QARD-AL-HASSAN AS A TOOL FOR POVERTY ALLEVIATION A CASE OF FAEL KHAIR WAQF PROGRAM IN BANGLADESH

Abstract

Islamic economic system centrally focuses on socioeconomic justice and overall welfare of the society especially the bottom of the pyramid segment. Qard-al-Hassan, alongside zakat and sadaqah, is one of the instruments of redistribution of income and wealth from the rich to the poor in Islam. In 2007, Bangladesh struck by super cyclone SIDR, leaving 3,406 people dead. Moreover, the SIDR caused unprecedented damage to homes, crops and livelihoods. Fael Khair Waqf (FKW) Program came as a response to the urgent need for assisting the victims of SIDR which initiated an interest-free micro-loan (Qard-al-Hassan) scheme to restore the livelihoods of a large segment of victims and to uplift them from poverty. While investigating the effectiveness of Qard-al-Hassan in poverty reduction, this paper has examined FKW program as a case. This study conducted an analysis on 1600 households using independent sample t-test and logistic regression to investigate to what extent FKW program has been effective in reducing poverty. The finding of the logistic analysis is that the probability of being poor for FKW participants is around 1.46 times lower than the non-participants. Moreover, Qard-al-Hassan of FKW lowers the cost of borrowing significantly and hence the participants can accumulate more assets which might help them to improve their economic status after the cyclone. Overall, the effectiveness of this program implies that the development practitioners and researchers should promote the outreach of Qard-al-Hassan so that extreme poor can easily avail the services.