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Can Islamic finance rescue youth from unemployment?

Unemployment among the youth is a dilemma for policymakers. Even affluent societies are worried about the direction in which the youths are heading

Although Islamic banking has achieved due recognition globally last year, and is presently competing with traditional financing institutions, there remain challenges to be addressed. At the global arena, two important events took place – the first was the 13th World Islamic Economic Forum (WIEF) on October 2017  in Jakarta, which confirmed the Indonesia Government commitment to develop the city as an important hub for Islamic Finance.

At the same time, London Mayor, Boris Johnson, was keen to encourage investment, pledging £100 million to attract technology starts-up from the Muslim world. Undoubtedly, London is, in many ways, ideally placed to benefit from a growth in this special form of finance. The second event was the Global Islamic Economy Summit (GIES) held on November 25-26, 2013, in Dubai, United Arab Emirates (UAE). Organised by the Dubai Chamber of Commerce and Industry and Thomson Reuters, the summit discussion focused on Islamic finance sectors and Halal industries, including food, travel and lifestyle, to tackle the most important challenges and chart paths for the future of the Islamic economy.

The Challenges
One of the main challenges facing Islamic finance industry is youth unemployment. It requires modern and new innovative strategies to find practical solutions to this social ill. Youths are the engine of economic development. They are the future leaders of the Muslim world, which is being confronted with various challenges and problems. Many have lost faith in their governments and are looking elsewhere for dynamic changes in the socioeconomic setting. Unemployment among the youth is a dilemma for policymakers. Even affluent societies are worried about the direction in which the youths are heading. Are they utilizing their time effectively or are they wasting it?
Regrettably, the unemployment crisis is aggravated by low capital flow and a sharp decline in exports which result from the slowdown in investment and growth in the economies of the Middle East and North Africa (MENA) regions main trading partners. This situation, for many countries, is further complicated by a sharp contraction in employment opportunities in Europe, a consequence of the global economic crisis. Indeed, finding new job opportunities in the MENA region is now more pressing than at any other time in the past. Furthermore, the lack of good jobs has the potential source of further social disruption and conflict, particularly as the population is forecast to increase to between 410 million and 460 million by 2020. A report sponsored by the International Finance Corporation and Islamic Development Bank shows that the economic loss due to youth unemployment exceeds US$40 billion to US$50 billion annually across the Arab world. The Main Causes of Youth Unemployment in the Muslim World

1. Out-dated Education System
Rote learning is the common method of teaching in most schools in the Muslim world. This type of learning does not allow students to think critically and analytically; and to appreciate the importance of learning as an on-going journey that passes through life discoveries by seeking knowledge and information. It paralyzes the minds of many students today and made them think that attending lectures is boring place because many lecturers do not allow them to think creatively. Regrettably, it is also true that through rote learning, students have been taught to memorize many topics in the recommended textbooks to enable him or her to pass the examination successfully without understanding fully the meanings.

Interestingly, renowned author of the “Rich Dad, Poor Dad” bestseller title, Robert Kiyosaki, concluded that modern education system of this kind prepares youth to become an employee not to an employer. This has led students to get bored in the classroom, especially when they are seldom exposed to the outside learning environment to appreciate the importance of understanding alsooq al-Islami, or Islamic market, to the contrary of what Islam wants us to be.


Surah Al-Furqan (verse 7) says, “What sort of apostle is this, who eats food, and walks through the markets? Why has not an angel been sent down to him to give admonition with him”.

According to Surah Al-Furqan (verse 20), “And the apostles whom we sent before thee were all (men) who ate food and walked through the streets: We have made some of you as a trial for others: Will ye have the patient”. These two verses show clearly the importance of the Islamic market and why it is vital for the Muslim world to start thinking again to have the paradigm shift in the way we teach marketing to our students in the universities. Students feel bored by learning too many western theories, most of which are not applicable in Muslim environment. For instance, in an economic text book, students have been taught that natural resources are limited to the contrary what Allah Almighty has promised humanity.

The Holy Al-Quran clearly states that natural resources are unlimited as long people believe in Allah Almighty and do righteous deeds to serve wider community. If they achieve that, Allah will shower them with endless natural resources.

2. Studying for Education Purposes (status and wealth), Not to Seek Knowledge
Today, most students are education seekers, not knowledge seekers. Sadly, their knowledge about the sociopolitical situation is rather limited to the textbook, and they are more preoccupied with mobile and online social networks like Twitters and Facebook.

In the past, Muslim thinkers such as Ibn Khaldun – his famous book, Muqaddimah – and Ibn Sina, both of whom did not possess formal education qualifications, were knowledge seekers and intellectual thinkers. Ibn Khaldun had vast knowledge, not only in astronomy, but also, in economy and mathematics. Meanwhile, Ibn Sina was physician, famous for his philosophy and the concept of reality and reasoning. Reason, in his scheme, can allow progress through various levels of understanding and can finally lead to God, the ultimate truth. He stressed the importance of gaining knowledge, and developed a theory of knowledge based on four faculties – sensory perception, retention, imagination and estimation. Imagination is the core to intellectual capacity as it can compare and construct images which give it access to universals. Again the ultimate object of knowledge is God, the pure intellect.
Sadly, the current education system in the Muslim world makes students obtain educational qualifications that do not teach them how to create their own jobs, to be job creators, but to be job seekers instead. It is therefore not a wonder why most of the Muslim states are puzzled by the large number of university  graduates who cannot find jobsand are only keen to get into government posts.

