| Abstract: |
Today widespread poverty is one of the major problems of mankind and its
alleviation one of her major agendas. In recent years microfinance has emerged
as an important instrument to relieve poverty in the developing countries.
Today there are more than 7000 micro lending institutions providing loans to
more than 25 million poor individuals across the world, their vast majority
being the women. However these institutions face some serious challenges,
especially in less developed countries where the proportion of people in
poverty is high. The existing microfinance in Nigeria serves less than 1
million people out of 40 million being the potential number that need the
service. Also, the aggregate micro credit facilities in Nigeria, account for
about 0.2 percent of the GDP and is less than one percent of total credit in
the economy. Addressing this situation inadequately would further accentuate
the problem and slow down growth and development of the country. We find that
the microfinance institutions charge interest rate as high as up to 100% for
lending and pay as low as 5% on savings. This aggravates the existing
inequalities in the distribution of wealth and income in Nigeria. Finally,
Nigeria being a country with a Muslims majority, represents a potential for
Islamic microfinance especially that most Muslims reject the conventional
interest based micro financing, which is not tailored in line with their
faith. This might cause failure of government project to combat poverty in the
country through micro financing. Under the circumstance Islamic micro
financing has potential to serve the country better. The paper has relied on
the sources of Shari`ah law, secondary data from journals, periodicals,
conference proceedings, text book , internet search and other sources of
published data to support the argument. |