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Purpose Small and medium enterprises’ (SMEs) capital structure and financial policies are important areas of policy concern. Only a limited number of studies on capital structure have, however, been conducted on SMEs, and this deficiency is particularly evident when investigating what influences funding decisions around Islamic finance. This paper accordingly aims to investigate whether Omani SME owner-managers’ intention to adopt Islamic finance is influenced by their knowledge of Islamic finance, their own characteristics and/or their firms’ characteristics. Design/methodology/approach The authors administered a questionnaire survey via face-to-face interviews to 385 SME owner-managers operating in Muscat, Oman’s capital city. The Kruskal–Wallis one-way analysis of variance (ANOVA) non-parametric test was used to analyse the questionnaire survey data. Findings The findings indicate that while SME owner-managers’ Islamic financial knowledge and personal characteristics do influence their intention to adopt Islamic finance, their firms’ characteristics have no significant influence on SME owner-managers’ decisions to accede to Islamic financing. Research limitations/implications The research’s first limitation is that it gathered data from SME owner-managers in Muscat only. Future studies could survey a wider sample of Omani SME owner-managers. Second, the study’s findings cannot be generalised to large and public firms, as the sample includes owner-managers of SMEs only. Finally, there is a need to investigate other factors such as nonfinancial and behavioural factors, which were not explored in the present study, but which may influence SME owner-managers’ Islamic financial decisions. Originality/value Theoretical and empirical studies on capital structure have focused primarily on large listed firms. Only a few studies have paid attention to the capital structure of SMEs, particularly in the context of an emerging market such as Oman. This gap in the literature is mostly evident when investigating the factors that influence the funding decision towards Islamic financing in a country, such as Oman, where Islamic finance represents a new banking sector offering.

Purpose This paper aims to investigate small and medium enterprises’ (SMEs) owner–managers’ awareness, willingness and perceptions concerning Islamic financing instruments as an alternative sourcing decision in SMEs’ businesses. Design/methodology/approach The research employed mixed methods to gather data. A questionnaire survey was conducted via face-to-face interviews with 385 SME owner–managers operating in Muscat, Oman’s capital city, along with face-to-face discussion on Islamic finance with 86 SME owner–managers. Descriptive and thematic analysis were used to analyse the data. Findings The findings indicate that SME owner–managers are aware of Islamic banking principles and have knowledge of Islamic financial instruments, despite Islamic finance being new to Oman. Interestingly, although the majority of the participants indicated their intention to adopt this new finance method, they were motivated by special requirements other than finance. Their positive perception of Islamic financing methods could play a significant role in developing the Islamic banking industry. Research limitations/implications The research is limited in that its data came only from Omani SME owner–managers in Muscat. Future research could investigate wider samples. Secondly, the study’s findings lack generalisability to larger and public enterprises, because only SME owner–managers were surveyed. Practical implications This study will be important for policy makers concerned about SMEs’ financing, Islamic financial institutions and new entrants into the Islamic banking industry, as it provides empirically evidence of Omanis’ views, and more specifically those of Omani SME owner–managers, on the recent introduction of Islamic finance into the country. The insights this study offers should help them to develop the strategies required to attract SMEs and to construct policies and regulations to improve Oman’s Islamic banking industry. Originality/value The research is significant, as it is the first study to investigate the awareness, willingness and perceptions of Omani SMEs regarding Islamic banking in Oman. Even though all Omanis are Muslims, Oman was the last of the six-nation Gulf Cooperation Council countries to introduce Islamic finance. Thus, this emerging market provides an important basis from which to extend future research on Islamic finance to other potential Islamic finance markets.