Awareness towards Interest-Free Microfinance: An Empirical Study with Special Reference to Jammu and Kashmir (UT)

Abstract

The leading cause of the failure of formal banking institutions in India while lending to the rural poor is the absence of proof of recognized employment or collateral that can be offered by the poor while applying for loans. The high risk and transaction costs of small loan savings deposits create difficulty for the banks as well. This leaves the poor with no alternative but to borrow money from local moneylenders at high-interest rates. On the other hand Islamic banking is a system of banking which primarily focuses on shariah laws that is totally against the collection or payment of interest called “RIBA”.it has a wide scope in India as the country has third largest Muslim population in world and at the same time the country has been put on 66th rank out of 109 countries of the world as per world poverty records 2021 that widens its scope beyond any religious domain. Therefore This study focuses on the prospectus of interest free microfinance in India with empirical reference to UT of Jammu and Kashmir.