study is to consider a country like Saudi Arabia, its economic conditions and the role of microfinance in uplifting its poor people.

Limitations

The research is limited to the Islamic countries only with the Saudi Arabia as its representative. The study restricts itself to the discussion of the relevance of microfinance in Sharia law driven country with an Islamic financial system. 

Chapter 2: Literature Review

Islamic Finance Law

Islamic finance is dictated by Sharia law which originates from the Quran, the holy book of Islam and from Hadith, a compilation of sayings of prophet Mohammad that are not present in Quran. According to Encyclopedia Britannica, Islamic jurisprudence or fiqh is “the science of deducing and applying the principles and injunctions of Shari’ah, as well as the sum total of deductions by particular jurists”. Fiqh interprets and adapts Sharia law to make it applicable in modern life “according to time and circumstance is necessitated by changes in society, and the influx of various cultures and material conditions” at the same time ensures that the principles follow the writings of Quran.  Islamic finance is based on the prohibition of riba, which is an excess over and above the quantity of loan. Riba can be classified into credit riba ((riba’ al-nasi’ah) and surplus riba ((riba’ al-fadl) (Az-Zuhayli 2006). According to the Islamic law no excess can be extracted neither from credit nor from surplus.

Iman Fakhruddin Razi in his book al-Tafsir al-Kabir states three reasons why riba is unlawful.  First, it leads to an exploitation of borrowers by the lenders as interest or riba make the lender well off at the cost of the borrower. Second, interest or riba can become a source of livelihood for a group of people who may not be willing to undergo the hardship of earning money, as it is certainly easy to earn income merely by lending money. Lastly, the concept of interest is in contradiction to the ideas of mutual sympathy, human goodness, and obligation (Rahim and Rahman, 2007).

The Islamic Fiqh Academy made a resolution in the year 1985 which states the following:

• Any excess or profit on a loan for a deferred payment when the borrower is unable to repay it after the fixed period and similarly any excess or profit on a loan at the time of contract are both forbidden as riba in the Shari’ah.
• Alternative banks should be established according to the injunctions of Islam to provide economic facilities.
• The Academy resolves to request all Islamic countries to establish banks on Shari’ah principles to fulfill all the requirements of a Muslim according to his beliefs so that he may not face any repugnance (Rhule, 2016).

After this resolution, Islamic finance and banking expanded in many countries who wished to operate under these rules. The Islamic finance is based on an alternative of riba, which is profit and loss sharing (PLS) arrangement. This arrangement is believed to be more equitable and egalitarian compared to interest-based approach (Rahim and Rahman, 2007).

Islamic Microfinance

Despite significant expansion of Islamic banking worldwide, the concept of microfinancing has not developed well in the Islamic states. Microfinance is an interest-based concept which leaves the majority of Islamic countries out of its realm as Islam does not support charging of interest on loans (Juliette, 2013). Bangladesh could witness the setting up of Grameeen Bank in 1976 as the country is classified as “moderate Muslim” by the United Nations and does not follow Sharia law strictly. The legal system of the country is based on British Common Law rather than Sharia law (Yasmin, 2013).

As defined in the Microcredit Summit (1997), microfinance means “programme that extend small loans to very poor people for self-employment projects that generate income in allowing them to take care of themselves and their families” (Rhule, 2016).  It involves micro-credit, micro-equity, micro-savings, micro-transfer and micro-insurance. The primary objective of microfinancing is to alleviate poverty, create more job opportunities and make the poor section of population independent and capable (Rahim and Rahman, 2010).  

Obaidullah (2008) in his work found that there is no fundamental difference or inconsistency between the models of microfinance and the Islamic values. The only thing that differentiates the two is the concept of riba involved in conventional microfinancing. But there is an opportunity to find alternative models of microfinancing that will allow the implementation of the concept in a Sharia-compliant manner (Obaidullah, 2008).

In his research Rahim (2007) discuses about a number of Sharia-compliant microfinance schemes such as “Hodeibah microfinance program in Yemen, the UNDP Murabahah based microfinance initiatives at Jabal al-Hoss in Syria, Qardhul Hasan based microfinance scheme offered by Yayasan Tekun in Malaysia, various schemes offered by Bank Rakyat Indonesia, and Bank Islam Bangladesh”.

