Development of Islamic microfinance: a sustainable poverty reduction approach (original) (raw)
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ISLAMIC MICROFINANCE: HOW WILL IT HELPINDIA IN POVERTY REDUCTION
Poverty in world is still a major issue even in this day and age. The population of people living below the poverty line in world is astonishing and the problem is not going away. Poverty is general scarcity or the state of one who lacks a certain amount of material possessions or money. It is a multifaceted concept, which includes social, economic, and political elements. Poverty alleviation remains the most important challenge before policy makers in the world that is characterized by high and rising poverty levels. The purpose of this paper is to demonstrate the potential of Islamic Microfinance as an alternative tool for poverty alleviation. While poverty is a common problem faced by all countries, the efforts and actions has not reached the purpose yet. Still, it calls more attention from majority of government and development oriented organization to alleviate it in an effective and comprehensive approach. We focus on basic tenants of the Islamic ethical system and treat the Islamic ethos as an ideal, through which socioeconomic policies dealing with poverty elimination are assessed. Islam views society as a unified equity in which individual freedom and human dignity is supreme although subject to the axiom of responsibility. In Islamic perspective, poverty is not just viewed from material aspect but also moral/spiritual, thus, any poverty alleviation strategy should reflect on both aspects. It might be argued that while conventional approach on poverty left the importance of committing to moral/spiritual, Islamic approach has more attention on that aspect. Islamic microfinance, having a unique feature compare to the conventional counterpart, offers apotential solution to poverty alleviation.
American Journal of Applied Sciences, 2012
Poverty is the main illness for sustainable livelihood because it destroyed human basic rights for surviving with minimum opportunities especially political, social stability and economic processes, literature and environment. The aims of this study are to discuss about existing approaches of poverty alleviation and sustainable livelihood. The study found throughout the discussion of the theoretical sources i.e., participatory approaches have determined as a good way of poverty alleviation and sustainable livelihood especially zakat based Islamic mode of financing and Qard-al-Hasan on the basis of spiritual values as an alternative model for poverty alleviation and ensuring sustainable livelihood.
A Review Paper on Islamic Microfinance Features Opportunities and Challenges [2019]
Islamic microfinance has been widely recognized as an effective development tool for poverty reduction and wellbeing development, especially among those who are deprived of accessing to conventional credit services. The interested things about Islamic microfinance is the fairness of this scheme in which win to win strategy which is the main principle in Islam Sariah. On other word, this model argues that poor people have the right to enjoy with credit that is off interest and the bank share both profit and loss with the borrowers. This offers new insight in how to steadily combat poverty. However, despite its advantages there are challenges that constrain its development. In addition, many studies have conducted to explore how microfinance combat poverty in many countries. Yet, the Islamic microfinance has not received adequate attention. Therefore, this study is a review paper discusses the concept of Islamic microfinance and how it differs from others. It also shows the challenges that surround Islamic microfinance development either in sustainability or outreach Keyword: A review, Paper, Islamic, Microfinance, Features, Opportunities, Challenges.
Re-thinking Microfinance Practices: Lesson Learned for Sustainable Islamic Microfinance Institutions
The last decade witnessed the popularity and appreciation of microfinance practices, against poverty alleviation, all across developing and underdeveloped countries. However, there is still deficiency of rigorous studies, to affirm the claims of microfinance products and services against the alleviation of absolute poverty. Over three decades have been passed yet even the champion of microfinance could not prove the effectiveness of microfinance services across their different operational regions consistently. This paper aims to investigate what are the fundamental flaws resulting in unsuccessful or ineffective microfinance operations against poverty. There are numerous psychological, experimental and empirical studies suggesting that poor are often involved in excessive borrowing behaviors. Thus the demand of the poor for credit and recovery rates as a proxy of successful operations are misleading indicators resulting from the psychological behaviors and 'social and peer pressure' respectively. The literature further suggests that irrespective of the financing methodology (whether conventional or Islamic) there is less chance of success for microfinance due to many technical reasons. Moreover, microfinance often result in destroying social capital and solidarity, pushing the poor to pay the full cost of credit supply and promoting the financers' interest while less attention is paid to transfer the benefits of microfinance institutions to financially excluded class. Findings of the study caution stakeholders to rethink about poverty alleviation models which should be feasible and sustainable to alleviate poverty effectively on a wider socioeconomic scale.
ISLAMIC MICRO-FINANCE AND POVERTY ALLEVIATION: A CASE OF PAKISTAN
INTERNATIONAL JOURNAL OF RESEARCH IN COMPUTER APPLICATION & MANAGEMENT, 2011
This research paper recognizes Islamic micro-finance as an important component in poverty alleviation strategies. While conventional microfinance products have been successful in Muslim majority countries, these products do not fulfill the needs of all Muslim clients. While taking an overview of Islamic microfinance in Muslim countries, this research paper undertakes a case study of Akhuwat, an Islamic microfinance organization operating in Pakistan. Critical financial analysis of Akhuwat indicates that it is providing its services for all living below the poverty line including the “extreme poor” and Interest free loans can be used as a powerful tool against poverty. It recommends that integrating Islamic microfinance with NGOs, NPOs (non-profit organizations), Zakah, Awqaf and with Takaful as well as with professional training and capacity building institutions will enhance the financial statbility of Islamic microfinance institutions and will be helpful to achieving their aim of providing micro financial services to the poorest of the poor under one roof.
