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Integration of waqf-Islamic microfinance model for poverty reduction: The case of Bangladesh

Mohamed Aslam Haneef (International Islamic University Malaysia)
Ataul Huq Pramanik (Economics Department, International Islamic University, Kuala Lumpur, Malaysia)
Mustafa Omar Mohammed (Economics Department, International Islamic University, Kuala Lumpur, Malaysia)
Md. Fouad Bin Amin (Economics Department, International Islamic University, Kuala Lumpur, Malaysia)
Aliyu Dahiru Muhammad (International Institute of Islamic Banking and Finance, Bayero University Kano, Kano, Nigeria)

International Journal of Islamic and Middle Eastern Finance and Management

ISSN: 1753-8394

Article publication date: 15 June 2015

4249

Abstract

Purpose

This paper aims to develop an integrated waqf-based Islamic microfinance (IsMF) for poverty reduction in Bangladesh. Microfinance institutions (MFIs) have been constrained by the high cost of funds, high interest rate charges and poor human resource quality of the recipients. Islamic MFIs have recently evolved with the hope of overcoming these financial, ethical and human capital deficiencies faced by the conventional financial institutions. Moreover, a good number of integrated models have been proposed to enhance the role played by Islamic MFIs. Most of these models, however, lack empirical justifications.

Design/methodology/approach

The research uses survey techniques. A total of 381 respondents were included in the survey. The integrated waqf-based Islamic microfinance model (IWIMM) was earlier on developed using literature and intellectual discussions. There are six constructs presenting the IWIMM, namely, waqf resources, IsMF, takaful, project financing, human resource development and poverty alleviation. In the survey instrument, 45 items represent the six constructs, but only 26 items have been retained after factor analysis. Structural equation modelling has been adopted to examine the relationship among the constructs.

Findings

The results show that there are significant relationships between IsMF and takaful, waqf resources and human resource development, takaful and human resource development, IsMF and human resource development and, waqf resources and project financing. The results also indicate that poverty alleviation is possible through the integration of these constructs.

Research limitations/implications

Though the paper has studied conventional and Islamic MFIs in Bangladesh, one of the populated Organisation of Islamic Cooperation (OIC) member countries and also where poverty incidence is high, further studies need to be conducted in other OIC member countries to adopt the model in line with practical and regulatory environment of those countries. Similarly, the study is based on the perception of the respondents, which limits the generalization of the result.

Practical implications

The paper proposed a model that has the potential of being applied for poverty alleviation programmes in most of the OIC member states.

Originality/value

The present paper has developed an IWIMM for poverty reduction.

Keywords

Acknowledgements

This paper is an abstract of a research project funded by the International Islamic University Malaysia (IIUM) with the collaboration of Research Management Center (RMC) of IIUM and SESRIC in Turkey. The authors would like to thank both SESRIC and the RMC for funding the research.

Citation

Haneef, M.A., Pramanik, A.H., Mohammed, M.O., Bin Amin, M.F. and Muhammad, A.D. (2015), "Integration of waqf-Islamic microfinance model for poverty reduction: The case of Bangladesh", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 8 No. 2, pp. 246-270. https://doi.org/10.1108/IMEFM-03-2014-0029

Publisher

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Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited

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