On the other hand, Ahmed (2002) has found a number of differences between the conventional microfinance and Islamic microfinance. The following table will summarize these differences:

Items	Conventional MFI	Islamic MFI
Source of fund	External Funds, Saving of Client	External Funds, Saving of Clients, Islamic Charitable Sources
Mode of financing	Interest based	Islamic Financial Instrument
Financing the poorest	Poorest are left out	Poorest can be included by integrating with microfinance
Fund transfer	Cash given	Goods Transferred
Deduction at the inception of contract	Part of the Funds Deducted as Inception	No deduction at inception
Target group	Women	Family
Objectives of targeting women	Empowerment of women	Ease of Availability
Liability of loan (which are given to women)	Recipient	Recipient and Spouse
Work incentive of employees	Monetary	Monetary and Religious
Dealing with defaults	Group/Center pressure and threat	G r o u p / C e n t e r / S p o u s e Guarantee, and Islamic Ethic
Social development program	S e c u l a r (n o n-I s l a m i c) behavioral, ethical, and social development	Religious (includes behavior, ethics and social)

Source: Rahim (2007)

Microfinance in Saudi Arabia

Saudi Arabia is known as a rich country but has undeclared poverty which is very high. An unofficial study by Tawfik El Seif (2013) revealed that there are almost 10 million Saudis who live below the poverty line. There is severe mismatch of financial support to encourage entrepreneurial activities of the people lacking financial strength but with the zeal to achieve.  It is worldwide proven that the small and medium sized enterprises (SMEs) have the most potential to support poverty alleviation. However, in Saudi Arabia, the SMEs contribute merely less than 40 percent of GDP with a financing penetration rate of mere 2 percent (Adewale, al-Jaafreh and Osman, 2015). 

The findings of Adeyemi, al-Jaafreh and Osman (2015) are quite significant. They show that the terms of formal financing in Saudi Arabia is highly unfair towards small enterprises. In 2006, the government of Saudi Arabia initiated Kafalah program through Saudi Industrial Development Fund (SIDF) to “act as guarantor to banks for providing credit for SMEs” (p.63). The program was successful in providing credit of around 950 million US dollar in 2013. Despite the success, it has been found that banks are mostly unwilling to offer fund to SMEs due to lack of sufficient market and feasibility studies. This implies that there is a scope for innovation and implementation of microfinancing in Saudi Arabia.

Adeyemi, al-Jaafreh and Osman (2015) also made a significant contribution in the literature by revealing that the concept of Islamic microfinance is not widely known among the SMEs of the country. Most of their interviewees expressed interest in getting Islamic finance products form the well-structured system of Islamic banking. They opined that there is a huge potential for banks and other financial institutions to provide Islamic microcredits to the SMEs in Saudi Arabia.     

 In their work Aboud and Faisal (2017) discuss about the challenges and prospects of the microfinance institutions of Saudi Arabia.  They are of the view that the major challenges that the microfinance institutions of Saudi Arabia face are lack of governance, professional management, internal transparency, high cost, poor targeting of low-income groups, their inability to move beyond the credit requirements of the loan seekers and help them with better financial infrastructure, advice, and risk management tools and techniques. The absence of proper regulation, supervision and assistance form the apex bank also adds to the problem of the microfinance institutions of Saudi Arabia.

Microfinance and Poverty Alleviation

The purpose of microfinancing is to make capital accessible to poor people so that they can build assts and opportunities on income and move out of poverty towards self-sustenance. Miled and Rejeb (2015) confirmed the role of microfinancing in poverty reduction in their study where they analyzed cross-sectional data and panel data of 1132 microfinance institutions in 57 developing countries.  Their study found that “a country with higher MFIs’ gross loan portfolio per capita tends to have lower levels of Poverty Head Count Ratio and higher level of per capita”.

Another study by Iqbal, Iqbal and Mushtaq (2015) found that microfinance has helped poverty alleviation by generating more self-employment opportunities and improving standard of living in a district of Punjab, Pakistan.
However, not everybody agrees to this proposition. Zhang (2017) is of the view that microfinance need not necessarily reduce poverty.  Aneel Karnani (2007) makes it clear that though microcredit yields some noneconomic benefits, it does not contribute significantly in poverty alleviation. In fact, in some cases, microfinancing creates more problem than solutions for the people at the bottom of the pyramid. This is because the cost of borrowing through microcredit institutions is higher compared to that of conventional banking system. This lowers the cash flow to the poor. Secondly, those who seek microcredits are often liberate or barely literate. They do not have the skill, vision, creativity or persistence to be an entrepreneur. Without any operational assistance it becomes difficult for them to conduct successful business.

