Islamic Microfinance versus Conventional Microfinance; A Way Forward to Eliminate Poverty

Abstract

That main purpose of this study is to identify that whether Islamic microfinance is better in reduction of poverty or the conventional microfinance is doing well in reduction of poverty. Many researchers examine that micro finance increase the income of poor and helps him to brake the poverty circle. But many argue that micro finance is only a debt trap for a poor. As a poor who don’t have money today, how it is possible for him to payback loan with interest in future. Islamic micro finance is an addition in micro finance, and help the poor people living in the Islamic state. But it is debate able that which micro credit institution is better in reduction of poverty. For this purpose the research is conducted in the twin cities of Pakistan through quantitative research method. For this research, quantitative method of research is used. Questionnaire is used for this research to collect information and collect data according to requirement. The questionnaire is divided into four sections. Section one relates with the general demographic questions. Section two and three is based on independent variables and last section relates with dependent variable. Total 150 respondents were conducted. Analyzing has been done with the statistical methods though SPSS software. The general finding from this research is, to evaluate effectiveness of ‘Islamic micro finance versus conventional micro finance’ as a better tool to eliminate poverty versus. After the analysis of results both institutions are helping the poor but Islamic micro finance should increase the loan amount and also make credit products for women. Conventional micro finance should not charge high rates as it is the main objective of micro finance to help poor not to earn profit.