Islamic Microfinance Model Research Articles

Transforming Poverty: Assessing the Significance of the Akhuwat Islamic Microfinance Model across Absolute, Moderate, and Relative Poverty Strata

Purpose: The goal of this study is to determine how the Akhuwat Islamic Microfinance Mode (AIMM) affects several types of poverty in Pakistan, including absolute, moderate, and relative poverty.
 Design/Methodology/Approach: In this study, primary data from Akhuwat Microfinance borrowers were collected using the stratified sample technique. The population was divided into four groups: manufacturing concerns, trading concerns, services concerns, and non-trading concerns. Additionally, a two-stage structural modelling technique was used for further data analysis. The measurement model was used to assess the reliability and validity, while the structural model was used to gauge the link between the underlying variables. 
 Findings: The study found positive and significant impact of Akhuwat Islamic Microfinance Mode (AIMM) on different dimensions of poverty, including absolute poverty, moderate poverty and relative poverty. Therefore, lending practices of Akhuwat enables the borrowers to reduce their absolute, moderate, and relative poverty. 
 Implications/Originality/Value: The role Akhuwat's unique approach to address different poverty levels including absolute poverty, moderate poverty and relative poverty is hardly investigate in the context of Pakistan by applying the Abraham Maslow's Hierarchy of Needs Theory.

Diversification and performance of microfinance institutions: does Islamic microfinance model matter?

Purpose The aim of this study is to investigate the effect of income and geographic diversification on the double bottom line of microfinance institutions (MFIs) in Middle East and North Africa (MENA) countries where conventional and Islamic MFIs coexist. The idea is to explore whether diversification impacts MFIs' financial performance and outreach differ for Islamic microfinance. Design/methodology/approach The authors test the effect of diversification and business models of MFIs on their performance and poverty outreach. The authors’ data set is an unbalanced panel sample of 81 (Islamic and conventional) MFIs in MENA countries covering 1999–2018, comprising 743 MFI-year observations. Findings The authors find that increasing income diversification in microfinance and focusing on rural areas decreases the financial performance of MFIs in MENA countries. Islamic MFIs benefit from income diversification by increasing their financial performance. The results provide evidence of a nonlinear relationship between income diversification and the financial performance of MFIs. Although conventional MFIs improve their depth of outreach by diversifying their income, Islamic MFIs have a lower breadth of outreach because they show a higher degree of income diversification. Practical implications This research contributes to the ongoing debate of whether MFIs should focus on or diversify their services to Islamic microfinance. Therefore, the findings of this study are practically crucial for MFIs' stakeholders to understand the contribution of diversification strategies in improving the Islamic MFIs to achieve both financial and social objectives. Originality/value To the best of the authors’ knowledge, it is the first research that addresses the impact of diversification strategies in Islamic microfinance. Additionally, using a panel data set of conventional and Islamic MFIs in MENA countries spanning 1999–2018, this study provides empirical evidence on the diversification versus focus issue from the microfinance industry and the subset of Islamic microfinance.

The Role of Islamic Microfinance in Poverty Alleviation: Evidence from Pakistan

This study aims to develop and propose an Islamic microfinance model that can be used for poverty alleviation in Pakistan. Other than investigating poverty, other interrelated aspects were also considered in which entrepreneurship, conventional microfinance, and Islamic finance were included. Moreover, by moving beyond and further exploring, this research presents various uses of Islamic microfinance to reduce poverty. A set of primary data was collected through interviews to carry out this research. Initial findings of the study unveil that poverty exists concerning common perceptions such as lack of necessities, unemployment, poor health, and insufficient financial resources. However, child selling, unethical ways of earning such as begging, robbery, and incompetency of the skilled person were the findings representing poverty from totally different perspectives. Moreover, the studied results also reveal that few respondents were aware of the concept and use of conventional microfinance. Still, at the same time, all the respondents represented the forbiddance of interest. Findings also represent the unawareness about Islamic microfinance's concepts, practice, and importance. This research is helpful as it presents the idea and the use of Islamic microfinance for the impoverished people of Pakistan and how it can be a beneficial alternative for reducing poverty. Moreover, it also seeks the attention from the financial institutions in the Country that how the beliefs and expectations of poor people are important in reducing their poverty. The significance of this study broadens the scope of the neglected concept of Islamic finance generally and Islamic microfinance particularly.