Banerjee and Jackson (2017) added to the literature when their study reflected a different picture contradicting the immense popularity of microfinance as a means of poverty alleviation. They found that instead of promoting empowerment while enhancing social capital in poor communities, microfinance increased indebtedness among already poverty-stricken communities and thereby exacerbating their economic, social and environmental vulnerabilities. The authors argue that microfinancing is providing funds but not the knowledge and skill needed to convert that fund into asset and start up a business venture. Devoid of any expert knowledge and understanding of formal business these poor people are not always becoming successful in their endeavors which is increasing their indebtedness and difficulty of life.  Moreover, the aggressive payment tactics involving public shaming of defaulters is adversely affecting the social ties within the communities and their family members. As a result, many poor people are getting secluded form their communities and are facing difficulty in developing social capital in terms of trust, reciprocity and cooperation. 

Microfinance has also been criticized from an ethical perspective as did Hudson and Sandberg (2013).  They questioned the lending techniques and charging of an abysmally high rate of interest by the microfinance institutions from an ethical point of view. They argued that it is exploitative and unfair to ask for an interest rate that is above the market rate form people who barely has any resource to fiancé their daily lives. Their study challenges the much-hyped poverty alleviating role of microfinance and offer suggestion on how to balance financial and social goals with the help of financial institutions. 

Chapter 3 – Methodology

This section aims to describe the research approach, tools used in the research and the hypotheses formulated regarding awareness of microfinance in Saudi Arabia. 

3.1 Scope of the research

The research questions are centered on the effectiveness of Sharia-based microfinance in Saudi Arabia and whether people of this country are aware of its benefit. Notwithstanding the economic prosperity of the country, microfinance has a vital role to play in improving the employment scenario of Saudi Arabia. The state has un-declared poverty issues which are mostly because of a lack of entrepreneurial activities and a traditional mismatch in terms of financial support. The conventional banking sector has not been active enough to extend their helping hands towards this group of people belonging to the lowest strata of the economy.  Sharia-compliant microfinance institutes can support people from financially constraint backgrounds to set up small and medium-sized enterprises and be self-sufficient.  The result of such endeavors will have a direct positive effect on the economy of Saudi Arabia.

The encouraging effects of microfinance can only be seen on the economy of the country when people belonging to the weaker section will be aware of its benefits and will come forward to take its advantage. One of the primary target groups of microfinance schemes is women. With support from microfinance institutions, women are encouraged to venture into businesses that are suitable within the society of the country and be empowered.  The objective is to bring in greater gender equality in society. Another aim of microfinance is to extend financial security to capital constraint group of people and make them capable so that they can lead a better life, manage their life events, invest in education, and head towards a meaningful life.

The research will attempt to offer recommendations on the awareness about microfinance can be improved in the Kingdom country.  It is essential for the youth and the people with low financial capacities to understand the benefits that microfinance can bring to their lives and what are its challenges. This is especially true for women who want to move ahead in the path of self-reliance.

3.2 Research methodology

Research methodology is important as the whole of the dissertation rests on the findings of the research which can only be arrived using the right research methodology.  Three types of the methodology can be used to carry out research, namely quantitative research, qualitative research, and mixed research.

The quantitative research method is concerned with the collection of data, analysis thereof and their final interpretation. Quantitative research design can be either descriptive, where the variables are measured once or experimental where the variables are measured before and after treatment. In social sciences, the descriptive method is generally used, and it establishes an association between variables. The basic characteristics of quantitative research methods are a high degree of control, emphasis on operational definition, replicability, and hypothesis testing. Quantitative research deal with data that can be measured in numbers analyzed applying convergent reasoning and represented visually. 

Qualitative research methodology emphasizes the qualities of variables where data are not in the form of numbers. This method is more concerned with the socially constructed nature of realities, the profound interrelationship between the researcher and the subject of study and situational barriers that outline inquiry.  Qualitative research follows a method of collecting and analyzing information in many different forms, which are primarily non-numeric. The objective of the qualitative approach is to explore things in great detail, examine the smaller numbers of instances from all possible perspectives and achieve depth instead of breadth. The significant characteristics of qualitative research method are that the contexts of inquiry are neutral. Nothing is predefined or assumed. The researcher gets personally involved in the issues that they are studying and views the problems from a broader perspective not just as a variable. This method of research is more experience based and strived to understand the experiences and the different perspectives.  

