On the Design of Islamic Blended Microfinancing for Refugee Entrepreneurship: An Institutional Logic Perspective

Abstract

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.