Islamic microfinance: A solution to poverty alleviation

In India poverty has been a principal challenge since the independence and its alleviation is one of the country's strategic goals to fight poverty and improve the standards of living of underprivileged population. Micro and SME financing have been playing important role in poverty reduction by creation a gainful employment opportunities. The Islamic banks and the Islamic windows of conventional banks in India could pursue strong promotion of Islamic micro and medium scale enterprise (SME) finance, in step with the country's concerted efforts to foster poverty eradication with deeper, wider financial inclusion. This paper resolute the role of the Islamic microfinance in poverty alleviation efforts in India. It intended to establish and recommend Islamic microfinance and its principles that could raise poverty reduction and economic development in the country. This paper tries to answer the following questions: Can Islamic microfinance help alleviate poverty? Because an institution is “Islamic” does this mean it has a particular obligation to invest in economic or community development? How does the concept of Islamic microfinance operate to serve the goal of poverty alleviation? In the backdrop of secular approaches this paper explores an Islamic strategy for poverty alleviation. The proposed strategy stresses on the impact of equitable growth on poverty. The sustainability aspect also occupies an important place in this formulation. It assigns key role to the utilization of internal resources and Islamic sources of financing. It stresses that growth must be internally-generated.