Opportunities and challenges of the Islamic microfinance institution based on Islamic social finance in poverty reduction

The main purpose of this research is to experiment interest-free microfinance products and to investigate the factors affecting the interest-free microfinance institution. Poverty reduction is one of the main goals of governments around the world. To achieve this goal, Microfinance is now used as an important tool to reduce poverty all over the world. For this purpose, different economic reform programs, sectoral policies, strategies, and plans have been developed by various countries for the eradication of poverty. Microfinance has proven to be a successful practice worldwide and has played an important role in poverty reduction in many countries. Some of the issues addressed in the research are whether Murabaha Interest-Free microfinance products will lower the default rate compared to Qard Al-Hassan interest-free microfinance products, investigate the factors affecting the repayment performance level and Interest-Free microfinance institution, and assessing the integration of Islamic social fund institutions for poverty reduction. The total number of participants who signed the Murabaha and Qard Al-Hassan contracts in the Field Experiment was 42 people. The research will use both quantitative and qualitative data types that will be collected through questionnaires, secondary data, interviews and experimental tests to answer key questions. Collected data will be analyzed using the Independent Samples T-test and Repeated Measures ANOVA. Murabaha Products participants have found that the repayment performance level is higher than Qard Al-Hassan, and it showed that it is one of the best mechanisms to reduce the default rate among borrowers. It had been observed that women have higher repayment performance than men, and those with different income sources had higher repayment performance levels than those who do not. In the study, it was shown that the effect of age, marital status and educational status on the repayment performance level of the participants was not statistically significant. In addition to these results, It has been shown that the participants' status of having or not having children also did not have a significant effect on the level of repayment performance. In addition, in the experiment, the main reasons preventing customers from paying their installments regularly and the gradual growth of their businesses are the fluctuations in vegetable prices, especially during the Christian fasting months, the Muslim fasting period, the money spent on social events, the opening time of the schools, the money spent for emergencies, political instability, The money spent on holidays, high electricity bill, the amount spent for personal use, the money they spend on holidays, the increase in rent, seasonal and non-seasonal jobs, personal consumption expenditures, and social ceremony expenses directly affected their repayment performance levels. With the survey used in the study, more data were collected on factors affecting Harar microfinance and the interest-free microfinance institution of HAKD customers, and important data were collected to develop a regulatory framework that would contribute to the establishment of Islamic social finance based interest free microfinance. The integration model will help the effective implementation of the Islamic social fund by organizing it under one roof for the Islamic social finance-based IFMF