Do Islamic Microfinance Practise Descrease the Level of Three Aspects of Poverty
IQTISHADIA, 2019
Islamic microfinance institutions such as Baitu Tamkin is one of Koperasi Syariah at Lombok Timur practising islamic value. In practising islamic value, Baitu Tamkin insert this value in line with three aspect including commercial finance, social aspect, and spiritual awareness. But the evaluation of this islamic microfinance practise has not been conducted yet. Therefor we conducted a research to evaluate the curent impact of this program wheter there was improvement and how the conditions of poverty in the member self before and after taking part in empowerment programs on Baitut Tamkin. Poverty condition that we observed not only financial aspect but also social and spiritual aspect. This research used parametric including Multiple Linear regression, a simple Linear Regression, t-test and non parametric test using Wilcoxon test. We conclude that the level of poverty at local region decreased at three aspects but with various condition. First, the islamic commercial financing...
Proceedings 2 nd ISLAMIC MICRO-FINANCE AND POVERTY ALLEVIATION: A CASE OF PAKISTAN
This research paper recognizes Islamic micro-finance as an important component in poverty alleviation strategies. While conventional microfinance products have been successful in Muslim majority countries, these products do not fulfill the needs of all Muslim clients. While taking an overview of Islamic microfinance in Muslim countries, this research paper undertakes a case study of Akhuwat, an Islamic microfinance organization operating in Pakistan. Critical financial analysis of Akhuwat indicates that it is providing its services for all living below the poverty line including the "extreme poor" and Interest free loans can be used as a powerful tool against poverty. It recommends that integrating Islamic microfinance with NGOs, NPOs (non-profit organizations), Zakah, Awqaf and with Takaful as well as with professional training and capacity building institutions will enhance the financial statbility of Islamic microfinance institutions and will be helpful to achieving the...
Purpose – This study aims to know the present structure and move of the Islamic banks of Pakistan as well as current issues and challenges for Islamic microfinance. However, this is based on perceptions of the Islamic bankers, regulators and micro-entrepreneurs and petty traders, as they are the key players in the credit market. Design/methodology/approach – The study gathered relevant information through conducting field survey. Two questionnaires were designed for the survey. One questionnaire was administered to survey 270 micro-entrepreneurs and petty traders in three major cities of Pakistan. Another survey deals with the perceptions of Islamic bankers. In total, 100 people from middle and top management were surveyed from five full-fledged Islamic banks of Pakistan. The SPSS software, version 16, was used for questionnaire reliability and descriptive analysis to analyse the data. Findings – In general, the study found the strong opinions of the respondents speak in favour of Islamic microfinance under a system of profit and loss sharing. Conversely, the majority of the clients also feel that Islamic banks do not encourage lower-income micro-entrepreneurs. In addition, the study found that Islamic microfinance is constrained by lack of knowledge, experience and professionalism of the supporting staff; however, Islamic bankers have shown great consensus that Islamic banks should offer Islamic microfinance products and instruments to respond to the needs of the poor for poverty alleviation. Research limitations/implications – The first limitation of the study is the meagre interest of micro-entrepreneurs and petty traders to participate in the survey. The second limitation of this work concerns the extremely busy schedule of top management and administrative impediment to approach and fix an appointment. Despite these limitations, the findings of this study provide insights to Islamic banks in diversifying their products by offering Islamic microfinance to the low-income entrepreneurs but with proper guidelines and policies. Practical implications – There is a need to educate the community towards the merits of Islamic banking system by developing a good information system using good visuals and professionally presented seminars, banners and arranging regular sessions with the business community. The growth and development of Islamic banking in the country largely depend on its customers' enhanced knowledge and awareness about its products and services. Social implications – It is the responsibility of the community as well as of government to change the mindset of the poor that banks are meant to serve the interest of everybody, regardless of social, economic and political status.
The Journal of Social Sciences Research
Indonesia has a strong presence of microfinance sector with the number of Islamic Microfinance Institutions (IMFIs) estimated to be around 5,000 currently. Microfinance is an effective tool in alleviating poverty in Indonesia due to the limited access to financial services by the poor who accounted for approximately 96 million Indonesians (or 37% of the total population), living on less than USD 1.90 a day. In the absence of collateral and steady income, the poor are considered too risky to be given credit facilities by the formal financial services providers and living in remote areas has also limited their access to formal financial services. This study aims to examine the poverty alleviation efforts from the perspective of the IMFIs in view of their direct involvement in the process and having rich information about financial issues facing the borrowers. The managers also understand about financial inclusion agenda as well as financial guidelines and regulations issued by the rel...
Islamic Microfinance for Poverty Alleviation: A Systematic Literature Review
2020
This paper reviews and discusses the impact of Islāmic microfinance and its conventional counterpart on their borrowers. Another primary focus of this study is to identify determinants that could influence the microfinance borrowers. The study also promotes Islāmic microfinance and suggests it as one of the best poverty alleviation tools, especially among the Muslim society by reviewing some measurements taken and suggestions by other researchers through systematic literature review. This paper is a literature survey of more than 50 articles related to microfinance which tries to analyze the areas that researchers investigated in microfinance. This survey comprises not only an empirical analysis and comparative analysis but also the recommendation and suggestion with some theoretical works. Microfinance is lauded asan effective tool for eradicating poverty. It has improved the livelihood, well-being and economic development of the poor people. However, studies show that most convent...