Impact of Qard-al-Hasan (interest-free loan) program in reducing multidimensional poverty: an evidence from the southwest Bangladesh
International Journal of Islamic and Middle Eastern Finance and Management
ISSN: 1753-8394
Article publication date: 15 February 2022
Issue publication date: 25 November 2022
Abstract
Purpose
This paper aims to investigate the effectiveness of Qard-al-Hasan (QH) or interest-free loan in reducing multidimensional poverty through examining Fael Khair Waqf (FKW) program as a case.
Design/methodology/approach
A Multidimensional Poverty Index (MPI) approach has been used in this study, which was conducted over 1,600 households including 1,200 program households in 40 villages and 400 control households in 20 villages of 8 districts in the south-western region of Bangladesh.
Findings
It is found that 38.5% of sample population was multidimensional poor with deprivation of above the cutoff score. However, FKW participants were relatively less multidimensional poor. It was 35.3%. Hence, it is argued that the FKW is an effective program in terms of poverty reduction as it has contributed to higher economic outcomes for their participating households. The econometric result also suggests that the likelihood of the participants of FKW to be MPI poor is around 1.5 times lower than the nonparticipants, and the result is significant at 1% level. This indicates that program has a positive impact in reducing multidimensional poverty.
Practical implications
The analysis in this paper would fill the literature gap by investigating the link between application of QH and poverty alleviation. It will also guide academicians, researchers and decision-makers to design evidence-based policy to alleviate poverty.
Originality/value
To the best of the authors’ knowledge, there has been no empirical work in Bangladesh on the effectiveness of QH in poverty reduction considering an MPI approach. Hence, this study is a unique contribution to the literature of Islamic social finance.
Keywords
Acknowledgements
The authors are grateful to the IDB for entrusting Institute for Inclusive Finance and Development (InM) to evaluate the FKWP in Bangladesh. The study is based on the data collected during the evaluation period.
Citation
Muneer, F. and Khan, F. (2022), "Impact of Qard-al-Hasan (interest-free loan) program in reducing multidimensional poverty: an evidence from the southwest Bangladesh", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 15 No. 6, pp. 1072-1087. https://doi.org/10.1108/IMEFM-03-2021-0101
Publisher
:Emerald Publishing Limited
Copyright © 2022, Emerald Publishing Limited