Investigating the Effect of Islamic Banking on Poverty Reduction: Empirical Evidence From Mogadishu, Somalia

Abstract

This study investigates to test and analyze the influence of Islamic banking on poverty reduction” The study mainly looked at the influence of Islamic Banking on poverty reduction and relationship between Islamic Banking and poverty reduction. The researcher used descriptive research design with quantitative methods with sample size of 45, Premier bank manager 17 and 34 Employees. Simple random sampling used to select the sample, and they included staff, operational, secretaries and departmental officers. Using simple random sampling respondents were chosen from the different departments selected and questionnaires distributed to the selected respondents from the four departments in the bank. Primary data used during collection of data. Data collected by use of questioner method and analyzed in form of tables. The Findings shows that Islamic banking influences poverty reduction and has moderate relationship which indicated by R-value (r=2.71) and p-value (p=1.00). The result identifies that role Murabaha is the major predictors of Islamic banking which influenced positively in poverty reduction. Islamic banking is more important for poverty reduction, researcher recommended giving them high effort, and Management of Premier is encouraged to promote that activity. Also, study indicated that there is moderate relationship between Islamic banking and poverty reduction, so management of the bank should develop and make strong that relationship by providing and facilitating Islamic banking products such Murabaha and Mudarabah. This research makes significant theoretical and practical implications to enrich the existing literature on Islamic banking and contribute to poverty reduction help existing policy makers and Islamic banking institutions to reduce poverty by introducing low-income people to Mubaraha.