scholarly journals Alleviating Poverty Through Islamic Microfinance: Factors and Measures of Financial Performance, and Roles of Islamic Values and Financial Policies

2019 ◽  
pp. 1266-1273
Author(s):  
Adhitya Ginanjar ◽  
Salina Kassim
Keyword(s):  
Financial Services ◽  
Poverty Alleviation ◽  
Financial Education ◽  
Financial Inclusion ◽  
Microfinance Institutions ◽  
Financial Policies ◽  
The Poor ◽  
Depth Interview ◽  
Rich Information ◽  
Islamic Microfinance

Indonesia has a strong presence of microfinance sector with the number of Islamic Microfinance Institutions (IMFIs) estimated to be around 5,000 currently. Microfinance is an effective tool in alleviating poverty in Indonesia due to the limited access to financial services by the poor who accounted for approximately 96 million Indonesians (or 37% of the total population), living on less than USD 1.90 a day. In the absence of collateral and steady income, the poor are considered too risky to be given credit facilities by the formal financial services providers and living in remote areas has also limited their access to formal financial services. This study aims to examine the poverty alleviation efforts from the perspective of the IMFIs in view of their direct involvement in the process and having rich information about financial issues facing the borrowers. The managers also understand about financial inclusion agenda as well as financial guidelines and regulations issued by the relevant authorities. A total of 34 managers of Baitulmaal Wa Tamwil (BMTs), which registered under the Sharia Cooperative Centre (INKOPSYAH) are taken as respondents from the Jakarta, Bogor, Depok, Tangerang and Bekasi (JABODETABEK) areas. The first instrument was a survey questionnaire, and the second one was an in-depth interview to outline data related to the model design. The findings of this research are expected to contribute to better decision-making for the BMTs to further enhance its role in alleviating poverty. The findings also elaborate several dimensions to improving financial inclusion among the poor including providing financial services, implementing Islamic principles, significant policies, community-based framework concept and training financial education. This research highlights the need for a variety of strategies to warrant success of poverty alleviation efforts by BMT.

scholarly journals CAN ISLAMIC MICROFINANCE ALLEVIATES POVERTY IN INDONESIA? AN INVESTIGATION FROM THE PERSPECTIVE OF THE MICROFINANCE INSTITUTIONS

2020 ◽  
Vol 6 (1) ◽  
Author(s):  
Adhitya Ginanjar ◽  
Salina Kassim
Keyword(s):  
Decision Making ◽  
Poverty Alleviation ◽  
Financial Inclusion ◽  
Survey Questionnaire ◽  
Model Design ◽  
Microfinance Institutions ◽  
The Poor ◽  
Depth Interview ◽  
Islamic Microfinance

This study examines the poverty alleviation efforts undertaken by the Islamic microfinance institutions (IMFIs) in Indonesia. We focused on the role played by the IMFIs in view of their direct involvements in the process of dealing with the borrowers, and their better understanding about the financial inclusion agenda as well as the financial guidelines and regulations issued by the relevant authorities. In methodology, a total of 34 managers of Baitul Maal wat Tamwil (BMTs) were taken as respondents from the Jakarta, Bogor, Depok, Tangerang and Bekasi (JABODETABEK) areas. A two-step approach was adopted in arriving at enriching findings: first, a survey questionnaire was distributed to the respondents, and subsequently, an in-depth interview was conducted to outline data related to the model design. The findings of this study highlight specific dimensions to improve financial inclusion among the poor. Apart from providing important inputs for better decision-making for the BMTs to further enhance its role in poverty alleviation, this study suggests a variety of strategies to warrant success of poverty alleviation efforts by BMT.

scholarly journals THE SOCIO-ECONOMIC BENEFITS OF MICROFINANCE: CONVENTIONAL VS. ISLAMIC

