Islamic

Islamic microfinance: A tool for poverty alleviation in Pakistan-1

Mufti Asad Gul

Poverty has been a cause of concern in every society throughout the human history. Islamic views poverty as a social ailment which has potential to create number of social and moral evils in the society. The Holy Prophet (S.A.W.S) always sought refuge in Allah from the affliction of poverty. In another Hadith Holy Prophet (S.A.W.S) warned against evil consequences of poverty. He said that: “Poverty has strong likelihood to bring one to heresy and disbelief”. Muslim society, from its inception, has been concerned with eradication of poverty. The institutions such as zakat and waqf played vital role in establishing economic and social justice in the society and helping the poor and the destitute to attain a respectable standard of living. Islamic microfinance, has emerged in recent past, as an effective tool for socio-economic development in Muslim countries and has effectively contributed in the alleviation of poverty and economic uplift of the society. Through its multifarious charitable and business activities, it has shared the burden of governments and their responsibilities towards the poor and destitute segment of the society.

Microfinance refers to small loans available to poor people (especially those traditionally excluded from financial services) through programs designed especially to meet their particular needs and circumstances” core objective of Microfinance is to eradicate poverty, to raise income levels and to broaden financial markets by providing financial services to the financially excluded people. But since conventional microfinance is interest based, a committed Muslim refrains from availing financial services offered by conventional microfinance institutions. For such religiously motivated people, Islamic microfinance is the only choice. It provides microfinance services to lower income groups in a Shariah compliant manner through the religiously tailored products such as qardhasana, murabahah, mudarabah, salam etc.

A number of beliefs and social and moral values underlay the concept of Islamic microfinance. These values are the basic pillars of the institution of Islamic microfinance. According to Islamic Law, the status of man in the universe is that of trustee of Allah. Thus, whatever is in the hand of man, is only a trust reposed by Allah in him. The Quran says: “Spend in charity out of the property of which He made you custodians” (or trustees). In another verse the Quran attributes ownership of wealth to Allah. It says: “And give in charity out of God’s wealth which He gave unto you” The verse points to the fact that man has been given temporary right of ownership. He has the right of property over the things but his right is not absolute. He is bound to spend it according to instructions of its real owner. In Surah 28:77, Quran has mentioned two such instructions. The verse says: “Seek the other world by means of what Allah has bestowed upon you, and do not be negligent about your share in this world, And do good (to others) as Allah has done good to you and do not seek to spread disorder on the earth”.

Social responsibility, also known as “KafalatAammah” suggests that society as a whole has responsibility and obligation towards less fortunate and deprived segment of the society. It is generally claimed that eradication of poverty and uplift of living standard of people, is the responsibility of state which ought to perform this duty through distribution of Zakah. The Holy Quran and Sunnah refute this misconception. Holy Prophet (S.A.W.S) was asked whether the poor have any right to the wealth of the rich beside Zakah. He replied, yes, they have certainly right beside Zakah. Then he recited the verse, 177 of Surah al-Baqarah. Which states: “Righteousness is not that you turn your faces towards the east or the west, but [true] righteousness in [in] one who believes in Allah, the Last Day, the angles, the Book, and the Prophets and gives wealth, in spite of love for it, to relatives, orphans, the needy, the traveler, those who ask [for help], and for freeing slaves; [and who] establishes prayer and gives zakah;…(al-Baqarah: 177). Hadrat Ali – May Allah be pleased with Him – narrated that Allah said: “Allah has made obligatory on the rich to provide the poor with what is adequate for them and if the poor are hungry or naked, this is only due to the fact that the rich have deprived them of their right”. It is pertinent to note that according to the Quran, the share of poor in the wealth of rich is his right, not a favor or benevolence from the rich. The concept has been emphasized in a number of Quranic verses. In Surah Isra (verse 24) Quran says: “In their wealth, there is a due share of the needy who asks and who is prevented from asking”. Here Quran alludes to the obligation of Zakah. In Surah al-Zariyat (Verse, 19) Quran says: “And in their wealth, there is a right for needy who asks, and who is prevented from asking”. Here Quran clearly mentions that whatever a poor person receives from the rich, he receives it as a matter of right. Explaining the meaning of the above mentioned verse, renowned religious scholar Mufti Shafi writes: “Under materialistic economic systems, there is only one way of acquiring the right to wealth, and that is by direct participation in the process of production. In other words, only those factors that have taken a direct part in producing wealth, are entitled to a share in wealth and none else. On the contrary, the basic norm of Islam in this respect is that wealth is in principle the property of Allah, and He alone can prescribe the rules as to how it is to be appropriated. Thus, according to the Islamic point of view, not only those who have directly participated in the production of wealth are entitled to its spoils, but also those to whom Allah has apportioned a share by

His Command. Allah has made it obligatory upon others to help the needy, who are the legitimate sharers in the wealth of others. Hence, the poor, the helpless, the needy and the destitute, all have a right to wealth. Allah has made obligatory on all those producers of wealth, among whom wealth is in the first place distributed, that they should pass on to the less fortunate ones a part of their wealth. The Quran makes it quite explicit that in doing so, they would not be obliging the poor and the needy in anyway, but only discharging their obligation, for the poor and the needy are entitled to share in wealth as a matter of right”.

Since all resources, according to the Quran, are gift of God to all human being, there is no reason, why they should remain concentrated in few hands. Islam emphasizes distributive justice and gives a program for redistribution of income, so that every individual is guaranteed a standard of living that is humane and respectable. Holy Prophet (S.A.W.S) has said: He is not a true Muslim who eats his fill when his next door neighbor is hungry”. Islam prohibits concentration of wealth in few hands. It demand that wealth should be circulated in the society as widely as possible, so as the distinction between the rich and poor is narrowed down.

The Quran says: “So that this wealth should not become confined to the rich amongst you Hazrat Umar (r.t.a) the second Caliph in one of his public address emphasized that everyone had equal right in the wealth of the community, and that if he were to live longer, he would see to it that even a shepherd on mount of San‘a received his share from his wealth. This means that circulation of wealth among large number of people, and the attainment of well-being of the society, is the objective of Islam, which it seeks to realize through its institutions, such as zakat institution. The above beliefs and values lie at the very root of Islamic microfinance. Th-ese very values make Isla-mic microfinance a really Shariah-based finance.

(To be continued)

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