Poverty eradication greatest moral challenge of current century

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Poverty eradication is the greatest moral challenge of current century. There are more than three billion human beings in the world live in debasing poverty. Islamic societies are much worse than the rest of the world in the issue of addressing the poverty problem. The Islamic world has over 1.2 billion people, extending from Senegal to the Far East, comprising six regions: North Africa, Sub-Saharan Africa, the Middle East, Central Asia, South Asia, and Southeast Asia. Except for a fistful of states in Southeast Asia and the Middle East, there are high and rising poverty levels in both urban and rural regions of most Muslim countries. Poverty levels have also associated with high inequality along with low productivity. In Indonesia alone which is the world’s largest Muslim population, almost half of the local populations, about 129 million people are poor or vulnerable to poverty with level of incomes less than only $2 a day. Bangladesh and Pakistan comprise 122 million people and followed by India at almost 100 million Muslims under poverty line. Usually debt or loan is central cause to the difficulties faced by the poor people. The Islamic response to eliminating this problem is to make free interest and collateral loans available to the poor people. Since Islamic rules require borrowers and lenders of the capital to share the risk of profit or loss equally, loans are made on a profit/loss sharing basis. Islamic banks, which are the main source of loans, have a significant responsibility in facing the credit needs of the poor people. Unfortunately, Islamic banks are often not meeting these needs. As an alternative, an innovative and broadly utilized way to meet the financing needs of the poor was innovated and created by Muhammad Yunus, an Economist from Bangladesh. yunus begun the Grameen Bank, a microcrdit organization. Microcredit involves providing small collateral-free loans to poor people who have a powerful desire to start a business and make a good living for themselves and their families. Such people are usually denied loans from conventional banks because they have no valuable assets that could be collateralized. Conventional banks and conventional microfinance institutions usually consider these people as high-risk borrowers or customers and do not supply them financing. Yunus believes that the poor are bankable and providing credit available to the poor not only improves their live, but it also could overcome the poverty problem and thus increase the welfare of the community as a whole. However, his organization charges interest for loans. While the subject of charging interest is obvious and significant difference between Islamic banking and conventional microfinance institutions. In this paper, I argue that this difference is not insurmountable and there are significant ideological and practical links between Islamic banks and microfinance institution. These links have not been clearly established in the literature and I believe these are important to detail so that more services can be giving and offering to the poor in Islamic states. In this paper, I first describe Islamic banking and microfinancing,

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