Islamic microcredit and poverty alleviation in the Muslim World: Prospects and challenges

Murtada Mirghani, Mubarak Mohammed, Abul Bashar Bhuiyan, Chamhuri Siwar

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

Poverty is the central problem to sustainable human development. While Islamic microfinance has been recognized as the best-fit alternative to conventional Microcredit which promises the same benefits based on Shariah. As the Islam provides the complete code of life, the religion covers poverty reduction as one of the premier agendas. Islam considers that poverty induces other indecent acts; therefore, poverty should be treated with much care. However, the Shari'ah encourages savings and investment rather than excessive consumer debt. Some of the most significant obstacles facing Islamic Micro Finance (IMFIs) lie in the rising costs, where the needs for implementation and follow-up to the field are greater than in conventional finance; poor awareness of systems and methods of Islamic finance among the target audience; and the execution of Islamic finance by certain authorities without having adequate knowledge in it, leading to wrong practices and loss of public confidence in Islamic finance. In addition to this, there is a scarcity of skilled personnel in the field of Islamic finance due to the lack of interest among academics in the Islamic finance in the Middle East region. Despite the prospects for microfinance, there are a number of specific challenges facing this industry under the Islamic financial systems, some of which include: There is an urgent need to build bridges between the religious institutions and the microfinance sector; the concept that there is a lack of convergence between the parties in terms of objectives; The challenge is to recognize the common grounds in human development, which will bring together these two parties; One of the challenges in addressing the sceptical perception prevalent among Muslim consumers, especially in the South Asian region, is about whether or not these products comply with the Shari'ah rules; and finally The Islamic finance industry needs to adapt and modify the range of products and operating models that are not used in accordance with the fundamental rules of Shari'ah in order to meet the needs of the poor.

Original languageEnglish
Pages (from-to)620-626
Number of pages7
JournalAustralian Journal of Basic and Applied Sciences
Volume5
Issue number9
Publication statusPublished - Sep 2011

Fingerprint

Muslims
Poverty alleviation
Microcredit
Islamic finance
Microfinance
Poverty
Human development
Industry
Islam
Authority
Consumer debt
Middle East
Poverty reduction
Costs
Scarcity
Agenda
Personnel
Confidence
Financial system
Savings

Keywords

  • Islamic Microfinance
  • Microfinance
  • Poverty
  • Shari'ah and IMFIs

ASJC Scopus subject areas

  • General

Cite this

Islamic microcredit and poverty alleviation in the Muslim World : Prospects and challenges. / Mirghani, Murtada; Mohammed, Mubarak; Bhuiyan, Abul Bashar; Siwar, Chamhuri.

In: Australian Journal of Basic and Applied Sciences, Vol. 5, No. 9, 09.2011, p. 620-626.

Research output: Contribution to journalArticle

Mirghani, Murtada ; Mohammed, Mubarak ; Bhuiyan, Abul Bashar ; Siwar, Chamhuri. / Islamic microcredit and poverty alleviation in the Muslim World : Prospects and challenges. In: Australian Journal of Basic and Applied Sciences. 2011 ; Vol. 5, No. 9. pp. 620-626.
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