A notable example of philanthropic Waqf is the Well of Uthman (may Allah be pleased with him) or Bayruha in Medina in the same year when the two mosques were built. The well originally belonged to someone who was selling water at ridiculously high prices, depriving the poor Medina residents of access to drinkable water. Knowing this, the Prophet peace be upon him proclaimed that the person who would buy the well and make it an endowment to the residents would be guaranteed Paradise. Uthman (may Allah be pleased with him) set out immediately to get the well and did so in two instalments of 38,000 silver dirham each time. He later endowed the well as ordered by the Prophet peace be upon him, letting anyone fetch water from it regardless of the person being Muslim or otherwise without any payment charged for it. Some scholars believe that Waqf of philanthropic nature was initiated by Umar (may Allah be pleased with him) instead of while others opine that the Waqf made by him was more of family Waqf. A Hadith that is recorded in Sahih Muslim narrates the story: “Ibn Umar reported: ‘Umar acquired land in Khaibar. He came to Allah’s Apostle peace be upon him and sought his advice in regard to it. He said: “Allah’s Messenger, I have acquired land in Khaibar. I have never acquired more valuable for me than this, so what do you command I do with it? Thereupon the Prophet peace be upon him said, “If you like, you may keep the corpus intact and give its produce as Sadaqah.” So, Umar gave it as Sadaqah declaring that the property must not be sold or inherited or given away as a gift. And Umar devoted it to the poor, to the nearest of kin, to the emancipation of slaves, to wayfarers and guests, and in the way of Allah.” Therefore, these first few Waqf acts kickstarted itsdevelopment in Islamic finance. Today, many new forms of Waqf have been established that include liquid assets Waqf, Sukuk Waqf and corporate Waqf.
Previous researches concerning micro-financing have assessed if micro-finance programmes popular in Nigeria can reach the comparatively poverty stricken populace and susceptible in their actions. Modern researches have revealed proof of optimistic influence as it correlates to six Millennium Development Goals (Adamu, 2007; Irobi, 2008; Wrigth, 2000; Zaman, 2000; McCulloch and Baulch, 2000), all pledged to consider that microfinance is an efficient and dominant instrument for alleviating hardship. For instance, Amin, Rai, and Topai (2003) concentrated on the capability of microfinance to get to the underprivileged as well as asserted that microfinance has provided individuals under as well as over the line of poverty. Also, the outcomes of experimental proofs signifies that the most underprivileged can gain from microfinance together on financial and socio-economic welfare position, furthermore that this can be accomplished devoid of putting at risk the monetary and financial survival of Micro-credit organizations (Zaman, 2000; Robinson, 2001; Dahiru and Zubair,2008). For example, Khandker (2005), discovered that every additional 100 taka of loan and advances to females increase entire yearly family spending by over 20 taka. This research illustrates an awesome advantage of boost in earnings and a decrease of susceptibility.
The causes of poverty, in accordance with the classical theory, are not sufficient in analysing poverty in developing countries like South Africa. This is due to poverty in South Africa being an epidemic problem that is highly perpetuated by the country’s past policies and not necessarily households’ poor choices as asserted by the classical theory. Consequently, the state and dimensions of poverty in South Africa compel the government to intervene. As such, the formulation of effective and efficient poverty alleviation strategies has been one of the key objectives of the government in the post-1994 period. The South African government’s active role in fighting poverty is a direct contradiction of the propositions by the classical theory (laissez faire approach). This contradiction means the classical theory cannot be used to paint an accurate landscape of the poverty incidence in South Africa. Another theory, which is a development from the classical theory, is the neoclassical theory. The neoclassical theory emphasises that human capital development (talent, skills and capital of talents) contributes to a person’s productivity and high productivity ensures better labour market returns (Jung and Smith, 2007:5). As opposed to the classical theory, the neo-classical theory views the reasons of poverty as beyond an individual’s control by including reasons such as lack of assets, market failures, and lack of access to education, employment as well as poor health.
