Legal Framework to Induce Paradigm Shift in Islamic Alternatives to Poverty Alleviation

The Islamic approach to poverty alleviation is mainly done through the redistribution of wealth to fulfill the basic needs of the poorer strata of the society. However, even though this approach has been successful in mitigating absolute poverty, the emphasis of the system is simply the fulfillment of basic needs and not towards the creation of viable financial systems. While the redistribution of wealth can sometimes lead to a system of providing subsidized credit to the poor, there is no viable Islamic compatible system of creating sustainable financial intermediation among the poor. Albeit lacking Islamic elements, microfinance has been successful in creating a sustainable financial intermediation among the poor and is considered the “new paradigm” in the fight against poverty. This paper argues that this approach can potentially help to shift the paradigm of an Islamic charitable model of poverty eradication. By combining the microfinance model with existing Islamic wealth redistri