Islamic Microfinance Model To Reduce Poverty: Pakistan's Case

Abstract

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 socio-economic 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.