IMPACT ASSESSMENT OF ISLAMIC MICROFINANCE ON THE RELIGIOUS, ETHICAL AND SOCIAL WELL-BEING OF PARTICIPANTS: A CASE STUDY OF PAKISTAN

Abstract

Poverty is considered one of the basic problems confronted by the
developing and underdeveloped countries of the world including
Muslim majority countries like Pakistan. During the last two
decades, microfinance institutions have been rapidly established all
around the world on the premise that they can alleviate poverty.
These institutions open new horizons of economic development. But
majority of Muslim populace yearn for Islamic products over
conventional microfinance products on account of religious
injunctions against paying interest. This paper attempts to analyze
the multilevel impact of Islamic microfinance on two Pakistani cities
(Multan and Lahore) poor population. This has three dimensions at
(i) household level, (ii) enterprise level and (iii) religious, social &
ethical levels. Primary data has been collected from the program
participants of microfinance institutions in Pakistan, Akhuwat and
Wasil Foundations, by employing cross-sectional design with
stratified random sampling method. Pearson’s Chi-Square χ2, Yates
Continuity Correction, Cramer’s V (φ) and Odds Ratio are used to
quantify the difference between established clients (more than one
year) and new clients (less than one year). The results of the study
support the wide literature on a belief that microfinance can
significantly improve the socio-economic and religious status of the
participants.