2020 ◽  
Vol 6 (1) ◽  
Author(s):  
Amela Trokic ◽  
Eldina Karamustafic ◽  
Velid Efendic
Keyword(s):  
Poverty Alleviation ◽  
Modern Society ◽  
Economic Benefits ◽  
Financial Inclusion ◽  
Microfinance Institutions ◽  
Client Characteristics ◽  
The Poor ◽  
Socio Economic Development ◽  
Islamic Microfinance ◽  
Socioeconomic Benefits

The reduction of poverty and socio-economic development has become a foremost issue in modern society. One approach to improving this was the establishment of microfinance, which has since become an important part of poverty alleviation strategies, but very few studies have considered its benefits based on characteristicsother than poverty. Therefore, this study aims to investigate and determine how different client characteristics affect the way people benefit from the financing provided by microfinance institutions. Data were gathered from the beneficiaries of both conventional and Islamic microfinance using a questionnaire, and then analysed using the Kruskal-Wallis and the Mann–Whitney U tests. The results show how MFI financing benefits clients differently based on certain characteristics, as well as how these socioeconomic benefits differ based on whether the financing is provided by a conventional or an Islamic MFI. Overall, conventional and Islamic MFIs have similar strategies when it comes to providing socio-economic benefits to their clients. However, where they diverge is when client gender is considered, as IMFIs are more likely to benefit women. This research will be beneficial to MFIs in terms of the development of their services, as it will help them identify the strengths and weaknesses of their offerings and how well these are able to assist them in fulfilling their purpose of providing benefit to the poorest of the poor, increasing financial inclusion and contributing to socio-economicdevelopment.

Adopting Islamic microfinance as a mechanism of financing small and medium enterprises in Uganda

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ssemambo Hussein Kakembo ◽  
Muhamad Abduh ◽  
Pg Md Hasnol Alwee Pg Hj Md Salleh
Keyword(s):  
Financial Services ◽  
Small And Medium Enterprises ◽  
Skills Training ◽  
Microfinance Institutions ◽  
Alternative Scheme ◽  
Content Type ◽  
The Poor ◽  
Islamic Microfinance ◽  
Financial Challenges ◽  
Medium Enterprises

PurposeDespite the fact that small and medium enterprises (SMEs) play a crucial role in strengthening the financial sector within developing and emerging economies through providing employment opportunities to the rural and urban population, capacity building in the form of skills training and economic empowerment, they still face a plethora of challenges that continue to threaten their existence, performance and growth. Access to operational and administrative funds needed to execute their activities effectively is a significant challenge and detrimental to the growth of SMEs in Uganda. Conversely, Islamic microfinance has been noted as a panacea to the challenges of financial inaccessibility among SMEs, especially in developing countries. The purpose of this paper is therefore to investigate how the adoption of Islamic microfinance can play a fundamental role in enhancing the sustainability of microfinance institutions (MFIs) while meeting the financing challenges of SMEs in Uganda.Design/methodology/approachIn this study, a review of existing literature was carried out to critically examine relevant information (literature sources) and empirical studies on SMEs, their performance and challenges. The study being conceptual tries to understand how Islamic microfinance could be adopted as an alternative scheme of financing to bridge the gap and mitigate the financial challenges facing SMEs.FindingsThe study finds that the existing MFIs have failed to achieve their objectives of providing financial services to the poor and SMEs while remaining sustainable. This has left the majority of SMEs within Uganda's informal sector financially handicapped, thus leading to their failure in meeting their expectations and eventually collapsing even before celebrating their third or fourth birthdays. However, the enactment into law of the Financial Institutions Amendment Act 2016 that paved the way for the introduction of Islamic finance in Uganda, and the Tier 4 Microfinance Institutions and Money Lenders' Act, 2016 that incorporated the aspects of Islamic microfinance within the existing microfinance framework as seen and is perceived as a key factor in addressing the financial challenges faced by MFIs and the SMEs if fully adopted.Research limitations/implicationsThis study is conceptual with no empirical investigation and discussion of key theories. On the contrary, it will be imperative and useful when carrying out more extensive hypothetical studies by future researchers, specifically in the area of Islamic microfinance that is relatively new in Uganda.Practical implicationsPractically, this paper will serve as a guide to policymakers and practitioners in the field of microfinance by adding a flair that could enable in bridging the challenges associated with inadequate financing of SMEs in Uganda.Social implicationsSocially, the social aspects of charity (Zakah and Sadaqah) will help to improve the livelihood of the poorest of the poor who cannot engage in active business through meeting their basic needs of life without begging thereby preventing them from being social outcasts.Originality/valueThe study establishes Islamic microfinance (IMF) as a promising and unexplored viable option potentially needed in intensifying the financing needs of SMEs in Uganda. The paper provides an entirely new dimension in nature and way microfinance products should be structured with a view of ensuring that there is sustainable provision of financial services to SMEs. The paper adds real value to the existing conventional microfinance products and services in Uganda, given the ethical and moral attributes of Islamic microfinancing practices that are assumed to efficiently and effectively motivate SME owners and other small entrepreneurs to thrive.

