Abstract
The present study has been carried out to compare the performance, efficiency and sustainability of Islamic and conventional micro finance programs. Islamic and a conventional microfinance organizations namely AKHUWAT (Islamic Microfinance organization) & Sarhad Rural Support Program “SRSP” (Conventional Microfinance organization) were selected. Secondary, time series data ranging from 2005 to 2009 about the operating income, total assets, total income from investments, operating cost, total amount of disbursed loans and number of beneficiaries were selected. Profitability, number of beneficiaries from each program and amount of disbursed loan, have been used as a proxy of successful performance of Microfinance programs. The efficiency and performance of these two microfinance programs have been measured by using four different ratios i.e. Return On Assets (ROA), Net Interest Margin(NIM), Operating Cost as a Percentage of Loan (OCL), and Beneficiaries to Employees Ratio(BER). AKHUWAT is nonprofitable mosque based NGO, working purely on the basis of mutual cooperation. The performance of AKHUWAT organization has been compared viz a viz SRSP for the time period under consideration. The performance indicators show a relative good picture for AKHUWAT as compared to SRSP. The outcome of the study shows that Islamic microfinance programs can perform better and serve the poor with religious compatibility. Therefore, Islamic microfinance programs can be a better candle of hope for the poor and marginalized segments of the society. Conventional microfinance organizations are charging very high rates of interest i.e. charging an interest rate of 22% or more which is not affordable for a person who is already in a disastrous condition of poverty. Under such circumstances the government under its own supervision should initiate a fully fledged Islamic micro finance program, so as to eradicate the poverty and to improve the standard of living of the poor and marginalized of the society.
Zahoor khan: Lecturer,, , AsmatUllah, Khyber. (2010) Commercial Verses Cooperative Microfinance Program: An Investigation of Efficiency, Performance and Sustainability , The Dialogue, Volume 5, Issue 2.
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