Maldives moves to fully Islamic banking model for small businesses
Maldives’ SME Development Finance Corporation begins converting loans to Islamic models, promoting ethical and digital banking
MALE, Maldives (MNTV) — The Maldives’ state-run SME Development Finance Corporation (SDFC) has launched a sweeping plan to convert its lending portfolio into fully Shariah-compliant facilities, becoming one of the first national financial institutions in the Indian Ocean region to undergo a complete Islamic finance transition.
The move signals a major shift in the country’s banking landscape as the corporation, a subsidiary of the Bank of Maldives, prepares to operate entirely under Islamic financing principles by early 2026.
The transformation will begin with Diminishing Musharakah — a partnership-based model where the borrower gradually buys out the financier’s share in an asset — and later expand to include Wakalah Bil Istithmar, an investment agency arrangement where the financier acts on behalf of the client, and Tawarruq, a trade-based system that provides cash liquidity through commodity sales compliant with Islamic law.
Under the initiative, existing conventional loans will be restructured into Shariah-compliant financing arrangements, easing repayment pressures on customers while maintaining religious and ethical integrity.
Borrowers will also benefit from extended repayment terms designed to improve financial stability for small and medium enterprises (SMEs).
Managing Director Badhurudheen Hassan described the reform as a “defining milestone” for the institution. “This transition allows us to support businesses in an ethical framework rooted in fairness and shared responsibility,” he said, adding that the program is being rolled out in phases through a digital customer platform.
The shift reflects a broader strategy by Maldivian financial authorities to expand access to Islamic banking and position the archipelago as a regional hub for Shariah-compliant financial services.
It also mirrors global trends in ethical finance, where Muslim-majority nations are increasingly turning to faith-based instruments to promote inclusion and sustainability.
Once the transition is complete, the corporation aims to serve as a model for digital Islamic banking in small island economies. Its new mandate prioritizes lending to startups, women entrepreneurs, and sectors central to national livelihood such as fishing, farming, and agribusiness — aligning financial reform with social development goals.
Analysts say the move underscores how Islamic finance, often associated with Gulf states, is gaining ground in emerging economies seeking to balance digital innovation with ethical lending practices.
Have Your Say!
Have you been affected by the issues raised in this story? Please share your experiences by emailing haveyoursay@soundvision.com.
Please include a contact number if you are willing to speak to a Muslim Network TV’s representative. You can also get in touch in the following ways:
Tweet: @MuslimNetworkTV
We must take charge of our narrative. Research indicates that 92% of their Muslim coverage is negative. Help us change that.
