Islamic Microfinance: Concept, Outreach and Conceptual Framework of Operations Muhammad Khan Nauman*, Muhammad Rehman Ziaur 1Lecturer, Department of Finance, College of Business Administration, King Saud University, Riyadh, Saudi Arabia 2Assistant Professor, Department of Finance, College of Business Administration, King Saud University, Riyadh, Saudi Arabia *E-mail for correspondence: mnauman83@gmail.com
Online published on 9 July, 2013. Abstract In the last two decades, conventional microfinance institutions have expanded their operations and have become very popular as a crucial mode for poverty alleviation. Conventional microfinance institutions are far ahead in their modus operandi in comparison to microfinance establishments based on Shariah. Islamic Microfinance render services such as savings, credit, remittance, venture equity and insurance on the micro level, typically to the low income clients by using Islamic financial instruments developed within the precincts of Shariah. As majority of Muslim populace yearn for Islamic products over conventional microfinance products on account of religious injunctions against paying interest, Islamic microfinance has the potent to take care for the less privileged in tandem to deliver financial access to the poor. This paper offers theoretical basis and operational conceptual framework of the Islamic Micro Finance Institutions (IMFIs). After evaluating the Conventional Micro Finance Institutions (CMFIs), an Islamic alternative is presented. Further the paper articulates the operations and the central funding instruments that the IMFIs use to finance their clients. In contrast to CMFIs, IMFIs are more focused on poverty alleviation and human development. This paper concludes that IMFIs, by working closely with different charity institutions can proffer various programs for the deprived groups and for the active economic borrowers. That shall not only lead to poverty alleviation but also be instrumental for the economic development of the whole society. Top Keywords Entrepreneurship, Islamic Microfinance, Microfinance, Poverty Alleviation. Top |