Abstract
The objective of Islamic Microfinance is to reduce poverty and to bring about development by enabling the poor to enhance their earnings and enrich their social welfare. In order to achieve this objective, microfinance provider should consistently have a major impact in fighting against poverty. Therefore, generating a sustainable source of loanable funds is crucial for the success of microfinance loan programs (MFLP) in alleviating poverty. Transaction cost of the Islamic Microfinance is considered as critical factors that determined the survival of these institutions. The objective of this paper is to suggest Islamic Microfinance framework after taking into consideration the transaction cost.