The Role of Islamic Microfinance in Uplifting B20 Communities in Malaysia in The Covid-19 Pandemic

The purpose of this study is to review the Islamic microfinance model that best suited the bottom of the wealth pyramid (B20) communities in Malaysia. Islamic microfinance products and services that are friendly to the B20 communities are crucial to ensure they are not lacking behind from the current development where everybody has access to the financial services. Most current Islamic microfinance products use debt-based financing that similar to the banking products. These products are not suitable to the B20 communities because it creates debt and burdens them to pay back the financing. Therefore, this paper reviews the potential of equity-based financing models that suit to the B20 communities. The study reviews past literature obtained from scholarly databases including Web of Sciences, Scopus, and Google Scholar. In addition, data from microfinance providers are also collected through their website, news published, and bulletin. The findings reveal that equity-based financing via musharakah mutanaqisah seeing as the innovative Islamic microfinance model that suit to the B20 communities compares to debt-based financing.

The Potential of Islamic Microfinance in Uplifting B20 Communities in Malaysia: A Review of Literature

The purpose of this study is to review the Islamic microfinance model that best suit the bottom of the wealth pyramid (B20) communities. Islamic microfinance products and services that are friendly to the B20 communities are crucial to ensure they are not lacking behind from the current development where everybody has access to financial services. Most current Islamic microfinance products use debt-based financing that similar to banking products. These products not suitable to the B20 communities because it creates debt and burdens them to pay back the financing. This paper reviews past literature to determine the Islamic microfinance model through Scopus, Google Scholar, and ResearchGate platform. The search criteria are confined to English documents that are within the period of 2000-2020. Articles that did not score or did not convince that the subject of Islamic microfinance has been applied in the Islamic economy, Islamic finance, Islamic financing products, and economic development are excluded. Appropriate search keys are used to get better results. The findings inform that contemporary scholars show a robust commitment to the themes of the result during the stated period. Equity-based financing via musharakah mutanaqisah is seen as the innovative Islamic microfinance model that suits the B20 communities compare to debtbased financing.

Using Fintech in scaling up Islamic microfinance

Purpose This study aims to propose a hybrid microfinance model that integrates various Islamic commercial and social finance institutions through Fintech for efficient and impactful results. The microfinance model caters to the financial and social intermediation needs through a set of financial services and non-financial support. Design/methodology/approach The study uses both a mathematical model and an empirical estimation using micro panel data to establish the core problem in microfinance operations. Conclusions from the mathematical model and estimated results in the empirical analysis are used to suggest an institutional design which embeds technology in the delivery of Islamic microfinance in an integrated structure. For screening and incentive conditions, the study gives illustration through numerical examples. Findings The mathematical model highlights the need for financial sustainability, outreach, scale and complementariness of non-financial factors such as commitment, repayment incentives and skills enhancement multiplier. In light of this, the proposed Islamic microfinance model is outlined to create synergies by integrating a diversity of funding sources through social savings and impact investments. The programme also blends financial services with non-financial support to ensure engagement and commitment on a long-term basis. It uses Fintech in various demand and supply-side operations to show how technology embeddedness can help in achieving cost efficiencies and extend outreach. Originality/value It is the first study in integrated institutional design in Islamic microfinance literature that embeds Fintech in both demand side and supply side operations comprehensively. The proposed model is conducive for enhancing outreach, scale and impact in the Islamic microfinancial services.

Islamic Microfinance Model and the Hypothesis of Poverty Alleviation

Efforts to alleviate poverty in the world have the most perilous impact in human history. Contrary to the prevailing paradigms in public and private policies, the erosion of poverty remains very shocking. The Islamic finance model tried to present its alternative vision and to participate in international efforts to at least help the poor in Muslim countries. This paper is an essay among others that analyzes the effectiveness of this system based on official data.

Proposing an Integrated Islamic Microfinance Model in Alleviating Poverty and Improving the Performance of Microenterprises in Indonesia

Objective – This study proposes an integrated Islamic microfinance model in alleviating poverty and improving the performance of microenterprises based on a case study of Indonesia, by focusing specifically on BRI Microbanking. Design/methodology – This study adopts the exploratory study to construct the integrated Islamic microfinance with the purpose to alleviate poverty and enhance the business performance of enterprises. Results – As Islamic microfinance is known widely due to the high demand from Muslim countries. Since, it plays a crucial role effectively in alleviating poverty and developing the business performance on enterprises, particularly on microenterprises. Presently, many scholars attempted to build a successful Islamic microfinance model by using Islamic financing instruments such as mudarabah, musyarakah, and murabahah. This study attempts to build an integrated Islamic microfinance model by using BRI Syariah Micro as a case study. It is expected that this integrated Islamic microfinance model can enrich existing models in terms of social and economic aspects. Originality/Value – This research concentrates on proposing an integrated Islamic microfinance model based on the case study of BRI Syariah Microbanking. There seems to be a gap in the literature on the actual implementation of integrated Islamic microfinance in the world. The study highlights major factors to be emphasized to ensure the effectiveness of proposing an integrated Islamic microfinance model for BRI Syariah micro banking to alleviate poverty and to improve the performance of microenterprises.

