The challenge in poverty alleviation: role of Islamic microfinance and social capital

Purpose – The purpose of this paper is to examine the growth of Islamic microfinance (bila sudi-qardh) scheme in Andaman Islands and to see how Islamic microfinance sector and social capital contribute to face the challenge in poverty alleviation. Design/methodology/approach – The researcher developed a questionnaire and conducted non-random survey with the samples of Islamic microfinance group members to examine the Islamic microfinance and cash awqaf effect for the development of the local common resources (LCRs) in general; and financial, physical capital as well as social and human capital effects of the group members in particular. Findings – This study found that collective action through Islamic microfinance groups actually helps to increase environmental awareness, economic betterment of the members and fruitful management of LCRs through Islamic microfinance. Research limitations/implications – The paper's findings are limited to the Islamic microfinance groups' management in Andaman Islands in India. Originality/value – The paper explores social, financial and physical capital effects such as environmental awareness, economic upliftment of the Islamic microfinance groups' members and potential for LCR management through united action of the groups.