Mudarabah as an effective tool to alleviate poverty through microfinance

Microfinance has been identified and proven to be an important financial instrument that facilitates the poor group to access to the financial service to move from the poor socio economic group. As the microfinance program highly concentrate to the poor group people it helps to alleviate the poverty and thus achieve Malaysia 11th Plan Goal. Microfinance with Mudarabah contractual becomes a good combination to combat the poverty. Mudarabah is an Islamic financial tool that aims to aid the poor people and at the same time it is good for the economic and social development. This paper provides the Islamic thoughts and a motive behind these initiatives also discusses the compatible financial mechanisms proposed by Islam to encourage them to move from poor group for a better living. The qualitative method is used to carry out the objective of this research.