Building Entrepreneurial Resilience Through Islamic Social Finance and Microfinance

Abstract

Microentrepreneurs in vulnerable households face a distinctive problem: business capital doubles as household survival capital, so any shock forces capital to be diverted from productive use toward consumption. Existing entrepreneurship and microfinance research has concentrated heavily on capital access, leaving this household-level antecedent underexplored. This paper proposes a prescriptive conceptual framework showing how household resilience functions as an enabling condition for entrepreneurial resilience, allowing microentrepreneurs to protect productive capital, access Islamic microfinance, and sustain business development rather than merely survive economic shocks. The framework integrates four sequential and cyclical layers: Islamic Social Finance (ISF) as resource mobilisation; household buffer support as protection against shocks; Islamic microfinance as a connectivity mechanism providing capital, social capital, and capacity building; and microenterprise development as transformation, through which beneficiaries move from aid recipients (mustahiq) toward productive entrepreneurial actors and, eventually, zakat payers (muzakki). Grounded in Maqasid al-Shariah as its normative foundation and drawing on Hanisch's (2024) prescriptive theorising approach, the framework engages entrepreneurial resilience, entrepreneurial ecosystem, and social entrepreneurship literature to derive five higher-level, theoretically testable propositions, together with opportunity and risk mechanisms that anticipate outcomes such as mission drift and poverty traps. Evidence drawn from prior empirical studies indicates that productive zakat programmes combined with mentoring significantly strengthen business growth and mustahiq welfare, and that coordinated ISF models outperform unintegrated ones in reducing poverty. By repositioning household buffer support as the mechanism connecting Islamic social finance to entrepreneurial outcomes, the paper contributes to entrepreneurship theory by proposing how household resilience may enable entrepreneurial resilience beyond capital access alone, in vulnerable Muslim-majority contexts. The paper closes with theoretical, entrepreneurship-practice, and policy implications for entrepreneurs, microenterprise support organisations, zakat institutions, waqf nazhirs, Islamic microfinance providers, and regulators in Indonesia and Malaysia, and outlines a future research agenda centred on empirical testing of the proposed propositions.