Interest Free Micro Finance in India

Abstract The Prophet banned interest interest-based financial system. The financial system of lending money that has spread across globe is interest-based. And this system makes richer richer and the poor to poorest. In Islamic financing, interest-based lending is not permitted and it is one of the major sins. The prophet cursed on four people first the person who lends the money on interest, second the person who takes the money on interest third the person who is witness of the same and fourth one who writes this transaction. Neo Modernist have an opinion that in ancient times (pre-Islamic period) interest-based lending financial system was in practice and that to a great extent. The author rejects this opinion in toto. Another dispute raised by the Neo Modernist is about “Riba and Usury” and “Individual and Institutional Riba”. These disputes and debatable issues were completely rejected by the researcher as there are sufficient references from Holy Book and authentic Hadith. Some estimates indicate that there are about three billion people living in abject poverty making the problem of poverty a global challenge. One of the biggest challenges is, there are near about 600 million Muslims who are living the life of poverty. Microfinancing is becoming more popular now a days. From last two or three decades it is observed that Microfinancing can be one of the significant tools to eradicate poverty. Moreover, it can also be one of the mechanisms to empower women in India. And it can also contribute to develop Economics and Social life of poor. Government of India has launched many of the schemes for rural poor in the context of microfinancing to upgrade skill development, to provide venture capital and many more. Microfinancing will also be helpful in creating more jobs opportunities, financial liberty and to purse higher education.