Islamic microfinance as a panacea for poverty alleviation.

Abstract

Islamic microfinance is a tool for promoting financial inclusion and reducing poverty levels. Countries such as Nigeria has scanty empirical investigations in this regard. This calls for a more robust analysis. This study, therefore, investigated the influence of the Islamic microfinance system on poverty alleviation in Kwara State, Nigeria. Nonprobability, purposive sampling was adopted to select traders and small business owners from the weekly-market setting of selected towns/villages in the three senatorial districts of Kwara State. Five (5) markets were selected from each of the three (3) senatorial districts. Data were collected with a structured questionnaire and analyzed with descriptive and inferential statistics. Ordered Logistic Regression was conducted. It was found that qard al hasan (0.91, p<0.05) murbah (0.72, p<0.01), mudharaba (0.51, p<0.1) musharaka (0.17, p<0.05) had a positive, significant effect on income level. It was also found that qard al hasan (0.38, p<0.05) murbaha (0.63, p<0.01), mudharaba (0.15, p<0.05) musharaka (0.59, p<0.01), zakat (0.45, p<0.01) and sadaqa (1.35, p<0.01) had a positive, significant effect on the productivity level. The study concluded that micro-credit, micro-equity and charity (social finance) products significantly influenced poverty alleviation. An adequate supply of shariah-compliant micro-credit, micro-equity and charity financial resources was recommended to boost the productivity and income levels of low-income earners and small business owners in the State. Also, the Central Bank of Nigeria (CBN) is encouraged to provide enabling environment for formal non-interest microfinance to promote financial inclusion and reduce poverty in the Country.