Integration of waqf-Islamic microfinance model for poverty reduction

Abstract

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.

Poverty Alleviation via Microfinance using the Concept of Mudharabah

“…Islamic microfinance, on the other hand, provides interestfree loan (qard hasan) or profit-loss sharing system based on Mudharabah (Haneef et al, 2015). In relation to that, Islamic microfinance institutes may have the great potential of reaching the bottom of pyramid due to its interest-free loans.…”

“…According to Hassan (2014), such collective efforts to promote economic activities and regional development will affect both production and consumption of a community. However, as Haneef et al (2015) suggested, it is important to provide educational and training programmes to the borrowers so that the borrowers are equipped with necessary know-how to run their businesses or agricultural farms.…”

“…In this regard, there is a need for robust screening, strict monitoring and supervision on the entrepreneur by selected larger organisations to minimise asymmetric information problems and transaction costs (Haneef et al, 2015). Islamic bankers and supporting staff also need to be equipped with knowledge of Islamic finance and risk management in order for them to properly and responsibly manage the allocation of funds and distribution of profits to be shared accordingly (Abbas and Shirazi, 2015).…”

Financial Problems of Bottom 40 Percent Bumiputera in Malaysia: A Possible Solution Through Waqf-Based Crowdfunding

“…In Turkey, waqf system has contributed significantly in providing employment other than those employed directly by the state. Recent studies on the potential of waqf have revealed that the system can significantly contribute to poverty alleviation by providing them opportunities to generate their income from favourable economic activities (Ali 2014;Haneef et al, 2013;Hassan, 2010;Shirazi, 2014;Zarka, 2007).…”

Determinants of Qardhul Hassan Financing Acceptance in Nigeria

“…Prior researches provided evidences on the studies conducted on the acceptance of Islamic financial products such as Qardhul Hassan in the emerging markets such as Malaysia (Amin, Ghazali, & Supinah, 2010;Mansori, Kim, & http://dx.doi.org/10.15405/epsbs.2016.08.109 eISSN: 2357-1330 Selection and peer-review under responsibility of the Organizing Committee 776 Safari, 2015), Iran (Mojtahed & Hassanzadeh, 2009), Libya (Ali Khalifa & Bardai, 2013), Bangladesh (Haneef, Pramanik, Mohammed, Bin Amin, & Muhammad, 2015;IFSB, 2014;Khan, Hassan, & Shahid, 2007) and Indonesia (Febianto & Ashany, 2012;Yumna & Clarke, 2013). Moreover, in the developed countries, similar studies were conducted such as in Australia (Sain, Rahman, & Khanam, 2013) and UK (Warsame, 2009).…”