Islamic Microfinance for Poverty Alleviation: A Systematic Literature Review


  • Erna Farina Mohamed International Islamic University Malaysia, Malaysia
  • Neneng Ela Fauziyyah International Islamic University Malaysia, Malaysia.


Microfinance, Microcredit, Islamic microfinance, Impacts, Factors


This paper reviews and discusses the impact of Islāmic microfinance and its conventional counterpart on their borrowers. Another primary focus of this study is to identify determinants that could influence the microfinance borrowers. The study also promotes Islāmic microfinance and suggests it as one of the best poverty alleviation tools, especially among the Muslim society by reviewing some measurements taken and suggestions by other researchers through systematic literature review. This paper is a literature survey of more than 50 articles related to microfinance which tries to analyze the areas that researchers investigated in microfinance. This survey comprises not only an empirical analysis and comparative analysis but also the recommendation and suggestion with some theoretical works. Microfinance is lauded asan effective tool for eradicating poverty. It has improved the livelihood, well-being and economic development of the poor people. However, studies show that most conventional microfinance programs neglected the extremely poor population. Therefore, various modes and structures of Islāmic microfinance can deal with different activities and levels of poverty, including the extremely poor. The findings of this study suggest that Islāmic microfinance is one of the best tools to reduce poverty, especially in Muslim society.


Abdelkader, I., and A. Salem. “Islamic vs Conventional Microfinance Institutions: Performance Analysis in MENA Countries.” International Journal of Business and Social Research 3, no. 5 (2013): 219-33.

Abdul-Majeed Alaro, A. and A. Alalubosa. “Potential of Shariah Compliant Microfinance in Alleviating Poverty in Nigeria: A lesson from Bangladesh.” International Journal of Islamic and Middle Eastern Finance and Management 12, no. 1 (2019): 115-29.

Acheampong, G. “Microfinance, Gender and Entrepreneurial Behaviour of Families in Ghana.” Journal of Family Business Management 8, no. 1 (2018): 38-57.

Adnan, M.A., and S.R. Ajija. “The Effectiveness of Baitul Maal wat Tamwil in Reducing Poverty: The Case of Indonesian Islamic Microfinance Institution.” Humanomics 31, no. 2 (2015): 160-82.

Ahamad, S. “Determinants of Microfinance Performances in Bangladesh: The Case Study of Rural Development Scheme and Muslim Aid Bangladesh.” International Journal of Business and Technopreneurship 6, no. 3 (2016): 499-510.

______, R. Bakar, and Z. Lubis. “Economic Impact of MAB Microfinance Program on Borrowers Household: Evidence from Rural Area of Bangladesh.” International Journal of Economics, Finance and Management Sciences 4, no. 5 (2016a): 298-302.

______. “Islamic Microfinance and its Impacts on Borrowers: A Systematic Review from 1995-2015.” Mediterranean Journal of Social Sciences 7, no. 6 (2016b): 113-20.

Ahmed, H. “Financing Microenterprises: An Analytical Study of Islamic Microfinance Institutions.” Islamic Economic Studies 9, no. 2 (2002): 27-64.

Al-Mamun, A., J. Adaikalam, and S. Abdul Wahab. “Investigating the Effects of Amanah Ikhtiar Malaysia’s Microcredit Program on Their Clients Quality of Life in Rural Malaysia.” International Journal of Economics and Finance 4, no. 1 (2012): 192-203.

_______, M. Mohiuddin, and S. Mariapun. “Investigating the Effects of Amanah Ikhtiar Malaysia’s Microcredit Programmes on Employment in Rural Malaysia.” Southeast Asian Economies 31, no. 3 (2014): 471-83.

Antoh, E.F., F.E. Kwesi, and M. Addison. “Socio Economic Characteristics of Microfinance Beneficiaries in Ghana - Evidence from Sinapi Aba Trust Microfinance Institution.” Archives of Business Research 3, no. 6 (2015): 94-107.

Aslam, M.N. “Role of Islamic Microfinance in Poverty Alleviation in Pakistan: An Empirical Approach.” International Journal of Academic Research in Accounting, Finance and Management Sciences 4, no. 4 (2014): 143-52.

Asyraf, M.A. “The Effectiveness of Microcredit Programs and Prospects of Islamic Microfinance Institutes (IMFIs) in Muslim Countries: A Case Study in Bangladesh.” Journal of Islamic Economics, Banking and Finance 6, no. 4 (2010): 69-85.

Bali Swain, Ranjula. Microfinance and Women’s Empowerment: Evidence from the Self Help Group Bank Linkage Programme in India. Stockholm: Swedish International Development Cooperation Agency (Sida), 2006.

