Procedia Economics and Finance. Volume 31, 2015, Pages 803–812, (2015)

 

DEVELOPMENT OF COMMUNITY CURRENCY FOR ISLAMIC MICROFINANCE


Nabilah Rozzani, Rashidah Abdul Rahman, Intan Salwani Mohamed and  Sharifah Norzehan Syed Yusuf


 
Abstract  

The potential of Islamic microfinance is significant in contributing towards the alleviation of poverty and also promoting development of a nation. This is because Islamic microfinance has the ability to nurture its clients from being a recipient of zakat (obligatory contribution) to eventually becoming a zakat payer in the future. From the capital assistance provided to clients, Islamic microfinance institutions monitor its clients’ growth from start-up all the way to success. The emergence of technology had made life much simpler in the past few years. Also, with the interaction between members of the community, benefits of establishing this community via Islamic microfinance institutions would be expanded, rather than acting as capital provider alone. This can be made possible with the introduction of community currency, which is a medium to exchange goods and services within a community, where this community is defined to be a group with a common bond, such as members of a locality or an association, and it is not restricted geographically. The current study looks into the usage of community currency worldwide. The benefits of community currency usage are hence investigated. Finally with the findings gathered and discussions made throughout the research journey, the current study proposes a community currency framework which could serve as an alternative economy in a Malaysian context. The study examines secondary data, such as reports, documentaries and booklets to understand how community currency is being a success in other parts of the world. The study had also identified one type of community currency that can suit the environment of Islamic microfinance institutions, which is the Local Exchange Trading System (LETS) mechanism.