ISLAMIC MICROFINANCE: A FORCEFUL TOOL FOR ALLEVIATING POVERTY
Mar 12 - 18, 2012
Islamic microfinance is becoming very much popular for its capability of alleviating poverty particularly in the developing countries. The Islamic finance industry as a whole is expected to reach over two billion dollars in 2012 and a continually growing sector due to its ethical principles and prohibition of Riba.
Islamic microfinance sector is making substantial progress by effectively removing the shortcomings faced by the traditional microfinance industry. According to a press release issued by Islamic Microfinance Network, at present about 300 Islamic microfinance institutions are efficiently operating around the world.
It is to be noted that almost 1.7 billion people are living hand to mouth. Amongst them, 44 percent are living in Muslim countries and this factor spotlights the need of Islamic microfinance.
Recent surveys and research reports of USAID, CGAP, the World Bank, IFC, and Frankfurt School of Finance report Islamic microfinance is the best means of poverty alleviation. Currently, more than 300 Islamic microfinance organizations in Indonesia, Kenya, Afghanistan, Bangladesh, Sri Lanka, Yemen, Egypt, Sudan, Tanzania, Mauritius, South Africa, Malaysia, and Pakistan are working to alleviate the poverty.
At a time when poverty is still dominant around the world, there is no better solution than one which can provide benefits to poverty-stricken community and help to rebuild economies.
In this world, conventional microfinance has not performed up to the mark and this was observed in India and Latin America. Due to interest use in the financial and banking system which is strictly prohibited in Islam many Muslim countries in the world are adopting Islamic microfinance system for eradicating poverty, hunger and disease.
Islamic microfinance is essential to achieve millennium development goals, proposed by the United Nations for alleviating poverty and social uplifting.
For boosting Islamic microfinance, AlHuda Centre of Islamic Banking and Economics has established a special microfinance help desk so that trainings, research and technical consultation could be provided to microfinance institutions worldwide.
Islamic microfinance by using the financial products based on Shariíah principles can get the people out from poverty. Not only Muslims but non-Muslims will also get benefits from Islamic microfinance.
Islamic microfinance sector is facing difficulties due to negligence of donors and to remove this drawback, Sukuk (Islamic bonds) can be issued. More financial products can be introduced by increasing research in the field of Islamic microfinance.
Pakistan has been acknowledged as a leader of Islamic microfinance with more than 20 institutions providing microfinance services.
State Bank Governor Yaseen Anwar has said that the Islamic banking has great opportunity to finance projects in agriculture and small and medium enterprise (SME) sectors which are the avenues missed by conventional financial institutions.
"Reaching out to such sectors will not only be beneficial for the Islamic financial industry but will also guarantee economic welfare of society," Anwar said while inaugurating the 'Second International Conference on Islamic Business 2012í.
Recognizing the importance of Shari'ah-compliant agriculture financing, the State Bank is working hard with the industry to develop standardized products, he said. He emphasized the need for Islamic banks to be more aggressive in increasing their network in rural Pakistan.
Islamic microfinance is easily adaptable to any model of microfinance and it has the alternative to all the products of conventional system. In the wake of the current financial crisis all around the globe, the Islamic microfinance has gained even more importance due to its transparency and sustainability. Islamic microfinance sector is rapidly making progress by effectively removing the hurdles and challenges faced by the traditional microfinance industry.