Page 55 - CMA Journal (Mar-Apr 2025)

Fighting Poverty

Focus Section

with Islamic Finance

Poverty in developing countries can be attributed to a Islamic financial institu-
variety of interrelated factors, mostly due to a lack of tions are available in
education and skills, unemployment, underemployment, the country. They
economic instability, lack of access to financial services, operate under the
lack of industrialization, etc. regulatory framework
of the State Bank of
Poverty in Pakistan is a complex issue, interrelated with
Pakistan. Some non-
education, labor market dynamics, the average
banking Islamic microfi-
population growth rate, and other socio-economic
nance financial institu-
challenges. According to the latest reports from the
tions operate under the
Pakistan Bureau of Statistics, the poverty rate in Pakistan is
regulatory framework
estimated to be around 24%. Over time, the phenomenon
of the Securities and Zafar Saeed Ansari
of begging has increased significantly in urban areas.
Exchange Commission Ex-Islamic Banker
of Pakistan, while a few
Due to the lack of proper educational and vocational
others are registered under the Societies Act. Their opera-
training centers, unskilled and semi-skilled labor, street
tions are found in various cities across the country.
workers, and daily wage or seasonal workers are unable to
utilize their potential to the fullest in order to earn a better Dedicated full-fledged Islamic banks and Islamic banking
living. Therefore, per capita income in Pakistan is marginal branches of all other banks, as well as specific-purpose
compared to similar economies in neighboring countries. Islamic microfinance banks, run under the regulatory
framework of the State Bank of Pakistan. Several other
Poverty is not only an economic issue but also a social
non-banking Islamic microfinance institutions—
one that affects individuals’ quality of life, opportunities,
including Akhuwat Microfinance, APNA Microfinance
and dignity. Eliminating poverty can significantly
Bank Limited, Khushhali Bank Limited, Pak Oman
enhance workforce productivity by enabling individuals
Microfinance Bank Limited, Tameer Microfinance Bank
to focus on performance and professional development
Limited, The First Microfinance Bank Limited, Advance
rather than mere survival.
Microfinance Bank Limited, and FINCA Microfinance Bank
Islamic banking offers various tools and frameworks Limited — also offer Islamic microfinance services.
based on Shariah-compliant mechanisms—such as Islamic finance represents a promising venue for
risk-sharing instead of risk transfer, promoting equity fostering financial inclusion and creating equal
investment, sustainable development, asset-based opportunities across various demographic groups. By
financing, zakat and Sadaqah, community development, adhering to the principles of justice, transparency, and
and microfinance including Qard-e-Hasna (interest-free ethical investment, it has the potential to empower
loans). Islamic banking can play a supportive role in women, assist low-income individuals, and support
reducing poverty through these tools. underprivileged communities in their efforts toward
economic well-being. With continuous efforts for public
Microfinance can support various business ventures like
awareness about the concept of Islamic banking and
small retail shops, food and beverage services, barber
Islamic financial products, and the development of
shops, laundry businesses, tyre repair shops, handicraft
innovative products suited to different marginalized
production, agricultural ventures, service-based
segments of society, Islamic banking can significantly
businesses, home-based freelancing, online businesses,
contribute to achieving a more inclusive financial
IT-based services, digital marketing, event planning, and
landscape, covering the financial needs of various
management. Entrepreneurs with limited resources can
business ventures.
establish, run, and grow their businesses successfully
with the support of Islamic microfinance. Islamic finance is based on Shariah laws, which
emphasize justice, transparency, and ethical behavior. Its
Poverty can also be controlled through access to core principles include the prohibition of riba (interest),
financial services for deserving individuals who possess ensuring that lending and borrowing practices are fair
skills but lack the resources to enhance their and equitable. Islamic finance promotes risk-sharing
productivity. Islamic finance can play a crucial role in among parties, fostering partnership and collaboration.
alleviating poverty by offering financial products that
improve workforce productivity.
ICMA’s Chartered Management Accountant, Mar-Apr 2025 53