Micro-finance has proven to be an effective and powerful tool for poverty reduction. Like many other development tool, however it has insufficiently penetrated the poor strata of the society. The poorest from the vast majority of those without access to primary health care and basic education, similarly they are the majority of those without access to micro-finance. The literature reviewed points out to several specific conclusions about the impact of MFIs on poverty reduction. Evidence shows the positive impact of MFIs on poverty reduction as it relates to the first six of the seven MDGs. There is an overwhelming amount of evidence substantiating a beneficial effect on increases in incomes and reduction in vulnerability. There are fewer studies with evidence on health, nutritional status and primary schooling attendance; but existing evidence is conclusive and positive. Despite disagreement on specific definitions of levels of poverty, there is a general consensus that micro-finance is not for everyone. Moreover entrepreneurial skills and ability are necessary to run a successful micro-enterprise and not all potential customers are equally able to take on debt. However, while these points will be true across all strata of poverty, it is assumed it will have a greater effect on the very poorest.
Our focus is to analyze the impact of microfinance services rather than the performance of MFIs. Data of 490 MFIs from 96 countries are obtained from the Microfinance Information Exchange (MIX, 2014), the Global Multidimensional Poverty Index (MPI) Databank of the Oxford Poverty and Human Development Initiative (OPHI, 2014), and World Development Indicators (WDI, 2014) of the World Bank. MIX data provide reliable information on the funding sources, operational strategies, demand, stakeholders, performance, outreach, and sustainability of MFIs. The United Nations Conference on Trade and Development recommended the establishment of this database. OPHI, which is based at the University of Oxford and works toward the eradication of multidimensional poverty through the formulation of a systematic framework based on the experiences of the public, provides data on multidimensional poverty. WDI is a group of development indicators created by the World Bank. These indicators provide valid, accurate and the most current information for global, regional- and country-level estimations.
Beginning my research, I had a limited understanding of and knowledge regarding the subject of microfinance. Having only encountered the concept a handful of times in various literature for international studies courses, I conceptualized and idealized a revolutionary development practice that I thought perhaps could be the answer to ending extreme poverty, creating more egalitarian societies and/or promoting more extensive economic development. I knew Muhammad Yunus was famed for winning a Nobel Peace Prize in 2006, for establishing the Grameen Bank in his home country of Bangladesh. I had also heard mention of the successes of such organizations as Opportunity International at the Millennium Campus Conference, which I attended for two consecutive years in Boston. My enthusiasm was “based on the success of a few famous financial institutions in
Abstract: The purpose of this paper is to compare three different models of MFIs, namely microfinance banks (MFB), Microcredit programme (MCP) and rural development scheme (RDS), by focusing on their governance structures, and subsequently analyse their implications on social impact and poverty reduction of the MFIs. Three MFIs, one from each model, will be considered, using Bangladesh as the case study. Bangladesh is a country which is considered to be a pioneer in providing micro-finance to the underprivileged people to improve their entrepreneurial capacity. In methodology, the study relies on Porter’s Competitive Strategy Theory (1979). This theory is based on the concept that five forces determine the competitive intensity and attractiveness of a market which assesses five forces. The study relies on secondary data collected mainly from the annual reports of the three MFIs, and Microcredit Regulatory Authority (MRA) report. This study aims to contribute towards better governance practices of the MFIs given its strong implications on social responsibility, accountability, transparency, financial performance, increasing their social impact and poverty reduction of the MFIs. Findings of this study provide essential inputs on the way forward for the evolution of microfinance, as framed by the global development discourse and subsequent public policy choices. Overall, the study shows that only a limited number of variables influence the social impact and poverty reduction of an MFI. The limitation of the studied investment fund is that it invests in expanding and mature MFI’s. So the
The study on which this report is based was carried out in Ondo State. Ondo State was carved out of the defunct Western State of Nigeria in 1976. The State lies within latitudes 5 o 45’ and 8 o 15’ North and longitudes 4 o 45’ and 6 o 5’ East. The State covers a geographical area of 15,500 km 2 . The State has a fairly large population of 3.4million people suggesting a potential for high output. From the population records, 60.92 per cent of the population lives in the rural areas while the remaining 39.6 per cent live in the urban areas. The economy of the State is dominated by oil and crop production which jointly account for 90 per cent of its gross state product. Although the state is blessed with many natural resources, the level of poverty is still high as most of the available resources remain largely untapped. Based on the report from the National Bureau of Statistics, the level of poverty is 80.13 per cent. In terms of infrastructural development, the State still faces a lot of challenges. Currently, it is the government that provides the needed infrastructural facilities. There is still minimal private sector investment in the provision of certain facilities which include housing, education and water supply.
