The Challenge of Poverty and Mapping Out Solutions: Requisite Paradigm Shift from a Problem-Solving and Islamic Perspective

Abstract

Islamic economics [IE] emerged with a new vision and aspiration of a better path to development. Unfortunately, IE has evolved mostly as an intellectual/academic shell, in which poverty eradication, except in rhetoric, is a peripheral concern.

Gradually, IE was eclipsed by its offshoot, Islamic finance [IF], which evolved as a prohibition-driven, legalistically-shaped, “shariah-compliant” industry, but delinked from the broader development aspirations.

Encouragingly, renewed soul-searching is causing a shift toward substantively dealing with the challenge of poverty. However, beyond the issue of type of enterprises, policy frameworks and tools/mechanisms, a paradigmatic shift in IE/IF’s focus is needed.

This paper argues that a few key aspects must be addressed at a more fundamental level, without which mere institutional/legalistic changes in the financial/monetary sector, as opposed to the real sector, may prove inadequate for development and poverty alleviation. This paper explores some of those key aspects relevant to a needed paradigmatic shift, especially from a problem-solving perspective.

Keywords: Islamic economics, Islamic finance, Islamic banking, poverty, poverty alleviation, poverty eradication, development, grameen bank, microfinance, zakah, zakat, real sector, shariah-compliant, challenge of poverty, problem-solving

JEL Classification: D63, G20, I31, I32, O10