Bhuiyan, A.B. “Microcredit and Sustainable Livelihood: An Empirical Study of Islamic and Conventional Credit on the Development of Human Capital of the Borrowers in Bangladesh.” Journal of Economic Cooperation and Development 34, no. 3 (2013): 101-27.

______, C. Siwar, A.G. Ismail, and N. Omar. “The Islamic Microfinancing Contributions on Sustainable Livelihood of the Borrowers in Bangladesh.” International Journal of Business and Society 18, no. S1 (2017): 79-96.

Cheng, E., and A.D. Ahmed. “The Demand for Credit, Credit Rationing and the Role of Microfinance: Evidence from Poor Rural Counties of China.” China Agricultural Economic Review 6, no. 2 (2014): 295-315.

Cheston, S., and L. Kuhn. “Empowering Women through Microfinance.” Draft, Opportunity International 64 (2002): 1-64.

Choudhury, A. H., A. Das, and A. Rahman. “The Effectiveness of Micro-credit Programmes Focusing on Household Income, Expenditure and Savings: Evidence from Bangladesh.” Journal of Competitiveness 9, no. 2 (2017): 34-44.

Hadisumarto, M.C., W., and A.G. Ismail. “Improving the Effectiveness of Islamic Micro-Financing.” Humanomics 26, no. 1 (2010): 65-75.

Hamdan, H., P. Othman, and W.S.W. Hussin. “Is Microfinance Program in Malaysia Really Effective in Helping the Poor?” World Review of Business Research 2, no. 1(2012): 79-97.

Hashemi, S.M., S.R. Schuler, and A.P. Riley. “Rural Credit Programs and Women’s Empowerment in Bangladesh.” World Development 24, no. 4 (1996): 635-53.

Hassan, A. “The Challenge in Poverty Alleviation: Role of Islamic Microfinance and Social Capital.” Humanomics 30, no. 1 (2014): 76-90.

Hassan, M.K. “The Microfinance Revolution and the Grameen Bank Experience in Bangladesh.” Financial Markets, Institutions and Instruments 23, no. 4 (2002): 205-65.

Jariya, A.M.I. “True Economy Prosperity through Poverty Alleviation – Islamic Microfinance as Commercial Venture.” International Journal of Business, Economics and Law 2, no. 2 (2013): 49-53.

Jose, S., and J. Chacko. “Sustainable Development of Microfinance Customers: An Empirical Investigation Based on India.” Journal of Enterprise Information Management 30, no. 1 (2017): 49-64.

Karlan, D.S., and J. Zinman. “Expanding Microenterprise Credit Access: Using Randomized Supply Decisions to Estimate the Impacts in Manila.” Discussion paper no. 976 (2009).

Kay, T. “Empowering Women through Self-Help Microcredit Programmes.” Bulletin of Asia-Pacific Perspectives 2002/2003, (2003): 69-78.

Khaled, M. “Building a Successful Business Model for Islamic Microfinance.” In Global Microcredit Summit Commissioned Workshop, 2011.

Khan, Z., and M. Usman. “Financing non Bankable Masses: An Analytical Study of Conventional Verses Islamic Microfinance Programs (Lesson from Muslim World).” International Journal of Islamic Finance 2, no. 1 (2010): 113-30.

______, and Sulaiman, J. “Does Microcredit Help the Poor and Financially Marginalized Communities? Experience of Pakistan.” In Poverty Reduction Policies and Practices in Developing Asia edited by Jacques Silber. Springer, Singapore,2015,31-52.

Khandker, S.R. “Micro-Finance and Poverty: Evidence Using Panel Data from Bangladesh.” In Policy Research Working Paper 2945, 2003.

Mahmood, S. “Microfinance and Women Entrepreneurs in Pakistan.” International Journal of Gender and Entrepreneurship 3, no. 3 (2011): 265-74.

Mahmud, S., N.M. Shah, and S. Becker. “Measurement of Women’s Empowerment in Rural Bangladesh.” World Development40, no. 3 (2012): 610-9.

Mariyono, J. “Micro-Credit as Catalyst for Improving Rural Livelihoods through Agribusiness Sector in Indonesia.” Journal of Entrepreneurship in Emerging Economies 11, no. 1 (2018): 98-121.

Misnan, S.N.S., H.A. Manaf, and P. @ F. Othman. “The Role of Microcredit in Promoting Women’s Entrepreneurship Skills: Lesson from Amanah Ikhtiar Malaysia (AIM), Malaysia.” Journal of Governance and Development, Special Issue on Social Entrepreneurship no. 11(January) (2015): 39-51.

Models of Islamic Microfinance. In Models of Islamic Microfinance. (2011): 126-31.

Mohapatra, S., and B.K. Sahoo. “Impact of Microfinance Services on Rural Poor: An Empirical Investigation from India.” Microfinance: Performance Evaluation and Enterprise Development. Chennai: Allied Publishers Pvt, 2009.

