Effectiveness of Islamic Microfinance Institutions Through Customer's Satisfaction in Pakistan


  • Muhammad Mahmood Shah Khan Assistant Professor, Department of Banking and Finance, UMT Lahore
  • Muhammad Sadil Ali Research Associate, Department of Commerce, AIOU Islamabad
  • Farrukh Ijaz Institute of Research Promotion (IRP), Lahore
  • Asghar Kamal University of Management and Technology Lahore (UMT, Lahore)


Keywords: Islamic Microfinance Institutions, Small and Medium Enterprises (SMEs), Satisfaction, Shariah Compliance, Pakistan.


In developing economies, microfinance institutions have become an increasingly popular approach to reducing poverty, social empowerment (especially among women), and economic growth by providing new opportunities for the poor for entrepreneurship. This study investigates the effectiveness of Islamic microfinance programs on the comfort level of the Islamic Microfinance (IMF) system in Pakistan. The study examines the effectiveness of IMF institutions in the country's small and medium enterprises (SMEs). Quantitative research based on primary data is conducted to evaluate the effectiveness of various IMF institutions in Pakistan. The data is collected from the 88 SME owners located near Lahore (Punjab), Pakistan. The independent variables are the cost of the loan, income and living standard, loan repayment policy, Shariah compliance, and loan utilizing opportunities. The dependent variable is microcredit customer satisfaction examined through a 5-point Likert scale questionnaire. Regression analysis is applied and found that income, loan repayment policy, loan utilization opportunities, loan cost, and Shariah compliance have a statistically significant positive influence on the microcredit customer's satisfaction. The study implies that understanding customer satisfaction helps IMF institutions enhance their financial performance, improve client retention, and fulfill their social mission.