scholarly journals Evaluating the Impact of Microfinance for Women in Albania

2016 ◽  
Vol 4 (2) ◽  
pp. 233
Author(s):  
Oltiana Muharremi ◽  
Filloreta Madani ◽  
Erald Pelari
Keyword(s):  
Social Influence ◽  
Low Income ◽  
Financial Services ◽  
Poverty Alleviation ◽  
Empirical Investigation ◽  
Social Value ◽  
Microfinance Institutions ◽  
The Poor ◽  
The Impact ◽  
Micro Enterprises

<p class="Default"><em>Microfinance is defined as any activity involving the offering of financial services such as loans, savings and insurance to individuals with low income.</em><em> </em><em>Creating social value includes reducing poverty and having a better impact to improve living conditions through capital for micro-enterprises; insurance and savings deposits for reducing risk and boosting consumption. Worldwide microfinance actors promote access to basic financial services by developing new tools, a variety of products and the adoption of an integrated banking access.</em></p><p class="Default"><em>Initially, microfinance was largely gender neutral: it sought to provide credit to the poor who had no assets to pledge as collateral. It quickly emerged, however, that women invested their business profits in ways that would have a longer-lasting impact on their families and communities. Consequently women became fundamental to the success of the microfinance model as a poverty alleviation tool. The purpose of this article is to examine the impact of microfinance loans in improving the lives of women borrowers, as well as in strengthening their social influence and the microcredit impact in promoting savings. This study is based on an empirical investigation of 384 structured questionnaires and surveys directed at microfinance institutions and their clients in the regions of Vlore and Fier, Albania.</em></p>

Employing Islamic Microfinance in Addressing Poverty Challenges in Brunei

2019 ◽  
Vol 6 (1) ◽  
pp. 49-61
Author(s):  
Ssemambo Hussein Kakembo ◽  
Abu Umar Faruq Ahmad
Keyword(s):  
Financial Services ◽  
Living Standards ◽  
Microfinance Institutions ◽  
Absolute Poverty ◽  
Asian Region ◽  
Brunei Darussalam ◽  
The Poor ◽  
The People ◽  
Islamic Microfinance ◽  
Poverty Levels

Countries within the Asian region are continuously struggling to improve the living standards of their citizens. Some of them are still facing a plethora of challenges due to the ever-increasing levels of both relative and absolute poverty. This is especially among the poorest of the poor who have no access to the mainstream financial services. The conventional microfinance institutions have been greatly criticised for their dubious acts of charging exorbitant interests. Islamic microfinance has therefore, been seen as one of the viable alternatives to meeting the challenges of poverty and as an opportunity in the livelihoods of the people in the Asian region. This article analyses the magnitude at which Islamic microfinance can play a fundamental role in alleviating insignificant poverty levels in Brunei Darussalam through using a proposed Mudarabah financing model.

