The Role of Islamic Microfinance on Poverty Alleviation: A Case Study of Al-Barakah Microfinance Bank, Lagos, Lessons for Yobe Microfinance Bank, Nigeria

Abstract

This study aims to examine the impact of Islamic microfinance on poverty alleviation among Islamic microfinance bank customers. A cross sectional survey   research was adopted to collect data. A sample of 200customers participated as respondents. Stratified Random Sampling technique was used to select sample of the respondents. Similarly, Structured questionnaire was utilized in data collection. The descriptive and inferential statistics were used to analyzed the data. Result showed that Islamic microfinance has contributed to welfare improvement, growth of small enterprises, increase in income level, personal savings and expenditure of the customers. Besides, Logit model was applied to determine whether the level of poverty has reduced or not, due to the influence of particular explanatory variable. In this regard, a positive relationship was observed on the relationship between respondents' income level, age, education level, religion and poverty reduction. Consequently, this study concludes that Islamic microfinance has a positive effect on poverty alleviation. Therefore, this study recommends the adoption of Islamic microfinance as tool for poverty alleviation in Nigeria. Furthermore, it is advocated that conventional microfinance banks should consider full-fledge Islamic microfinance banking in order alleviate poverty in states having majority Muslim population in Nigeria, particularly in Yobe state due to its peculiar poverty level and large Muslim population. Also, it is suggested that policy makers should encourage the establishing of more Islamic finance banks in Nigeria by providing less stringent policies and providing training on Islamic micro financing and banking.