There is considerable publicity these days about microfinance or micro-credit as a tool against poverty. This tool has widely been adopted in European, American, African, and Asian countries with a considerable degree of success. The Government of India too is giving a lot of importance to this scheme for eradicating poverty. Typically, the characteristic features of microfinance programmes are that:

·         Loans are u...

Poverty alleviation is a big challenge to our society. Creation and growth of wealth does not guarantee prosperity to poor mass. Rather it gives rise to increasing gap of income between haves and have-nots in the capitalist system of economy. Stark poverty in itself is a big problem, but unprecedented gap between the poorest and the wealthiest has cast a devastating effect on human society in the present age. Pro-capitalist global agencies have their own agenda to deal with this human probl...

The National Commission for Enterprises in Unorganised Sector (NCEUS), set up by the UPA government in September 2004, with Arjun Sengupta as chairman, presented its report on May 16, 2006 to the prime minister.

Findings of the report, inter alia, are summarised as under.

Over 394.9 million workers (more than 85 per cent of the working population and more than 78 per cent of the workers in unorganised sector) live with an income of less than Rs. 20 a day.<...

Equity Bank, an indigenous banking company of Kenya, is in the news for its success in the field of microfinance. This is a success story of the characteristic feature of microfinance in terms of small size loans without any physical collateral.

The core idea is that ‘social collateral’ is sufficient and it is capable of replacing personal and physical collateral for taking any loan from a bank or any other financial institution. Established in 1984, the bank’...

The crucial question we have to answer in the design of microfinance in Islamic framework is: In place of lending, is it possible to use equity based instruments?

Lending at interest can be replaced by murabaha. Islamic Microfinance Institution (IMI) can provide the needed equipment or raw material for its client at a stated price to be paid at a set date. This leaves the IMI with debt papers and creates a string of payment obligations. Default is difficult and costly t...