Islamic microfinance (IsMF) provides qard hasan (interest-free loan) or PLS (profit-loss sharing) system based on mudharabah. Islamic microfinance institutes (IMFIs), thus, not having the requirement of collateral, have the great potential of reaching the poorest of the poor. IBBL has introduced a scheme called rural development scheme (RDS), specifically to address the investment needs of the country’s agricultural rural sectors where the majority of people live under the poverty line. The programme is based on PLS with necessary modification of Grameen Bank’s model (followed by principles of Shariah) and provided financial services to both men and women. Among other existing IMFIs, the microcredit programme under RDS model is the largest and remarkable one. According to World Bank survey, there are about one million businesses in the country where only 7 per cent of those have had access to the financial institutions (Bhuiya and Chowdhury, 2002). As the lending formalities are less and more emphasis is given to the root level, the landless poor borrowers have a greater chance to get microfinance assistance from RDS of IBBL.
Nigeria, though endowed with natural and human resources are still poor due to mismanagement of natural resources etc as stated by Mrs. Ngozi Okonjo-Iweala, a director in the World Bank and former minister for finance on ‘lets have a deeper discussion on aid’ (www.ted.com). She pointed out some of the things that should be done to aid in poverty eradication in Nigeria that also leads to development. She said that if the resources and finances were used in a very meaningful way than mismanaged, a drastic change would be effected leading to better development. Some of the resources in the past according to her had been mismanaged and this was why they remained poor. She added that if the government misuses resources for their personal interests, poverty will remain static at a place as far as moving from poverty is concerned. On this note, development will be far fetched. Some time Mrs. Ngozi Okonjo-Iweala was fired and removed from the position of the minister for finance. I suspect it was because she was a woman when it comes to finance and poverty alleviation.
Although concerted efforts have been initiated by the Government of India through several plans and measures to alleviate poverty in rural India, there still remains much more to be done to bring prosperity in the lives of the people in rural areas. At present, technology dissemination is uneven and slow in the rural areas. Good efforts of organizations developing technologies, devices and products for rural areas could not yield high success. Experiences of many countries suggest that technological development fuelled by demand has a higher dissemination rate. However, in India, technology developers for rural areas have been catering to needs (with small improvement), rather than creating demand. There is no industry linkage machinery to create demand-based-technology market for rural communities. Besides, there is also an imbalance between strategies and effective management programmes. Propagation of technology/schemes for rural development is slow and there is a lacking in wider participation of different stakeholders. An ideal approach may therefore, include the government, panchayats, village personals, researchers, industries, NGOs and private companies to not only help in reducing this imbalance, but also to have a multiplier effect on the overall economy.