Development Of Waqf Based Microfinance And Its Impact In Alleviating The Poverty

The purpose of this paper is to discuss the potential role of the institution of Waqf in poverty alleviation. Poverty is a complex, multi-dimensional phenomenon that has captured the attention of numerous scholars and agencies globally. The social role of the Islamic financial sector can be best exemplified by providing finance to the poor to increase their income and wealth. This paper will explore on how microfinance can be provided on Shariah compliant basis through Waqf model. This research also reviewing the development of the integrated Waqf based Islamic microfinance which aimed to provide solutions to reduce poverty. An integration of Waqf-based Islamic microfinance (IWIM) model is proposed to address all the practical challenges of microfinance faced in Muslim communities. In this model, microfinance is practised in compliance with Shari’ah to address the multi-dimensional aspects of poverty and empowering the poor in order to enhance the socio-economic development and hence the well- being of the Ummah. With this aspiration, the IWIM model aims to tackle the challenges related to the scarcity of capital, inadequate human resources, absence of proper Takaful programs and project financing in an integrated approach. However, Waqf based microfinance still may be facing some problems should be addressed which related to credit risk, moral hazard, and economic viability.

Pemberdayaan Zakat : Model Intervensi Kemiskinan Dengan Microfinance Syariah Berbasis Masyarakat DPU DT Jawa Barat, Indonesia

This study aims to find out about the general description of the empowerment of zakat conducted by DPU Daarut Tauhiid in intervening poverty, through community based-Islamic microfinance. This research is a qualitative research using grounded research method that moves from empirical level to conceptual-theoretical level. The results showed that the empowerment of zakat by DPU Daarut Tauhiid through misykat program in the form of financing micro business capital for small groups-based zakah mustahik by adapting the Islamic microfinance model equipped with multifunctional facilitation

Banking the Unbanked a perceived recipes for Poverty Eradication Program: Induction of a New Islamic Microfinance Model in Nigeria

Banking the Unbanked a perceived recipes for Poverty Eradication Program: Induction of a New Islamic Microfinance Model in Nigeria

THE ROLE OF ISLAMIC MICRO-FINANCE IN ENHANCING THE WELLBEING OF THE CLIENTS: EXPLORATORY FACTOR ANALYSIS

This pilot study seek to explore the structural characteristics of Islamic Micro-finance and statistically group them in to Products (Independent), Empowerment (Mediator) and Clients’ wellbeing (dependent) constructs. This is to conceptualize an Islamic Micro-finance model towards the Clients wellbeing. Empirical data was collected from the staff of eight (8) branches of Amanah Ikhtiar Malaysia (AIM) in the Johor state, Malaysia. The data collected was analyzed by means of an Exploratory Factor Analysis using IBM SPSS Statistics 21, which resulted to the extraction of five (5) factors which upon grouping, defined the variables for this study. The results indicated an acceptable factor loadings and effective grouping according to the conceptualized framework. The Cronbach’s alpha of ≥0.7 is an indication of acceptable internal consistency and reliability of the five Islamic Micro-finance constructs. This study is part of on-going Ph.D. to proof the capacity of Islamic Micro-finance towards Clients’ wellbeing.

Taking stock of the waqf-based Islamic microfinance model

PurposeThe purpose of this paper is to explore two main aspects of waqf: the characteristics of waqf property and the management of waqf. This paper also discusses the governance of waqf management as a source of funds for Islamic microfinance institutions (MFIs).Design/methodology/approachThis research uses content analysis method to examine various literatures that discuss the concept and management of waqf.FindingsThe characteristics of cash waqf such as permanence, irrevocability and perpetuity differentiate waqf from other type of donations. Therefore, cash waqf-based Islamic microfinance needs to be sustainable. Good corporate governance is vital to ensure the sustainability. As the donors of cash waqf do not aim to make financial profit, waqf-based Islamic MFIs will be able to provide low-cost capital to the poor entrepreneurs. Furthermore, to ensure the perpetuity of the waqf, it is suggested that only revenue from the waqf property should be used for microfinance fund.Social implicationsThe cash waqf-based Islamic microfinance will help the micro entrepreneurs to get low-cost capital without collateral. At the same time, public can donate any amount they afford to contribute to cash waqf.Originality/valueThe creation of a cash waqf-based Islamic MFI must observe the issues of agency conflicts and the right of stakeholders to a transparent management. This paper emphasizes the importance of good governance in managing the waqf property as a source of fund for Islamic MFIs.