This research is based on a quantitative method where the research question will be answered studying behaviors of a few variables for which numeral data will be collected and analyzed. The rationale behind the choice of research method is that quantitative research allows a broader study involving a more significant number of objects and thereby helping in the generalization of the result. It has more objectivity and accuracy so far as the results are concerned and do not involve personal bias. 

Now there are two typical modes of data collection, a name using primary sources and using secondary sources. Data that are collected directly from the field of research for the first time by the researcher to conduct a specific study is known as primary data. The origins of primary data are interviews, questionnaire surveys, Delphi technique, projective techniques, and focus group interviews. Secondary data are those that were collected by someone else for a different purpose and may have undergone statistical analysis but is being used by the current researcher for his or her study.  There are two sources for collecting secondary data: internal and external. Internal sources include financial statements, sales reports, customer details, management information system and the like. The external sources of secondary data are government reports, business journals, books and magazines, newspaper, libraries, database, and the Internet.

This study will use both types of data to understand the awareness of microfinance in the Kingdom of Saudi Arabia and analyze its significance. This is because the subject of study is vast, and it requires the right amount of information to fulfill the aim and objective of the study.

To be able to grasp the notion of proprietors’ at the usefulness of Islamic microfinance in Saudi Arabia, a qualitative observe changed into behavior. Semi-established interviews became used due to the number one research technique. The interview become conducted at some stage in March 2015 with an aggregate of statement on bank performs and relation to Short firms, and interviews with micro-entrepreneurs and financial executives of short and middle corporations. There have been four interviewees such as micro-marketers, a economic executive in middle business venture with differences in economic know-how and the population so that you can hold close the banks’ lodging to each resident and citizens of Riyadh, Saudi Arabia. The motive for the pattern volume would be the joblessness of additional comparable stage tops of agencies or industrialists, as the studies try and discover the high relationship of banks to companies and recognition of those corporations to Islamic microfinance as a format. 

3.3 Collection of research data

This study took the help of the questionnaire method to collect primary data. A questionnaire was prepared which contained queries related to demographic information and a set of questions about microfinance, its effects, and awareness. The surveys were distributed to 150 individuals who were randomly selected.

For the collection of secondary data, caution was maintained concerning the reliability of the information and sources. Authentic sources such as online database like EBSCO Host, Emerald, Science Direct and Social Science Research Networks (SSRN) were extensively used to gather published articles on the subject of microfinance. Besides books related to banking and finance were also consulted to collect authentic and relevant data.     

The data obtained had been subjected to an interpretive analysis to locate commonplace themes amongst responses supplied with the aid of the interviewees. This becomes achieved so as in an effort to apprehend the perception of these interviewees on numerous financing strategies and mainly the Islamic microfinance. The small sample and widespread traits of these interviewees will limit the similarities that are what the examiner is aiming to obtain. Furthermore, the analysis takes observe to the present day financial institution practices and focuses on the similarities between the real bank processes to the MSMEs section within the market and the understanding of the interviewees to the bank’s practices.

Chapter 4 – Findings and Discussion

4.1 Demographic profile

4.1.1 Gender

Out of 150 individuals interviewed, 85 were male, and 65 were female, which makes the gender ratio 57 percent is to 43 percent.  

4.1.2 Age

The age distribution of the 150 respondents is represented in the following table and the graph.

Age (Years)	No. of respondents	Percentage of respondents
Less than 20 years	10	7
20-30	30	20
30-40	90	60
More than 40 years	20	13

Table 1.

Sixty percent of respondents are in the age group of 3-40 years, 20 percent are in 20-30 years. 13 percent are more than 40 years old and a mere 7 percent is less than 20 years old. 

4.1.3 Marital Status

The marital status of the 150 respondents is represented in the following table and the graph.

Marital Status	No. of respondents	Percentage of respondents
Single	39	26
Married	68	45
Widow	28	19
Divorce	15	10

Table 2.

The sample consisted of 45 percent married individuals. 26 percent are single. 19 percent have lost their spouses, of which most are women and 10 percent had their marriages terminated. 

4.1.4 Education

The level of education of the 150 respondents is represented in the following table and the graph.

