Islamic Microfinance: A Missing Component in Islamic Banking

IntroductionMicrofinance means "programme that extend small loans to very poor people for self employment projects that generate income in allowing them to take care of themselves and their families" (Microcredit Summit, 1997).The World Bank has recognized microfinance programme as an approach to address income inequalities and poverty.The microfinance scheme has been proven to be successful in many countries in addressing the problems of poverty.The World Bank has also declared 2005 as the year of microfinance with the aim to expand their poverty eradication campaign.The main aim of the paper is to assess the potentials of Islamic financing schemes for micro financing purposes.The paper argues that Islamic finance has an important role for furthering socio-economic development of the poor and small…