Evaluating the Transformative Role of Islamic Microfinance in Poverty Alleviation and Entrepreneurship Development
Keywords:
Islamic microfinance, Empowerment, Poverty Alleviation PovertyAbstract
Research was also done to test the transformative effect of Islamic microfinance (IMF) in changing the developmental strategies of the poor to shift the patterns of charity-based to the aspect of empowerment. The main theme of the research is how much the Sharia-compliant microfinance organizations, like Baitul Maal wat Tamwil (BMT) and Sharia cooperatives, may help to reduce poverty and promote entrepreneurship based on the Islamic beliefs. The study used a qualitative descriptive research approach, and interviews (semi-structured), direct observation, and documentary analysis were used to elicit the experiences and perceptions of the participants and the subsequent changes in socio-economic gains to the recipients. The results show that Islamic microfinance is an institution that engages in financing with no interest as well as a tool of socio-economic empowerment, an instiller of self-sufficiency, hard work and moral accountability into the community. Through the application of the principles of qard al-Hasan, mudharabah and musyarakah, access to productive capital by the low-income individuals is achieved, hence enabling them to practice entrepreneurship based on the Islamic ethics. The shift towards empowerment as opposed to charity is seen through increased economic involvement, the change of mind set by the recipients into entrepreneurs and an awakened mindfulness on spiritual involvement in business practices. The research concludes that Islamic microfinance is a powerful tool to the achievement of the goals of maqasid al-Shariah based on the combination of the economic, social, and spiritual aspects to empower the populace in a sustainable manner.
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