Poverty is a harsh and undesired phenomenon in mankind. Reducing, if possible eradicating poverty is unquestionable. Microfinance programs have been considered as an instrument in poverty reduction in recent development agenda. The main objective of this study was to investigate empirically impact of Omo microfinance institutions on poverty reduction at household level referencing Wachamo surrounding Omo microfinance institution. Mainly primary data was collected through structured questionnaire from 200 households by selecting 90 OMFIs participants and 110 non-OMFI participants from two sub cities using random sampling methods. Propensity score matching (PSM) methods was used to assess the impact of OMFI on household income, expenditure, saving and asset accumulation value. The estimation ATT results from PSM output show that participation in OMFI had brought significant impact on household income, saving and aggregate expenditure, but insignificant impacts on asset accumulation value. Furthermore, sensitivity analysis tests on estimated ATT result shows effect of MFIs was insensitive to unobservable selection bias; even the two group allowed to differ in their odds of being treated up to 220% in terms of unobserved in which implying that being pure effect of program intervention. Thereby, improving living standard of participant and as far as ATT result was the only effect of intervention, thus microfinance intervention reduce poverty at household level. It can be recommended that, importance of microfinance in poverty reduction is of immense benefit to the participant households in study areas. Therefore, there is the need to help sustain it and help its growth as its role to the development of the Hosanna town and the country at large is very good.
3. The participation of Zakat and Waqf institutions in ISMF usually give the wrong signals to the clients that what they receive is not financing but charity. This affects the level of loan repayment. Therefore, the role of these institutions should be confined to non financial activities such as training.
In India, more than 65% population is living in rural areas even after than sixty eight years of independence (Census, 2011). They are directly or indirectly depend upon agriculture to earn their livelihood, meaning thereby poverty, and unemployment, are the offshoots of their dependency on agriculture. Since independence, government has taken several initiatives from time to time to tackle the scarce of mass poverty. Nationalization of major commercial banks in 1969 and 1980, establishment of Regional Rural Banks (RRBs), poverty alleviation programmes like Integrated Rural Development Programme (IRDP), Training of Rural Youth for Self Employment (TRYSEM), Rashtriya Mahila Kosh (RMK) were the initiatives that have been taken by the government to address the problem of mass poverty and unemployment. But all such initiatives didn’t bring any fruitful results. Thereafter, National Agricultural Bank for Rural Development (NABARD) launched microfinance under the name of SHG- Bank Linkage Programme in the year 1992 for generation of employment and eradication of poverty. Today, it became the world’s largest microfinance program and it shows drastic results (Khan, 2014).
From the Stata regression shown above in model 2 of table 4, the prediction equation is GDP Per Capita = 74.23187 (expedu) + -80.07604 (exphealth) + 763.1249. From the prediction equation, one could denote that GDP Per capita is predicted to increase by 74.23187 when the expenditure on education goes up by one percent, but decrease by -80.07604 when expenditure on health goes up by one, and is predicted to be 763.1249 when both expenditure on education and health are zero. It is evident from this result that expenditure on health is negatively correlated to GDP Per capita. This could be explained with the fact that GDP per capital is a function of countries population, an increased GDP as a result of Governments’ increasing its spending on healthcare may contribute to increasing population because of a corresponding increase in birth rate and life expectancy of the country. With a higher increase in population, which serves as the denominator in computing GDP Per Capita, an increase GDP may not lead to a higher GDP per capital because of rapid population growth brought in by improved medical sector.
