A Shariah perspective review on islamic microfinance

Abstract

Islamic micro finance is a growing industry in several Muslim countries such as Bangladesh, Nigeria, and Malaysia. Islamic microfinance is at the heart of Islamic finance as it addresses one of the fundamental roles of financial intermediaries demanded by Shariah. Over the past few decades, many initiatives have taken place to alleviate poverty in Muslim countries. This paper provides the Islamic thoughts and motives behind these initiatives and then, it discusses the mechanisms proposed by Islam to improve the life of poor, prevent them to become poor, and also to improve the general economic relations among members of society. Later on, mudarabah, Musharakah, murabahah, Ijarah, and qard al-hasan are discussed as different types of Shariah compliant contracts that can be used as the base of micro financing business model.