Comparative Analysis of Conventional and Islamic Microfinance and Its Role in Poverty Alleviation in Pakistan

Abstract

This study evaluates Pakistan's Islamic and conventional microfinance systems and investigates how each contributes to the fight against poverty. By giving impoverished members of society, particularly those in developing nations, financial support, microfinance has grown to be an effective strategy to mitigate poverty. As opposed to conventional financial institutions, Islamic microfinance adheres to Sharia-based financial systems that emphasize risk and profit sharing. A number of factors are included in the comparison analysis, including coverage, cost, accessibility, poverty level, and impact on security the research employs quantitative data analysis through questionnaires. Quantitative analysis consists on current loan amount, number of time loans availed, interest rate on loans, per capita income, family size, level of education, income level, asset before loan, asset after loan, monthly expenditure, loan for business, loan for consumption, monthly installment, loan default, security against loan and profitability of banks. The results illustrate the model's advantages and downsides, as well as the Islamic microfinance model's appropriateness to Pakistani poverty. The elements that contribute to the advantages of microfinance are studied, including cultural approval, religious beliefs, managerial styles, and organizational performance.