Partnership Based Microfinance in Islamic Banks: Need, Application and Commandments in Modern Age

Journal of Islamic Thought and Civilization Vol: 8, Issue: 1, 2018

17 Pages Posted: 28 Jan 2019

See all articles by Salman Ahmad Khan

Salman Ahmad Khan

University of Management and Technology (UMT), Pakistan

Ejaz Aslam

Minhaj University

Date Written: june 10, 2018

Abstract

There is no doubt that through endorsing different Islamic modes of financing, Islamic banks are showing the right way to people to free themselves from the menace of interest. However, it is equally necessary for Islamic banks to invest on poor members of the society. A keen observation of Islamic banks reveal that their greatest shortcoming is their inability and lack of interest in financing as well as investing on poor individuals of the society. The term ‘Islamic banking’ not only reflects the transitional modes of financing but also highlights the ideal modes of financing. Welfare of underprivileged members of the society is an important goal of the Shari‘ah. Dr. Muhammad Younus founded Grameen Bank with the aim of providing capital to the underprivileged segment of the society, giving two dollars each, which also earned him a Noble prize. Unfortunately, a banker with an interest-based background felt the dire necessity of providing loans to the poor, regardless of the fact that this loan was interest-based and prohibited by the Shari‘ah. His efforts were also appreciated worldwide. On the contrary, Islamic banks promoting Islamic financing still hesitate to invest on poor people, accusing them of default. Historically, this is an erroneous assumption, as poor people have the lowest level of default, while rich industrialists, politicians etc. usually have the highest level of default. So, it is the need of the hour to initiate microfinance in Islamic banks and its immediate launch should be closer to the goals of the Shari‘ah. This article discusses the potential of microfinance and also proposes practical methods of microfinance, especially the methods that focus upon partnership. If Islamic banks adopt these modes of microfinance they can speedily grow in this field as well.

Keywords: Islamic banks, Partnership, Salam, Istisna, Maqasid-e-Shari‘ah, Muzara‘ah

Suggested Citation

Khan, Salman Ahmad and Aslam, Ejaz, Partnership Based Microfinance in Islamic Banks: Need, Application and Commandments in Modern Age (june 10, 2018). Journal of Islamic Thought and Civilization Vol: 8, Issue: 1, 2018, Available at SSRN: https://ssrn.com/abstract=3322158

Salman Ahmad Khan

University of Management and Technology (UMT), Pakistan ( email )

Johar Town - Phase 1
Lahore, Punjab 54770
Pakistan

Ejaz Aslam (Contact Author)

Minhaj University ( email )

School of Islamic Economics, Banking and Finance
School of Islamic Economics, Banking and Finance
Lahore
Pakistan

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