Poverty means deprivation from the basic essentials of life. The level of poverty is determined by the income level and degree of inequality among others. The roles of microfinance in poverty reduction have attracted various researchers to the extent that different opinions have been formed (for example, Noruwa and Emeka, 2012). While some researchers conclude that microfinance loans are mainly used for health, education of school children and production related expenses, others are of the opinion that microfinance has played a tremendous role in reducing the depth and incidence of rural poverty and serves as aid for shocks from natural disaster and health related calamities. Even microfinance reduces poverty at the macro level (Anriquez, and Stamoulis 2007). Microfinance Institutions (MFIs) are expected to provide credit to the poor since the conventional banks consider microcredit loans to be risky because the poor cannot provide collateral (Morduch, 1999). Hence, Microfinance loan is regarded as panacea to alleviate poverty and increase household incomes (Aigbokan and Asemota, 2011). In view of this, scholars have made it expedient to carry out studies on the effectiveness of the programmes. For instance, Khandker and Pitt (1998) studied the impact of microcredit on 1,798 households in Bangladesh and concluded that the loan obtained by women in particular increased the household expenditure, family level of education and good nutrition among others. In the same vein, Morduch (1998) conducted research on the impact of microcredit on about 1,800 microfinance clients and non- client households taken from 1991-92 Cross-sectional survey in Bangladesh. The findings revealed that microfinance loans encourage mild increase in consumption and less vulnerability of the clients to poverty. Also Khandker (2005) conducted research on microfinance and poverty in Bangladesh; and concluded that there was 20 percent increase on microcredit given to women. The research further emphasised that impact of microfinance is always greater on the extreme poverty than the moderate one and that microfinance accounted for 40 percent of the entire reduction of moderate poverty in rural Bangladesh. Coleman (2002) studied the beneficiaries of microfinance in Northeast Thailand. It was opined that the wealthy people do participate in microfinance loan and become wealthier. Edgcomb and Garber (1998) assessed the microfinance participants and non-participants in Honduras. It was revealed that the profits of microfinance loan participants increased by 75 percent over that of non-participants.
Second type of Waqf known as philanthropic Waqf also recommended by the Prophet Muhammad (Peace and blessing of Allah be upon him). In this type, the aims are to support the poor in the society and all activities that are of interest to people at large such as public utilities, education, roads, bridges, dams, health services, care of animals and environment, libraries, scientific research, lending to small businessmen, parks and others. Kahf (2007) and Ahmed (2004) state that, philanthropic Waqf was intitiated by the Prophet (Peace and blessing of Allah be upon him). This happens when he calls the people to help in the effort to alleviate the water-shortage related suffering faced by their brothers. Other that, the Prophet Muhammad (Peace and blessing of Allah be upon him) had also given his advice to Umar (May Allah be pleased with him) to make Waqf of his most valuable land in Khaybar. In this event, the land was made a Sadaqah that could neither be sold nor given as a gift, and the fruits from the far were to be distributed to the poor and kinships, to liberate slaves, to provide for guests and the wayfarer, and some reasonable quantity to its custodian.
Microfinance is an economic development tool whose objective is to assist the poor to work their way out of poverty (Malegam, 2011). The Andhra Pradesh accounted for more than 30% of all borrower accounts and outstanding loan portfolios in the case of Micro Finance Institutions (MFIs) in March 2010 (Sa-Dhan, 2012c). Failure of Self-Help Groups (SHG) and Bank Linkage Programs (SBLP) has led to rise of MFIs. The repayment rates under the SHG-Bank linkage programs were low up to introduction of AP Ordinance (SOS 2011a).The State Government of AP, promulgated microfinance Ordinance in October 2010 in order to protect the interests of Self-Help Groups in AP by regulating money-lending transactions by MFIs and for attaining greater transparency with respect to such transactions in AP (AP MFI Act,2011). Microfinance crisis has shaken the world of microfinance. An industry that grew at 90% on an annual basis from 2002-03 to 2009-10 was reduced to just 7% growth in 2010-11 with its portfolio over the period October 2010 to September 2011 estimated by M-CRIL to fall by around 33% (M-CRIL, 2011). There is a drastic fall in loan disbursements and businesses have been stunted by the rapidly dropping repayment rates (SOS 2011c).
The paired sample t-test result indicated that islamic microfinancing that was given by Islamic MFI had a positive effect on the business profit of the Islamic MFI’s customers. In addition and as an insight, further analysis regarding the impact of islamic microfinance on the development of mi- cro business was conducted using Ordinary Least Square (OLS). The esti- mation result of multiple regression that was obtained from OLS method was tested using Eviews 9. Before conducting the estimation, the data were treated by multiple tests for attaining BLUE (Best Linear Unbiased Estimator) model. For this regards, the model needs to be acquired from autocorrelation, multicollinearity, and heteroscedasticity. Moreover, the model also need to meet the assumption in f-test and t-test. However, before these all, the model need to pass the normality test.