The Role of Islamic Social Finance in Strengthening Islamic Microfinance Institutions for Poverty Alleviation in Nigeria: A Synergistic Conceptual Framework

Abstract

Microfinance is an effective method for combating poverty. It offers access to financial resources to reduce poverty by promoting financial engagement and empowerment. Therefore, microfinance is considered a worthy circle for breaking the poverty chain. As of 2022, over 800 microfinance banks operate to drive the government's poverty reduction initiatives in Nigeria. However, the primary goal of poverty eradication has yet to be achieved. This research aims to propose a novel synergistic scheme that empowers existing Islamic microfinance through Islamic social finance resources, such as Zakat, Waqf, and Sadaqat, to increase financial outreach in Nigeria through the new Credit-Plus concept. It includes a comprehensive Shariah-compliant product, integrating multiple Islamic Microfinance and Islamic Social Finance products, such as Microcredit, Microdeposit, zakat funds, and waqf properties, along with entrepreneurship training, into one effective poverty intervention scheme. This study applies Igor Ansoff's synergy theory to develop a synergistic conceptual framework for identifying commonalities and assessing the need for collaboration between Islamic Social Finance and Islamic Microfinance in Nigeria, with the aim of working together to alleviate poverty in the country. It is expected that if this model is appropriately implemented, it could be a milestone in effectively reducing the poverty rate in Nigeria and ultimately bringing prosperity and upliftment to the country's impoverished populations.