Table 3

Level of Education	No. of respondents	Percentage of respondents
Illiterate	10	7
Matric	67	44
High School	42	28
Graduation	3	2
Post-Graduation	1	1
Vocational	20	13
Other	7	5

   The sample had 44 percent individual with an education level of school or metric level. 28 percent completed their high school. 13 percent received vocational training, and 7 percent is illiterate.

4.1.5 Occupation

The kind of occupation these 150 respondents are engaged in is represented in the following table and the graph.

Table 4

Type of occupation	No. of respondents	Percentage of respondents
Employed	20	13
Self-employed	31	21
Labour	17	11
Housewife	25	17
Unemployed	37	25
Professional	1	1
Family owned business	13	8
Retired	6	4

The survey had interviewed 13 percent people with services, 21 percent people engaged in self-employment, 11 percent working as labour, 17 percent are housewife, 25 percent unemployed.

4.2 Responses to the questionnaire

Question 1: Microfinancing helps in poverty reduction

Options	No of respondents	Percentage of respondents
Agree	35	23.33
Strongly agree	27	18
Neutral	56	37.33
Disagree	22	14.67
Strongly disagree	10	6.67

37.33 percent of respondents are not aware whether microfinancing has any positive effect on poverty eradication. 23.33 percent think that microfinancing helps in eradication of poverty, 14.67 percent do not agree with the view. There is a lack of awareness reading the effects pf microfinance.

Question 2: Microfinancing contributes to the improvement of income level

Options	No of respondents	Percentage of respondents
Agree	36	24
Strongly agree	25	16.67
Neutral	58	38.67
Disagree	23	15.33
Strongly disagree	8	5.33

No information is available to 38.67 percent people whether microfinancing improves income level or not. Despite that 24 percent thinks that microfinancing can be a key instrument in improving income level and 16.67 percent strongly believes so. But there is 15.33 percent people who do not agree with this view. People surveyed seems not aware how microfinance impacts impact level.

Question 3: Microfinancing uplifts social status

Options	No of respondents	Percentage of respondents
Agree	39	26
Strongly agree	23	15.33
Neutral	63	42
Disagree	12	8
Strongly disagree	13	8.67

Again, the impact of micro financing on social status is not very clearly understood by 42 percent of respondents. However, there seems to be an important segment of population who understands the impact. 26; percent agrees that microfinance can uplift social status and 26 percent strongly agree with this opinion. Another indication of lack of awareness is reflected through these responses. 

Q4: Microfinancing enhances recognition in the family

Options	No of respondents	Percentage of respondents
Agree	28	18.67
Strongly agree	25	16.67
Neutral	33	22
Disagree	47	31.33
Strongly disagree	17	11.33

There seems to be a sense of dissent with respect to the question whether microfinance can help in enhancing recognition in the family with 31.33 percent responding negatively to this this question. But 16.67 percent strongly believe it does and 22 percent are neutral. There is a general perception that microfinance does not alter one’s position inside the household. 

Q5: In developing countries, people are not aware of microfinancing

Options	No of respondents	Percentage of respondents
Agree	36	24
Strongly agree	45	30
Neutral	20	13.33
Disagree	27	18
Strongly disagree	22	14.67

 A whopping 30 percent of respondents strongly agree that people are not aware of microfinance in developing countries, 24 percent aggress to it and 18 percent expressed their opinion against it. Participants have acknowledged the absence of awareness regarding microfinance in most developing countries.  

Q6: Microfinancing originates from Islam and its principles.

Options	No of respondents	Percentage of respondents
Agree	20	13.33
Strongly agree	21	14
Neutral	10	6.67
Disagree	68	45.33
Strongly disagree	31	20.67

Most of the individuals find no relation between Islam rule and microfinancing. 45.33 percent believes that it is against the rules of Islamic laws. 20.67 percent are disagree with the notion that microfinance originates from Islam and its principles. There is a dearth of basic understanding so far as Islamic law and microfinancing is concerned, which perhaps has led to its low popularity.  

Q7: Microfinancing based on Sharia law is better than traditional microfinancing.

Options	No of respondents	Percentage of respondents
Agree	63	42
Strongly agree	78	52
Neutral	5	3.33
Disagree	2	1.33
Strongly disagree	2	1.33

Those surveyed are highly in favour of Sharia law based microfinancing as 52 percent strongly believes that Islamic microfinancing is better than traditional microfinancing. Preference towards Sharia-based microfinancing system makes it the need of the hour. 

