Integration of waqf and islamic microfinance for poverty reduction: case of Pakistan
Pakistan has been facing a high incidence of poverty. Despite its persistent efforts to make a dent on poverty, the country never witnessed a systematic reduction in the same. The country has been spending a significant amount on safety nets and social protection programs. Some programs provide d...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Islamic Economics and Finance Research Division
2015
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/47794/ http://irep.iium.edu.my/47794/ http://irep.iium.edu.my/47794/1/IRTI_working_paper.pdf |
| Summary: | Pakistan has been facing a high incidence of poverty. Despite its persistent efforts to make a dent
on poverty, the country never witnessed a systematic reduction in the same. The country has
been spending a significant amount on safety nets and social protection programs. Some
programs provide direct cash grants and other forms of indirect support to the poor, while
microfinance programs provide microcredit, micro savings and micro insurance to the
beneficiaries. The government extends full support to the microfinance industry and seeks to
provide an enabling environment for its successful operation. As a result, the microfinance
industry in Pakistan has been flourishing and steadily enhancing its outreach. However, despite
all the efforts, it currently covers just about 10 percent of the market in 2013.
In Pakistan, initiatives for Islamic microfinance have been undertaken by a few NGOs and financial
institutions. Almost all IMIs function below operational self- sufficiency (OSS) and financial-selfsufficiency
(FSS) levels. Most of IMIs are unable to increase their outreach due to the human and
financial constraints. They face a constrained supply of funds as well as human resources. This
paper posits that the constraints are more apparent than real. Islamic finance must include as
part of the formal financial system, its time-tested institution of waqf involving endowment of
both financial and real assets for community empowerment. The IMIs should be well aware of
how to create and put to use such community assets for the economic and social betterment of
the community. The paper sought the opinion of beneficiaries on waqf- Islamic microfinance
integrated model and discussed the same with the professionals and practitioners. The
beneficiaries were not aware of the main components of the waqf-microfinance integrated
model, but professionals and practitioners, invariably supported the integrated model while
voicing some concerns that should be considered while formulating policies for the sector |
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