Effectiveness of Islamic Microfinance in Alleviating Poverty: Empirical Evidence from Bangladesh (original) (raw)
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Role of Islamic Micro Finance in Alleviating Poverty in Bangladesh: A Study on RDS of IBBL
International Journal of Financial Research
The goal of this study is to determine the Role of Islamic Micro Finance in Alleviating Poverty, a study on RDS (Rural Development Scheme) of the Islamic Bank Bangladesh Limited. The study employed interview method, descriptive statistics, T-test, Chi-squared test, and multiple regression analysis to investigate a total of 328 samples (RDS borrowers). The sample has been purposefully selected for the study from two districts of Rajshahi division of Bangladesh. The results of our study indicate that in any category having an income level of more than 5001 to 10000, after access to the RDS scheme of IBBL, overall, 72% of respondent’s income increased. In the case of impact analysis of the program on poverty alleviation, the results of the statistical analysis (regression model) revealed that there is a significant impact of the Rural Development Scheme (RDS) on poverty alleviation (P-value-0.000).
Despite being heralded as an acclaimed method for poverty reduction worldwide, the key aspects of traditional microfinance have created a sociological as well as psychological barrier in the Muslim social and intellectual hegemony in Bangladesh. The high interest-based loans, encouraging the poorest population for a shortcut but unstable route for development and the overwhelming focus on women as the beneficiaries of microfinance are few of the many aspects of the problem. The question regarding the effectiveness of microfinance as a tool for social justice is also under serious scrutiny worldwide. At the same time, the concept of Islamic microfinance is slowly taking shape in some Muslim countries including Bangladesh, aiming to solve the strategic problems with microfinance. By rectifying the ideas of microfinance with the general tools of Islamic financial mechanisms in the grass root level with a proper management of the Zakat can accelerate the process of poverty alleviation in Muslim countries. Finding Shariah accepted solutions for the shortcomings of mainstream microfinance and effective implementation of those approaches will be an effective tool for ensuring sustainable development as well as establishing social justice in Muslim world.
An Integrated Approach to Islamic Microfinance for Poverty Alleviation in Bangladesh
Üniversitepark Bülten
The study critically examines the state of the Islamic Microfinance sector of Bangladesh to find its role in addressing poverty. The study constitutes linkage between Islamic Microfinance and Poverty Alleviation. It is a desk-based and libraryoriented research relying on secondary data, structured on research objectives. Islamic microfinance organizations have not yet developed to the expected level in Bangladesh and thus Muslim citizens are compelled to borrow from conventional interest-based lending sources, but many underprivileged and small-scale entrepreneurs feel unable to access funding due to their religious ideology. Islamic concern for the disadvantaged makes it crucial to ensure Islamic microfinance services include their participation in the production process. Due to a lack of Islamic microfinance institutions in Bangladesh, the integration of Islamic microfinance with NGOs, NPOs (non-profit organizations), Zakah, Waqf, and capacity-building institutions to facilitate small-scale financial services to the poor can internalize them into the market mechanism and thereby work as a powerful tool for poverty eradication. This study proposes a new framework that directly addresses Islamic Microfinance and Poverty alleviation in Bangladesh.
Islamic microfinance programs have been used, for some time in Bangladesh, as an instrument to empower women and fight poverty. Women are specifically targeted by Islamic microfinance under the rural development scheme of Islami Bank Bangladesh Limited (IBBL), which provides interest-free-loans and many other benefits to the women groups involved. The main aim of this paper is twofold: firstly, to check for a positive relationship between Islamic microfinance and the socio-economic welfare of women and secondly, to explore the perspective in which Islamic microfinance packages function in Bangladesh and how the system of their performance can be enhanced. The main result of this study shows that the growth in women's revenues and resources plays an important role in improving women's financial freedom and sense of self-possession. However, a significant policy lesson from this study is that, it is essential to redirect Islamic microfinance to more sectors and more beneficiaries, in order to spread its benefits in the developmental activities, which will drive the contribution towards the wellbeing of the recipients and toward the socio-economic development of the country, in the long-run.
Islamic Micro-Finance Programme and its Impact on Rural Poverty Alleviation
International Journal of Banking and Finance
Bangladesh launched a shari’ah based micro-finance programme in 1995 under the Rural Development Scheme to uplift the overall socioeconomic standards of rural poor. It covered 0.52 million group members, 94% of whom are females. This paper presents findings on this experiment using 1,020 responses in a sample survey. Result showed that a significant of clients have improved their religious observations such as prayers and fasting. Results of the econometric models showed that household income, productivity of crops and livestock, expenditure and employment increased significantly due to the influence of changed behaviour and availability of micro-finance. Clients stated that the micro-investment had provided better organisation of their economic activities. Finally, the Islamic micro-investment programme appears to spur more ethical and economically desirable behaviour leading to poverty alleviation.
Going ( Beyond Microfinance ) : Enhancing Islamic Microfinance Programmes in Bangladesh
Islam and Civilisational Renewal, 2014
Microfinance programmes have been operating in Bangladesh since the early seventies. With the Bangladesh Rural Advancement Committee (BRAC) and the Grameen Bank (GB) as the pioneers, many other Non Governmental Organizations (NGOs) and Microfinance Institutes (MFIs) have grown up to provide banking services to the 'bankless' poor of the society. Most of these MFIs disburse cash loans, and in most cases at a high rate of interest. Of course, interest as riba is among the gravest of prohibitions in Islam. Besides, a majority of the clients who take such microfinance loans often live below the poverty level, and have their own priorities to meet before investing the loan in a profit-bearing investment. As a result, the loans turn out to be consumption loans without resulting in any profit to pay the interest therefrom. In the long run, the clients fall into the 'debt-trap' and get poorer. This paper suggests that if instead of disbursing cash facilities, the clients were provided with employment under specific projects of which some portions could also be sold to them after the project has recovered its capital, poverty eradication ought to become an easier task. This then goes 'beyond microfinance' facilities.
Islamic Microfi nance As a Tool of Financial Inclusion in Bangladesh
Though Bangladesh has achieved worldwide recognition as a star performer in interest based conventional microfinance programs, she is lagging behind exploring full potentials of Islamic microfinance to promote financial inclusion among unbanked people aiming at poverty and inequality reduction. The experience of poverty programs of NGOs during the last three decades reveals that they have, in general, been successful in serving the moderate poor but failed in reaching the extreme poor mainly due to higher rate of interest and operational cost, lack of customized products and reluctance of religious people to participate in interest based programs. Given this, the present paper focuses on concepts and models of Islamic microfinance and its effectiveness as a tool of financial inclusion in Bangladesh. The paper suggests necessary policy options for combating challenges in order to build a vibrant Islamic microfinance market to cater the demands of all categories of poor, extreme poor in particular.
2011
Microcredit initiative is widely acclaimed as an approach to alleviate poverty and bring about development, but recently the effectiveness of the Microcredit programs has been appeared to be a focus of debate in finance and economics literature. The controversy surrounds mainly on the impact of these programs on poverty, ultra-poverty and further overall socioeconomic development. An exploratory survey was conducted to analyze the microfinance members’ evaluation about the microfinance schemes adopted by different microfinance institutes (MFIs) in Bangladesh. The study also explores the possibility of establishing IMFIs as an alternative to the conventional MFIs. This study covered only three MFIs such as Grameen Bank (GB), Bangladesh Rural Advancement Committee (BRAC) and Association for Social Advancement (ASA). The data were collected from Gazipur, Savar and Narayanganj located around Dhaka city. The respondents (members of those three MFIs) were asked to evaluate their judgments...