Q8: Saudi Arabia has a strong system of microfinancing based on Sharia law for its poor population

Options	No of respondents	Percentage of respondents
Agree	40	26.67
Strongly agree	27	18
Neutral	33	22
Disagree	15	10
Strongly disagree	35	23.33

Saudi Arabia has a robust system of Sharia compliant microfinancing system things 26.67 percent respondents. Contrarily, 23.33 percent strongly opposes this view. A significant 22 percent remains neutral. Although many are aware of the Sharia compliant microfinancing system, efforts are needed to create greater awareness.

Q9: Developing countries need to spread awareness about microfinancing among its population.

Options	No of respondents	Percentage of respondents
Agree	27	18
Strongly agree	81	54
Neutral	17	11.33
Disagree	19	12.67
Strongly disagree	6	4

The need for spread of awareness about microfinancing in developing countries is strongly felt by 54 percent of respondents. 11.33 percent are neutral, and 12.67 percent disagrees.  Microfinancing has proved to be an effective tool of poverty eradication in many countries. Hence, it must be promoted in developing nations as well.

Q 10. Microfinancing can cause a higher level of indebtedness.

Options	No of respondents	Percentage of respondents
Agree	31	20.67
Strongly agree	42	28
Neutral	30	20
Disagree	19	12.67
Strongly disagree	28	18.67

Arabs are apprehensive that microfinance can increase their indebtedness as 28 percent strongly thinks so. 20 percent are again neutral, and 18.67 percent strongly disagrees. The apprehension is rather harmful for the spread and progress of microfinancing system in Saudi Arabia.

Q11: The techniques applied for loan repayment are rather harsh.

Options	No of respondents	Percentage of respondents
Agree	36	24
Strongly agree	59	39.33
Neutral	18	12
Disagree	29	19.33
Strongly disagree	8	5.33

Loan repayment techniques applied by financial institutions are rather harsh thinks 39.33 percent respondents, 24 percent resonate this view and 19.33 percent disagrees. People need to be sensitized about the repayment processes to make them feel comfortable about approaching for microfinance credits.

Q12: Microfinancing institutions often support poor entrepreneurs with needed decision-making skills and managerial practices.

Options	No of respondents	Percentage of respondents
Agree	30	20
Strongly agree	23	15.33
Neutral	48	32
Disagree	37	24.67
Strongly disagree	12	8

The role of microfinance institutes as a supporter of small enterprises is not widely known in Saudi Arabia as 32 percent are neutral, 24.67 percent disagrees that microfinance companies ever extend helping hand to small enterprises. The microfinancing companies are not active at promoting themselves and their contributions. 

4.3. Discussion

The demographic profile of the sample of 150 individuals consisted of 57 percent male and 43 percent female making it a near gender neutral sample. Sixty percent of the sample size belonged to the age group of 30-40 years and 20 percent 20-30 years, which means that majority of those surveyed are in the prime of their youth and are in a most productive and enthusiastic phase of life. Thirteen percent are retired, and seven percent are in their late teens. The marital status of the respondents shows that a large portion of them are married and are running a household while the next highest population is single. There are 19 percent of people who have lost their spouses. Since a significant part of this section is a woman, they are in dire need of financial support to become self-sustaining and independent. So far as the education level of the respondents is concerned, the majority of them have either studied till matriculation or have passed the high school. The study also found 13 percent of people who have undergone some kind of vocational education and 7 percent is illiterate. Thus, this study will reveal the viewpoints of those who are not considered highly educated and broadly aware. The participants are engaged in different occupations. Thirteen percent are jobholders, 21 percent self-employed, 11 percent labor, 17 percent housewife and a meager 8 percent belong to family-owned business. What is noteworthy is that 25 percent of those surveyed is unemployed, which is an indication of the underlying problem of unemployment and undeclared poverty in Saudi Arabia.

A significant section of the sample population is neutral (37%) to the question whether microfinancing helps in poverty reduction, which is an indication that either they have never approached any institution for microfinance or are not aware of its benefits.  Twenty-three percent of people agreed with the view and 18 percent strongly agreed. But interestingly, 14 percent of people expressed their opinions against this statement, which is another signal that awareness regarding microfinance is not high among less educated youth of Saudi Arabia. 

With respect to questions that tried to understand the opinion of the sample population regarding the benefits of microfinancing in terms of raising the level of income, uplifting social status, and enhancing recognition, it was found that the majority of respondents are neutral which again reinforces the premise that awareness about microfinance is low in the country.