scholarly journals Poverty Alleviation Fund in Financial Inclusions of Nepal

2019 ◽  
Vol 2 (2) ◽  
pp. 90-98
Author(s):  
Nahakul K.C.
Keyword(s):  
New Product Development ◽  
Financial Literacy ◽  
Financial Services ◽  
Poverty Alleviation ◽  
Secondary Data ◽  
Holistic Approach ◽  
Financial Education ◽  
Financial Inclusion ◽  
Services Research ◽  
Government Organizations

This research was an attempt to take a deeper look at people’s experience of existing financial services and their providers. In addition, it aimed to identify definitive indicators that would help to create a roadmap for the delivery of effective financial services in Nepal. The study emphasized that ensuring financial inclusion is an arduous task and requires a holistic approach encompassing strategies for awareness raising, financial education, technical advice on different dimensions of money management, debt counseling, saving mobilization, provision of affordable credit services, research and development. In order to promote financial inclusion, there is a need to develop and apply specific strategies to expand the outreach of their services using combinations of lending methodologies, market led approaches to new product development, fostering linkages with local communities and promoting the use of technologies. This paper is basically descriptive and analytical in nature and based on a number of policy models and provisions formulated in recent years for promoting financial inclusion in Nepal. Secondary data is used, drawn primarily from, Poverty Alleviation Fund, Department of Co-operatives and different departments. Micro finance institutions should give equal priority for non-financial services such as financial literacy and provision of entrepreneurship skills through government and non-government organizations that ultimately helps to utilize micro-credit into productive sectors.

Financial inclusion of the poor: from microcredit to Islamic microfinancial services

Humanomics ◽  
2015 ◽  
Vol 31 (3) ◽  
pp. 354-371 ◽  
Author(s):  
Abul Hassan
Keyword(s):  
Small Businesses ◽  
Financial Inclusion ◽  
Microfinance Institutions ◽  
Content Type ◽  
Direct Discourse ◽  
Minority Community ◽  
Playing Field ◽  
The Poor ◽  
Wide Range ◽  
Islamic Microfinance

Purpose – The purpose of this paper is to initiate a direct discourse towards an Islamic microfinance focus agenda for the economic enlistment of the poor minority community and to allow poorer households in the financial inclusion. The issue of the Indian conventional microfinance institutions in failing to attract the poorest of the poor amongst Muslims is important for the purpose of this paper. This study explores a Shari’ah-compliant microfinance system which will create a level of playing-field with respect to the financial inclusion of the poor. Design/methodology/approach – The paper is a theoretical discussion on Islamic microfinancial services for financial inclusion of the poor. Therefore, there is little to say about “methodology” other than the conventional microfinance model is reviewed, and an alternative model of Islamic microfinancial service has been suggested to allow poorer households in the financial inclusion. Findings – The paper finds that there are some opportunities capable of improving the economic condition of the poor Muslim communities through some innovative approaches. To illustrate this finding, the paper emphasises on designing and delivering Islamic microfinancial products suitable for the poor based on the principle of Islamic solidarity. It argues that this service will help the poor and turn their savings into sums large enough to satisfy a wide range of personal, social and asset-building needs as well as needs relating to small businesses and consumption. Research limitations/implications – The paper’s findings are limited to the matter of financial inclusion of the poor through Islamic microfinancial services in India. Originality/value – Combining the Islamic social principle of solidarity for the less fortunate with the power of microfinance to provide financial access to the poor has the potential to reach out to millions more people. The ideas presented in this paper are designed to direct discourse towards an Islamic microfinance focus agenda for the economic enlistment of the poor Muslims in India.

scholarly journals The Equity and Efficiency of Microfinance

2010 ◽  
Vol 3 (1) ◽  
pp. 11-17
Author(s):  
Mahazarin Kanga ◽  
Juhi Bansal ◽  
Siddharth Verma ◽  
Ishani Bandaranayake
Keyword(s):  
Financial Services ◽  
Poverty Alleviation ◽  
Social Benefits ◽  
Poor People ◽  
Microfinance Institutions ◽  
The Poor ◽  
Equity And Efficiency ◽  
Social Opportunities ◽  
The Common ◽  
Global Population

