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Towards a Sustainable Islamic Microfinance Model in Pakistan

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  • Shaikh, Salman ahmed

Abstract

According to SDPI estimates, poverty rate in Pakistan has roughly returned to the mid-thirties level of the 90s era. Some 58.7 million Pakistanis are classified as poor while Microfinance beneficiaries are only 2.35 million people. The progress and penetration of Islamic Microfinance is even more insignificant in relation to the enormous underdevelopment challenges faced by Pakistan. In this paper, we document the progress of Islamic Microfinance in Pakistan and build the case for its importance for Pakistan and for the Islamic finance industry. We also document the various business models and institutional structures in vogue in offering Islamic Microfinance products and services. We also document the regulatory environment under which Islamic Microfinance products can be offered in Pakistan. We explain the two basic models of Islamic Microfinance using a mathematical representation. The paper highlights the reasons why Islamic Microfinance in particular and Microfinance in general is not growing as rapidly as it should have given the level of underdevelopment and poverty in the country. Lastly, we propose how standardized screening and complimentary operations of NGOs and commercial IMFIs together with fiscal and monetary support can make Islamic Microfinance sustainable and commercially viable.

Suggested Citation

  • Shaikh, Salman ahmed, 2014. "Towards a Sustainable Islamic Microfinance Model in Pakistan," MPRA Paper 68748, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:68748
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    References listed on IDEAS

    as
    1. Obaidullah, Mohammed, 2008. "Role of Microfinance in Poverty Alleviation (Research Paper)," Occasional Papers 236, The Islamic Research and Teaching Institute (IRTI).
    2. El-Komi, Mohamed & Croson, Rachel, 2013. "Experiments in Islamic microfinance," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 252-269.
    3. Abdel-Fattah A.A. Khalil & Colin Rickwood & Victor Murinde, 2002. "Evidence on agency-contractual problems in mudarabah financing operations by Islamic banks," Chapters, in: Munawar Iqbal & David T. Llewellyn (ed.), Islamic Banking and Finance, chapter 4, Edward Elgar Publishing.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Microfinance; Microcredit; Islamic Microfinance; Islamic Banking; Islamic Finance; Poverty;
    All these keywords.

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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