3. More Emphasis on Western
Theories Rather Than Application Student today spent at least eight hours in the classroom environment where they are taught by their respective lecturers on western theories, most of which are not applicable in local Muslim cultures and values. This leads them to be frustrated and disappointed, wondering why these theories are being taught in the first place.

4. Lack of Freedom
According to the renowned Muslim scholar, Dr Yousef Al-Qaradawi, freedom is the main condition to achieve innovation and increase productivity, and his views is affirmative because without freedom one cannot express his or her opinion freely (www.forums.

The Importance of Modern Skills
Before modernizing the Muslim world’s education system, an analysis of the youth must be conducted to understand what their demands are. For instance in Egypt, in the past three decades, the youth was marginalized and they have never been consulted, leading them to be frustrated. For Egypt, fulfilment of youth needs is vital because they are the main engine of economic development in the country. Therefore, the government needs to hire experience researchers so that they can make a decision on the appropriate research method to be used – interviews, focus groups, observation and/or questionnaires to be distributed and analysed. To enable the government to achieve that and to reduce the problem of unemployment among youth, it requires the government to equip them with modern skills, rural farming and trades, for example. U n d o u b t e d l y, a g r i c u l t u r e development must be concerned with the rate of increase in food production and the means by which product is increased. Unless a country’s pattern of agriculture development ease the absorption of a large segment of the rural labour force in productive employment, even a large increase in food output will leave many household with inadequate access to food supplies. Therefore, time has come to induce technical innovation and  farmers to increase agriculture productivity by involving youth in the farming methods.

1. Drip irrigation
This is one of the most efficient uses of water, which is delivered directly to plant roots so that plants receive just the adequate supply they need. For farmers, this results not only in greater production, and thus increased income, but also significant added benefits, such as reduced labour and fuel costs (to pump water) and the elimination of the need to build holding tanks. Crops such as watermelon, eggplant, cucumber, tomatoes and squash can often recoup the cost of the improved irrigation network in one harvest cycle.

2. Hydroponics
This method dictates the growing of plant without the use of soil. It has started to gain momentum in many parts of the world. One of the biggest benefits of hydroponic garden is that you can grow a wide variety of plants in a small area. Water and nutrients are provided to the roots at all times, so that they do not have to spread out in order to find what they need to survive. Since youth like new business ventures they can benefit from hydroponic systems because there is no need for large track of fields. More food can be grown with less fuel cost. Another benefit is that hydroponically grown plants tend to be healthier and mature faster for earlier harvest.

3. Electro technology
In the area of trade, there are increasing demands for electro technology as life without electricity is harder to imagine now. The Unitec Institute of Technology in Auckland, New Zealand 4 ( has an interesting applied programme that is of great benefit to Muslim youth today. Technology is used everywhere in our lives – in appliances, telecommunications, security systems, fibre optics and smart buildings – and applied skills in electrical, electronics and audio-visual engineering and technical are in demand. Through this programme, youth can design circuits, install alarms, work on electrical controls of an industrial machinery and design household appliance, to name but a few.

4. Plumbing
Similarly, plumbing is of necessity in the modern life because youth will actually work on making showers, sinks, hot water cylinders and washing machines under the watchful eyes of their lecturers. Again, Unitec’s Department of Plumbing and Gas fitting is doing a great job of equipping youth with applied skillsMand it goes the extra mile to provide an online learning programme, which is of obvious benefit.

Why Islamic Microfinance Enterprise is vital now?
To enable youth to start their businesses, seed capital based on Islamic microfinance principles is vital. Generally speaking, microfinance is a financing tool that provides very small loans to the working poor, who are traditionally considered non-bankable, mainly because they lack the guarantees that can protect a financial institution against a loss. Islamic microfinance provides an innovative interest-free alternative to conventional microfinance. Based on the profit-sharing principles of equity-based finance, Islamic microfinance offers greater resilience than conventional microfinance. If a business fails, nothing is paid; if a business succeeds, profits are shared. Risks and rewards are always proportionate to equity shares. While any return on capital in the form of interest is completely prohibited in Islam, there is no objection to getting a return on capital if the provider of capital enters into a partnership with a worker, or entrepreneur, and is prepared to share in the risks of the business. Though still a long way from the financial mainstream, many governments now see microfinance as an effective way to build up local enterprise and reduce unemployment. Microfinance is seen as a powerful tool to reach out to the unemployed youth, raising living standards, creating jobs, boosting demand for other goods and services, contributing to economic growth and alleviating poverty.

The main purpose of this noble task is to enable youth to succeed and to be financially independent, to live according to what Allah wants us to be as human beings, living a decent life called Hayat Taeebah, with no fear of tomorrow.
This endeavour, if it is well implemented and managed by an efficient and experience professionals, will undoubtedly
lead to major changes about the way we think about the youth.

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