A Sustainable Islamic Micro-finance Model in the True Spirit of Islam

Microfinance is considered an effective tool in alleviating poverty all over the world. The objective of this paper is to develop a sustainable Islamic Microfinance model in the true spirit of Islam. Despite its importance, the microfinance sector accounts less than 1% of the overall Islamic Finance industry although 1.2 billion of global population is living below poverty line (earning less than $2 per day) and 44% of which are living in Muslim countries. Similarly the current practices of Islamic Banks and Islamic Microfinance Institutions are based on the principles of materialism rather than the concept of falah (success in this worldly life and hereafter) due to which they havefailed to achieve the objective of fair distribution of wealth in the society and alleviating poverty from the society. Therefore, in this paper an Islamic Microfinance Model based on the moral and ethical values of Islam (Piety, Justice, Benevolence, Cooperation, equality, selflessness avoidance from materialism) is developed. This model proposes Musharakha, Modarabah, Wakalah and Qarz-e-Hasana as the ideal modes of Islamic Microfinance because legitimacy of these modes of financing is beyond any doubt. In this Islamic Microfinance Model various steps are proposed for microfinance institutions, central bank and government. If this model is implemented in true letterand spirit, it can result in balanced growth and bring harmony in the various segments of the society by reducing poverty, increasing employment and fair distribution of wealth among them and thus contribute in the economic development and social wellbeing of the people.

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 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.

Integration of waqf-Islamic microfinance model for poverty reduction

Purpose – This paper aims to develop an integrated waqf-based Islamic microfinance (IsMF) for poverty reduction in Bangladesh. Microfinance institutions (MFIs) have been constrained by the high cost of funds, high interest rate charges and poor human resource quality of the recipients. Islamic MFIs have recently evolved with the hope of overcoming these financial, ethical and human capital deficiencies faced by the conventional financial institutions. Moreover, a good number of integrated models have been proposed to enhance the role played by Islamic MFIs. Most of these models, however, lack empirical justifications. Design/methodology/approach – The research uses survey techniques. A total of 381 respondents were included in the survey. The integrated waqf-based Islamic microfinance model (IWIMM) was earlier on developed using literature and intellectual discussions. There are six constructs presenting the IWIMM, namely, waqf resources, IsMF, takaful, project financing, human resource development and poverty alleviation. In the survey instrument, 45 items represent the six constructs, but only 26 items have been retained after factor analysis. Structural equation modelling has been adopted to examine the relationship among the constructs. Findings – The results show that there are significant relationships between IsMF and takaful, waqf resources and human resource development, takaful and human resource development, IsMF and human resource development and, waqf resources and project financing. The results also indicate that poverty alleviation is possible through the integration of these constructs. Research limitations/implications – Though the paper has studied conventional and Islamic MFIs in Bangladesh, one of the populated Organisation of Islamic Cooperation (OIC) member countries and also where poverty incidence is high, further studies need to be conducted in other OIC member countries to adopt the model in line with practical and regulatory environment of those countries. Similarly, the study is based on the perception of the respondents, which limits the generalization of the result. Practical implications – The paper proposed a model that has the potential of being applied for poverty alleviation programmes in most of the OIC member states. Originality/value – The present paper has developed an IWIMM for poverty reduction.

Grameen La Riba Model: A Strategy for Global Poverty Alleviation

The objective of this paper is to develop and implement an Islamic micro-finance model, using the Grameen group financing methodology, which can be used as a tool for global poverty alleviation. We posit that the fundamentals of Shari'ah concerning: (i) equitable risk and return sharing between the lender (bank) and the borrower (client) and (ii) helping the poor especially, the 'poorest of the poor' to be self sustaining, provide the necessary foundation for an Islamic finance model that is better suited to help the poor increase their sustainable income and eventually escape poverty. Our model begins with providing carefully self-selected client groups with murabaha contracts before providing musharaka finance. The murabaha financing agreement includes fixed payments each period of repayment and therefore is easier to administer and can be used to screen out potentially problematic clients who are most likely to default. Those clients who are in groups with successful repayment of the murabaha finance will have a choice between murabaha and musharaka financing in future. Finally, we describe our implementation strategy and preparations for a pilot study in Colombo and Bibile, Sri Lanka.