Available financing resources for Islamic microfinance institutions to alleviate poverty: cash waqf approach

Islamic Microfinance (IM) is considered an important element of economic prosperity and an instrument in reducing poverty rates in the Islamic world. However, the IM industry faces many problems in its efforts to serve the community. One of these problems is the lack of financing resources. This research studies the current Islamic financing channels that are used to finance IM institutions and determine the appropriate mechanisms or models practiced by IM institutions to finance the micro-enterprises and therefore reduce the poverty rate in Muslim communities. This research applied a qualitative approach by reviewing the current literature in the IM industry. This research focused on Cash Waqf as an alternative channel to finance IM institutions as this model has been successfully implemented and experienced by many Islamic countries, to deal with various social problems and poverty alleviation. The desired development can be achieved by investing Cash Waqf funds in micro-enterprises that may help to maximize investment and low-income people’s returns also enhance economic development to a direct impact poverty alleviation. It has been found that the Cash Waqf model is considered an appropriate source of funding to finance IM instigations that will utilize the Cash Waqf fund to finance micro-enterprises through several models like Mudarabah, Murabaha, Musharakah Mutanaqisah and Qard Hassan. These models were discussed after merging them with the concept of Cash Waqf through the previous literature, weighing the advantages and disadvantages of each one, and proposing some solutions that could contribute to solving the problems faced by the micro-enterprise