Banks are for people with money rather than for people without money. However, microfinance is banking for the unbankables. It brings credit, loan, savings and other essential financial services within the reach of millions of people who are too poor to be served by regular banks, i.e. almost 60-90% of the global population. It is one of the most intriguing features of financial economics today. In the aftermath of the 2006 Nobel Peace Prize being awarded to the Bangladeshi, Mohammed Yunus, who is a champion of the cause for microcredit, the common presumption has been that microfinance create s undeniable social benefits such as poverty alleviation and more equal social opportunities. Indeed, this is true to a large extent; however, less acknowledged are the problems that lurk behind this facade of ‘social service’. Donning the caps of economists, this pa per discusses the economic rationality of microfinance as an effective tool for achieving poverty alleviation. We ask the question on whether the theoretical objective of microfinance for ‘helping the poor’ is sullied in practice by rent seeking, profit seeking and corruption. We assess the fundamental economic model for the basis on which Microfinance Institutions (MFIs) provide loans to the poor and as whether the poor people eventually benefited from this financial innovation.

scholarly journals IMPROVING FINANCIAL EDUCATION TO THE POOR AT THE BOTTOM-OF PYRAMID: THE ROLE OF SOCIAL FINANCE VIS A VIS FINANCIAL INSTITUTIONS

2016 ◽  
Vol 1 (1) ◽  
pp. 44
Author(s):  
Laily Dwi Arsyianti ◽  
Salina Kassim
Keyword(s):  
Financial Institutions ◽  
Financial Education ◽  
Financial Inclusion ◽  
Financial Resources ◽  
Microfinance Institutions ◽  
Operational Costs ◽  
The Poor ◽  
Bottom Of Pyramid ◽  
The Cost

This paper aims to explore the role of Islamic social finance and financial institutions in contributing towards improving financial inclusion through financial education among the poor. While there have been a lot of efforts undertaken by financial institutions, especially microfinance institutions, to achieve the financial inclusion agenda, the financial inclusion programs would normally require high operational costs which many financial institutions would consider them as not commercially viable. The costs thenare transferred back to the customers, resulting in the financing/ credit cost higher than commercial financial institutions. As a result, incidences of bankruptcyincrease when the cost of credit is higher. Thus, financial education is essential for average family in managing their day to day financial resources. While financial institutions keep busy with financial inclusion agenda and trying to find the best way without disturbing their core business agenda, Islam offers social finance institution (amil and nadzir) as the solution to this problem.

scholarly journals Assessing the Determinants of Operational Self-Sufficiency of Microfinance Institutions (MFIs) in Afghanistan

2018 ◽  
pp. 31-48
Keyword(s):  
At Risk ◽  
Financial Services ◽  
Poverty Alleviation ◽  
Microfinance Institutions ◽  
Economic Activities ◽  
Loan Portfolio ◽  
The Poor ◽  
Self Sufficiency ◽  
Significant Factors

Microfinance Institutions (MFIs) started providing financial services in Afghanistan since 2003 to take part in poverty alleviation and providing micro loans for the poor entrepreneurs enabling them to expand their economic activities. Since the inception, the Microfinance sector in Afghanistan experienced serious ups and downs and most of the MFIs collapsed and could not become sustainable. Therefore, the aim of this study is to assess the determinants of MFIs sustainability in Afghanistan. To best of researcher’s knowledge, yet, no quantitative researches have been done in the context of Afghanistan to assess the determinants of MFIs sustainability. Using 2SLS econometrics approach through STATA and Eviews, the data of 5 MFIs from 2004 to 2015 was used to assess the determinants of MFIs sustainability. The research’s findings reveal that number of offices, total gross loan portfolio, operational expense to gross loan portfolio and portfolio at risk are statistically significant factors which determine the operational self-Sufficiency of MFIs in Afghanistan. However, other finding of this research shows that ratio of deposit to loan and total expenses to assets have not significant impact on the operational Self-Sufficiency of MFIs in Afghanistan during the study period.

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