The Islamic Solution (Qardh-Ul-Hassan)
Qard-ul-hassan (QH) is a voluntary loan without the lenders expectation of any payback principal. Furthermore, at the same time as, the nonpayer an obligation to return the principal, the lender is urged, according to a number of the sayings of the Prophet (pbuh), not to press the debtor if he/she is unable to repay at the specified deadline. For example, verses (2:245, 5:12, 11:57 18:57, 17:64 and 20:73) in the Quran explain in detail about those issues. (Askari, Iqbal, and Mirakhor, 2009)
The term Qard-ul-hassan (QH) means “beautiful loan” because the Qur’an asserts that these loans are made to (God)-Allah (swt) rather than to the borrower, intending to ease the pain of “tearing away” part of one’s wealth …show more content…
1.4.1 Constraints in Accessing Credit through SMEs to acquire capital from official …show more content…
In the experience of developing countries, borrowing to small business enterprises and entrepreneurs remain inadequate for the reason that financial intermediaries are anxious in relation to provide credit to small businesses due to their high risk, undersized portfolios, and high administration or operational cost. According to Cuevas et al. (1993), operational cost contributes to the incapability of the SMEs to access funding. This means that the higher the operational cost of lending the lower the net margin expected from the loan operation and unfavourable against safe investment represented by treasury bonds. Aryeetey et al. (1993) argues that if a lender faces information irregularity, the issues frequently turn out to be fairly influential ability s/he grasps in ensuring reimbursement. This means that during banks expectation the higher the operational cost its push, the higher the probability of default, that is why the lenders try to keep away from lending or inflict strict collateral requirement to SME’s as well as small clients. In an analysis made by a researcher in Tanzania lending system to SME’s is more expensive as compared to larger enterprises in terms of loan programme, loan scrutinizes and agreement enforcement, microfinance guesstimate that vetting to collect information about the
Qard-ul-hassan (QH) is a voluntary loan without the lenders expectation of any payback principal. Furthermore, at the same time as, the nonpayer an obligation to return the principal, the lender is urged, according to a number of the sayings of the Prophet (pbuh), not to press the debtor if he/she is unable to repay at the specified deadline. For example, verses (2:245, 5:12, 11:57 18:57, 17:64 and 20:73) in the Quran explain in detail about those issues. (Askari, Iqbal, and Mirakhor, 2009)
The term Qard-ul-hassan (QH) means “beautiful loan” because the Qur’an asserts that these loans are made to (God)-Allah (swt) rather than to the borrower, intending to ease the pain of “tearing away” part of one’s wealth …show more content…
1.4.1 Constraints in Accessing Credit through SMEs to acquire capital from official …show more content…
In the experience of developing countries, borrowing to small business enterprises and entrepreneurs remain inadequate for the reason that financial intermediaries are anxious in relation to provide credit to small businesses due to their high risk, undersized portfolios, and high administration or operational cost. According to Cuevas et al. (1993), operational cost contributes to the incapability of the SMEs to access funding. This means that the higher the operational cost of lending the lower the net margin expected from the loan operation and unfavourable against safe investment represented by treasury bonds. Aryeetey et al. (1993) argues that if a lender faces information irregularity, the issues frequently turn out to be fairly influential ability s/he grasps in ensuring reimbursement. This means that during banks expectation the higher the operational cost its push, the higher the probability of default, that is why the lenders try to keep away from lending or inflict strict collateral requirement to SME’s as well as small clients. In an analysis made by a researcher in Tanzania lending system to SME’s is more expensive as compared to larger enterprises in terms of loan programme, loan scrutinizes and agreement enforcement, microfinance guesstimate that vetting to collect information about the