Cover Image

Towards adopting Zero Interest Loan (ZIL) and Profit and Loss Sharing (PLS) principle in Islamic microfinance: the case of Amanah Ikhtiar Malaysia

Microfinance institutions evolved to alleviate poverty by providing micro-credit to the poor. There have been few poverty alleviation success stories from institutions such as Amanah Ikhtiar Malaysia (AIM). For the majority however, there is no solid evidence to support the positive impacts of micro...

Full description

Saved in:
Bibliographic Details
Main Authors: Md Saad, Norma, Omar Mohammad, Mustafa, S. Le, Long, Haneef, Mohamed Aslam, Abd Ghani, Mazanah
Format: Article
Language:English
Published: IIUM Institute of Islamic Banking and Finance 2013
Subjects:
HG Finance
Online Access:http://irep.iium.edu.my/35586/1/JIF_2013.pdf
http://irep.iium.edu.my/35586/
http://www.iium.edu.my/iiibf/research-publication/journal
Tags: Add Tag
No Tags, Be the first to tag this record!
id my.iium.irep.35586
record_format dspace
spelling my.iium.irep.355862015-02-17T04:18:23Z http://irep.iium.edu.my/35586/ Towards adopting Zero Interest Loan (ZIL) and Profit and Loss Sharing (PLS) principle in Islamic microfinance: the case of Amanah Ikhtiar Malaysia Md Saad, Norma Omar Mohammad, Mustafa S. Le, Long Haneef, Mohamed Aslam Abd Ghani, Mazanah HG Finance Microfinance institutions evolved to alleviate poverty by providing micro-credit to the poor. There have been few poverty alleviation success stories from institutions such as Amanah Ikhtiar Malaysia (AIM). For the majority however, there is no solid evidence to support the positive impacts of microfinance institutions on the poor (Kono and Takahashi, 2010; as cited by Aliyu, 2012). One factor that hinders the positive impact of microfinance institutions on the poor is the inherent nature of the microcredit scheme which charges fixed and high interest rate due to high administrative cost (IRTI, 2007, as cited by Aliyu, 2012). Islamic microfinance evolved to provide alternative to the interest based conventional microfinance. However, the financing modes being used by the Islamic micro-finance institutions (IMFIs) are mostly debt based, which have resemblance to the interest based conventional modes. IMFs shun away from using the PLS scheme, which they consider risky. Theoretically, it is argued that PLS mobilizes factors of production, encourages risk sharing and ensures distributive equity in income and wealth. There is hardly any literature that has shown that PLS is workable in a pristine environment of zero interest. Furthermore, there is hardly any studies that have discussed on the feasibility of financing the poor using a combination of PLS and zero interest financing (ZIF). This study will experiment on the feasibility of providing small financing using a combination of PLS and ZIF to empower the working poor. The research incorporates literature survey, field study and business model applications in its methodology to achieve the desired objectives. The results of this pioneering project are expected to promote the local socio-economic welfare of the poor and provide opportunities in applied areas for future research. © 2013 The IIUM Institute of Islamic Banking and Finance. Keywords: Poverty; Islamic microfinance; Amanah Ikhtiar Malaysia; Equity-based financing; Interest-free financing. IIUM Institute of Islamic Banking and Finance 2013 Article REM application/pdf en http://irep.iium.edu.my/35586/1/JIF_2013.pdf Md Saad, Norma and Omar Mohammad, Mustafa and S. Le, Long and Haneef, Mohamed Aslam and Abd Ghani, Mazanah (2013) Towards adopting Zero Interest Loan (ZIL) and Profit and Loss Sharing (PLS) principle in Islamic microfinance: the case of Amanah Ikhtiar Malaysia. Journal of Islamic Finance, 2 (2). pp. 38-50. ISSN 2289-2117 (O), 2289-2109 (P) http://www.iium.edu.my/iiibf/research-publication/journal
institution Universiti Islam Antarabangsa Malaysia
building IIUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider International Islamic University Malaysia
content_source IIUM Repository (IREP)
url_provider http://irep.iium.edu.my/
language English
topic HG Finance
spellingShingle HG Finance
Md Saad, Norma
Omar Mohammad, Mustafa
S. Le, Long
Haneef, Mohamed Aslam
Abd Ghani, Mazanah
Towards adopting Zero Interest Loan (ZIL) and Profit and Loss Sharing (PLS) principle in Islamic microfinance: the case of Amanah Ikhtiar Malaysia
description Microfinance institutions evolved to alleviate poverty by providing micro-credit to the poor. There have been few poverty alleviation success stories from institutions such as Amanah Ikhtiar Malaysia (AIM). For the majority however, there is no solid evidence to support the positive impacts of microfinance institutions on the poor (Kono and Takahashi, 2010; as cited by Aliyu, 2012). One factor that hinders the positive impact of microfinance institutions on the poor is the inherent nature of the microcredit scheme which charges fixed and high interest rate due to high administrative cost (IRTI, 2007, as cited by Aliyu, 2012). Islamic microfinance evolved to provide alternative to the interest based conventional microfinance. However, the financing modes being used by the Islamic micro-finance institutions (IMFIs) are mostly debt based, which have resemblance to the interest based conventional modes. IMFs shun away from using the PLS scheme, which they consider risky. Theoretically, it is argued that PLS mobilizes factors of production, encourages risk sharing and ensures distributive equity in income and wealth. There is hardly any literature that has shown that PLS is workable in a pristine environment of zero interest. Furthermore, there is hardly any studies that have discussed on the feasibility of financing the poor using a combination of PLS and zero interest financing (ZIF). This study will experiment on the feasibility of providing small financing using a combination of PLS and ZIF to empower the working poor. The research incorporates literature survey, field study and business model applications in its methodology to achieve the desired objectives. The results of this pioneering project are expected to promote the local socio-economic welfare of the poor and provide opportunities in applied areas for future research. © 2013 The IIUM Institute of Islamic Banking and Finance. Keywords: Poverty; Islamic microfinance; Amanah Ikhtiar Malaysia; Equity-based financing; Interest-free financing.
format Article
author Md Saad, Norma
Omar Mohammad, Mustafa
S. Le, Long
Haneef, Mohamed Aslam
Abd Ghani, Mazanah
author_facet Md Saad, Norma
Omar Mohammad, Mustafa
S. Le, Long
Haneef, Mohamed Aslam
Abd Ghani, Mazanah
author_sort Md Saad, Norma
title Towards adopting Zero Interest Loan (ZIL) and Profit and Loss Sharing (PLS) principle in Islamic microfinance: the case of Amanah Ikhtiar Malaysia
title_short Towards adopting Zero Interest Loan (ZIL) and Profit and Loss Sharing (PLS) principle in Islamic microfinance: the case of Amanah Ikhtiar Malaysia
title_full Towards adopting Zero Interest Loan (ZIL) and Profit and Loss Sharing (PLS) principle in Islamic microfinance: the case of Amanah Ikhtiar Malaysia
title_fullStr Towards adopting Zero Interest Loan (ZIL) and Profit and Loss Sharing (PLS) principle in Islamic microfinance: the case of Amanah Ikhtiar Malaysia
title_full_unstemmed Towards adopting Zero Interest Loan (ZIL) and Profit and Loss Sharing (PLS) principle in Islamic microfinance: the case of Amanah Ikhtiar Malaysia
title_sort towards adopting zero interest loan (zil) and profit and loss sharing (pls) principle in islamic microfinance: the case of amanah ikhtiar malaysia
publisher IIUM Institute of Islamic Banking and Finance
publishDate 2013
url http://irep.iium.edu.my/35586/1/JIF_2013.pdf
http://irep.iium.edu.my/35586/
http://www.iium.edu.my/iiibf/research-publication/journal
_version_ 1643610817198817280
score 13.211869

Similar Items