Proceedings 2 nd ISLAMIC MICRO-FINANCE AND POVERTY ALLEVIATION: A CASE OF PAKISTAN (original) (raw)
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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.
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.
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.
Role of Islamic Microfinance in Poverty Alleviation in Pakistan: An Empirical Approach
International Journal of Academic Research in Accounting, Finance and Management Sciences, 2014
After 2008 world economic crises, banks and other financial institutes move towards Islamic financing not only in Muslims countries but also in non-Muslim countries of the world. In view of this, some micro financial institutions also introduce Islamic micro financing products in Pakistan. The present study was conducted to analyze the role of Islamic microfinance to alleviate poverty in Pakistan its impacts, people satisfaction level and assess the future of it in Pakistan. An Empirical approach has been adopted due to lack of knowledge to clients about products, technical terms, lack of time, and we come to know the changing improvement in the eyes of those people who directly involve in this system. Questionnaire was used as a tool for data collection. The qualitative data was quantified and chi-square test was applied to test the association of attributes by 5% level of significance. Our analysis concluded that Islamic microfinance playing an important role to improve the living standard, per capita income, awareness level (Educational level), ethical values, profitability, sustainability, infrastructure position, employment level in the society, helpful to control the inflation and unequal distribution of wealth. People are more interested due to religious prospective and prohibition of riba in Islam as well as in Christianity but there should be proper regularity authority to control over it in order to get fruitful results through an implementable model.
Development of Islamic microfinance: a sustainable poverty reduction approach
Journal of Economic and Administrative Sciences, 2019
Purpose-Though microfinance has been working for many years as a tool to eradicate poverty from its root, most of the least developed and developing countries are yet to significantly alleviate it from the society. The purpose of this paper is to focus on Shariah-based microfinance products in the context of sustainable poverty alleviation approach and provide them financial benefits to enhance their livelihoods. Design/methodology/approach-Here, this qualitative study critically analyzes the basics of the sustainable Islamic microfinance to exterminate the level of poverty. Findings-Islamic microfinance is a more ethical practice than the traditional motives of profit maximization, and it encourages extending the time of repayment if the debtors are in hardship. In some case, it suggests to give charity if the creditor has capability. Research limitations/implications-Most importantly, research scholars and experts have already criticized the concept of conventional microfinance on the basis of various points, especially for its high rate of interest. Social implications-Islamic microfinance is provided with a view to fulfill two tools simultaneously, i.e., social and financial inclusion. In this case, credits and Zakah can be given to the extreme poor people for satisfying basic needs. In terms of social responsibility, Islam encourages the people to be soft in case of collecting the lending money. Originality/value-The study discoursed that sustainable Islamic Microfinance (IM) may be a promising future option to draw the attention of the religiously sensitive people toward the Shariah-based microfinance which can, in turn, mitigate the poverty level.
The paper attempts to highlight some issues of conventional microfinance leading to irrational results and suggests alternative mechanism of Islamic microfinance to alleviate poverty in more effective manner. The results of the research are based on extensive review of literature comparing both the systems and finding reasonable ground for Islamic microfinance to be more inclusive and viable. Owing to time constraint, data set of Pakistan Poverty Alleviation Fund was used to assess impact of conventional microfinance which suggested that change in poverty status of the poorest was not significant, rather the affluent poor benefitted the most. While making a case for Islamic microfinance, the paper suggests extending its scope through product diversification, innovation and downscaling operations of Islamic banks linking microfinance institutions, particularly for fund sourcing, Sharia' advisory, and technology transfer. The question of inclusion therefore needs to be addressed t...
Islamic Microfinance-Financing the Poorest of the Poor
International Journal of Research in Commerce, IT and Management, 2013
Making poor bankable is the shortest definition of microfinance. Microfinance (MF) is a powerful poverty alleviation tool. It implies provision of financial services to poor and low-income people whose low economic standing excludes them from formal financial systems. Access to services such as, credit, venture capital, savings, insurance, remittance is provided on a micro-scale enabling participation of those with severely limited financial means. The provision of financial services to the poor helps to increase household income and economic security, build assets and reduce vulnerability; creates demand for other goods and services (especially nutrition, education, and health care); and stimulates local economies..The main aim of the paper is to assess the potentials of Islamic financing schemes for micro financing purposes. The paper argues that Islamic finance has an important role for furthering socioeconomic development of the poor and small (micro) entrepreneurs without charging interest (read: riba'). Furthermore, Islamic financing schemes have moral and ethical attributes that can effectively motivate micro entrepreneurs to thrive. The paper also argues that there is a nexus between Islamic banking and microfinance as many elements of microfinance could be considered consistent with the broader goals of Islamic banking. The paper, first, introduces the concepts of microfinance, and presents a case for Islamic microfinance to become one of the components of Islamic banking. The paper then discusses, the potentials of various Islamic financing schemes that can be advanced and adapted for microfinance purposes including techniques to mitigate the inherent risks.
An Overviewof Islamic Microfinance
Some estimates indicate that there are about three billion people living in abject poverty making the problem of poverty a global challenge. With 600 million poor Muslims, this problem represents a major challenge before Muslim Ummah as well. Microfinance is seen as a "new paradigm" for bringing about development and eradicating poverty. Microfinance, which is the provision of small amounts of credit to the poor who is usually outside the formal banking system, is attracting growing attention from the World Bank and regional development banks. Conventional microfinance institutions (MFIs) already existed for a couple of decades and played a great role in helping the poor achieve higher income which, later on, may lead to the higher standards of living. Islamic microfinance institutions (IMFIs), which constitute a part of the Islamic financial system, are yet to be fully developed. This paper is addressing the issue of Islamic MFIs, their theoretical framework and implementation. It is believed that Islamic MFIs could play a greater role in poverty alleviation throughout the Muslim world. Various financing modes, such as mudarabah, musharakah, ijarah, and murabahah -among others, could be used by IMFIs to meet different needs faced by the poor.
Islamic Microfinance Model To Reduce Poverty: Pakistan's Case
The most essential element for any Government is to become a welfare state and the constitution of Pakistan gives great importance to promote the social welfare projects in order to alleviate the poverty. The article 37 and 38 of constitution 1973, is the mother source of socioeconomic and people welfare policies, explains that state should provide the basic necessities of life like food, clothing, shelter, education, medical relief, suitable job opportunities and reduce the disparities in the sources of earnings. In view of this, Pakistan government introduced different development programmes, schemes and plans for the provision of basic facilities to poor's. According to the State Bank report 2011, Microfinance has failed to make a major breakthrough in Pakistan in order to become a dynamic participant. The poverty rate in the country, increased from 23.9 to 37.5 percent according to planning Commission (2012). It was also reported that about sixty million people was living below absolute poverty line. The recent disaster of Thar and Chulsitan own speaks loud on the failure of Govt. development programmes and microfinance. As interest is prohibited as per belief of majority of the people, any interest based scheme is not suitable due to being exploitation. Now, there is a great need to bring a religiously acceptable model that will change baggers to donator hand. Islamic finance takes an impressive leap after ongoing economic and financial crises at the national and global levels and is increasingly gaining ground. The present study suggests a practical Islamic microfinance model that can be considered to be more fruitful and productive to alleviate poverty effectively; it explains seven years might be sufficient to reduce poverty from the society at large.