Moll, H.A.J. “Microfinance and Rural Development: A Long Term Perspective.” Journal of Microfinance7, no. 2 (2011): 13-31.

Quraisy, M., S.H. Abdul Razak, and S.O. Alhabshi. “The Impact of Islamic Microfinance in Enhancing the Well-Being and Quality of Life: Case Study of Islamic Financial Cooperative (BMT) in Indonesia.” South East Asia Journal of Contemporary Business, Economics and Law 13, no. 3 (2017): 1-12.

Rahim Abdul Rahman, A. “Islamic Microfinance: An Ethical Alternative to Poverty Alleviation.” Humanomics 26, no. 4 (2010): 284-95.

Rahman, M.M., and F. Ahmad. “Impact of Microfinance of IBBL on the Rural Poor’s Livelihood in Bangladesh: An Empirical Study.” International Journal of Islamic and Middle Eastern Finance and Management 3, no. 2 (2010): 168-90.

______, Khanam, R., and Nghiem, S. “The effects of microfinance on women’s empowerment: New evidence from Bangladesh.” International Journal of Social Economics 44, no. 12 (2017): 1745-57.

Ringkvist, J. Women’s Empowerment Through Microfinance: A Case Study on Burma. Sweden: Lund University, 2013.

Rokhim, R., G.A.S. Sikatan, A. Wibisono Lubis, and M.I. Setyawan, “Does Microcredit Improve Wellbeing? Evidence from Indonesia.” Humanomics 32, no. 3 (2016): 258-274.

Rokhman, W. “Baitul Mal Wat Tamwil (BMT) and Poverty Empowerment.” Qudus International Journal of Islamic Studies 1, no. 2 (2014): 181-95.

Rooyen, C. Van, R. Stewart, and T. De. Wet. “The Impact of Microfinance in Sub-Saharan Africa: A Systematic Review of the Evidence.” World Development 40, no. 11 (2012): 2249-62.

Rulindo, R., and A.H. Pramanik. “Finding a Way to Enhance Impact of Islamic Microfinance: The Role of Spiritual and Religious Enhancement Programmes.” Developing Country Studies 3, no. 7 (2013): 41-53.

Saad, N.M. “Microfinance and Prospect for Islamic Microfinance Products: The Case of Amanah Ikhtiar Malaysia.” Advances in Asian Social Science 1, no. 1 (2012): 27-33.

______, and J. Duasa. “Determinants of Economic Performance of Micro-Credit Clients and Prospect of Islamic Microfinance in Malaysia.” ISRA International Journal of Islamic Finance2, no. 1 (2010): 113-30.

Samer, S., I. Majid, S. Rizal, M.R. Muhamad and N. Rashid. “The Impact of Microfinance on Poverty Reduction: Empirical Evidence from Malaysian Perspective.” Procedia - Social and Behavioral Sciences 195 (2015): 721-8.

Sayvaya, I., and P. Kyophilavong. “Does Microfinance Reduce Poverty in Lao PDR?” International Journal of Development Issues 14, no. 3(2015): 215-30.

Tammili, F.N.M., Z. Mohamed, and R. Terano. “The Effectiveness of Microcredit Program in Enhancing Micro-Enterprice Entrepreneurs’ Income in Selangor.” Asian Social Science 14, no. 1 (2018): 71-8.

Terano, R., Z. Mohamed, and J.H.H. Jusri. “Effectiveness of Microcredit Program and Determinants of Income Among Small Business Entrepreneurs in Malaysia.” Journal of Global Entrepreneurship Research 5, no. 22 (2015): 1-14.

Tisdell, C., and S. Ahmad. “Microfinance: Economics and Ethics.” International Journal of Ethics and Systems 34, no. 3 (2018): 372-92.

Uddin, M.M. “Credit for the Poor: The Experience of Rural Development Scheme of Islami Bank Bangladesh Ltd.” The Journal of Nepalese Business Studies V, no. 1 (2008): 62-75.

Ukanwa, I., L. Xiong, and A. Anderson. “Experiencing Microfinance: Effects on Poor Women Entrepreneurs’ Livelihood Strategies.” Journal of Small Business and Enterprise Development 25, no. 3 (2018): 428-46.

Zahid Mahmood, H., K. Abbas, and M. Fatima. “Islamic Microfinance and Household Welfare Nexus: Empirical Investigation from Pakistan.” Journal of Global Entrepreneurship Research 7, no. 18 (2017): 1-15.




How to Cite

Mohamed, E. F., & Fauziyyah, N. E. (2020). Islamic Microfinance for Poverty Alleviation: A Systematic Literature Review. International Journal of Economics, Management and Accounting, 28(1), 141-163. Retrieved from