Nearly half of those who were surveyed strongly agreed that developing countries people are not aware of microfinancing. When asked about the connection between microfinance and Islamic principles, 45 percent of respondents disagreed. They are of the view that microfinance is a concept based on the charging of interest on the sum of money lent, which is against the rules of Islam. On the same line, 94 percent of those surveyed believe that microfinance or for that matter any kind of finance that is Sharia complaint is better than the traditional form of financing.

The opinion of whether Saudi Arabia has a robust system of microfinancing based on Sharia law for its impoverished population is widely distributed.  Around 27 percent think it has, 23 percent strongly things it does not, and 22 percent is not aware of any such facility. But a large section of 54 percent feel that it is essential to spread awareness about microfinancing in developing countries.

There seems to be a negative outlook about microfinance in Saudi Arabi as 28 percent think that microfinancing can cause a higher level of indebtedness. Here again 20 percent of people are neutral. Additionally, there is a strong opinion against the methods applied to recover microfinance loans. An apprehension is looming large that there is a likelihood of public humiliation in case of a loan default.  

When asked the role that microfinance institutes play in supporting the poor entrepreneurs with needed decision-making skills and managerial practices, 32 percent of the respondents seemed unaware. And a staggering 25 percent thought that they play no such role.

A more detailed analysis of the data has revealed that the awareness about microfinance is particularly lacking among women, especially those who are interested in running their business to support their families in cases of no support form male partners either due to their demise or for other reasons.

Chapter 5 -Conclusion and Recommendation

5.1 Conclusion

From the findings of the research based on primary data, it is clear that youth of Saudi Arabia who is not from educated background lack knowledge and understanding of microfinance as a system that can improve their possibility of leading a better life with an enhanced level of income and greater respect in the society and family. Rather, there is a negative feeling about it as a system that is against the rules of Islam. Questions are also being raised about the methods that microfinance institutes use o recover loan and the role that these institutions are supposed to play in offering the small entrepreneurs with managerial and risk management skills. There is a fear that microfinance may lead to increased indebtedness.

The secondary research reveals that efforts are being made in Saudi Arabia to increase the number of microfinance institutions and spread Shari compliant microfinance across those people who are either willing to start small scale businesses or are eager to add to the productivity of their existing businesses or are looking for opportunities of self-employment to get rid of the pangs of unemployment and poverty. However, the primary research tells that those efforts have not reached the target audience in the way they should have. Moreover, women who are the prime target of microfinance are severely unaware of the benefits of microfinance in Saudi Arabia.

5.2 Recommendations

It is an urgent need to spread awareness about microfinance across the country so that people from the backward section of the society can find employment and income opportunities. Women must be given special attention to awareness programmes as one of the top objectives of microfinance is the empowerment of women.

To achieve the desired outcome efforts from government and semi-government and nongovernment organizations must come forth. Seminars and lectures can be organized to let people know what microfinance is, how its related to the principles of Islam, how Sharia-based microfinance works and finally how they can be benefited. The microfinance intuitions can also run awareness programmes among their target groups and show them an example of other countries where people have overcome poverty with the help of microfinance. They should make all-out efforts to remove all the misconceptions that are prevalent in the minds of people concerning the side effects of microfinance such as an increase in indebtedness, the possibility of being humiliated in the society and disrespected inside the family. These people must be given assurance that the microfinance institutes will be there to support them not only with financial resources but also with knowledge, training, managerial skill, and risk management techniques.

It must be understood at the governmental level of Saudi Arabia that dependence on oil for the economic property is not a sustainable growth strategy. Alternative methods of growth need to be adapted to maintain the prosperity of the economy and its people.  With increasing population, the requirement for employment is sure to rise, which if unattended will heighten poverty and misery. Microfinance is the tool that can act as a savior. More support should be offered to the microfinance institutes so that they can reach out to those in dire need of finance and capital.

It is the responsibility of the microfinance institutes to be real support of those people who they lend their money to. They must understand that these people are not equipped with adequate knowledge, information, skill, and technology to run a business. They need constant assistance and guidance which will place in the path to success. Microfinance companies must earn the trust of these people and be their guiding light so that the borrowers can utilize their funds effectively in a venture and earn adequate revenue to repay the loan along with heading towards a life full of prosperity and satisfaction.  

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