Discussion on Islamic Finance and Small Medium Enterprises’ Financial Accessibility

Abstract

This study attempts to provide insights on SMEs’ financial accesibility through Islamic finance and its successfulness in Malaysia. The innovation in the Malaysia financial landscape especially Islamic finance has benefits the SMEs in accessing financial assistance without rely on traditional mode of financing. SMEs in Indonesia represent about 99 percent in all economic sector and involved labor participation of almost 95 percent but the issue of financial accessibility remain perpetual problem and block the development of SMEs in Indonesia. Therefore, the present study utilizes content analysis to critically look at the successful of SMEs Islamic financing in Malaysia and various published report and literature in generate better overview on the progression of SMEs. At the end of the study, this study provides some recommendations based on Malaysian SMEs financing successfulness for Indonesian authority to further restructure and enhance their existing financial assistance to the SMEs based on Islamic financing.

Access to Sharia Financing for Micro Enterprises: Case Study of Micro Enterprises in Semarang, Indonesia

“…Islamic bank financing products are more varied than conventional bank products so that the sharia principles applied in product variations provide wider opportunities to meet customer needs including micro business actors, as found by (Ellahi, Bukhari & Naeem 2010) and (Ali, Ahmad & Kamaruddin 2020). The test results in this study also support Elasrag (2016) and Thaker, Kanan & Sakaran (2019) that the spiritual commitment between fund providers and users of funds has provided sufficient security in Islamic financing transactions. In the sharia financing contract, aspects of honesty, trust and the integration of assets of the two parties guarantee the security of the Sharia financing transaction.…”

“…In addition, spiritual commitment for both parties can increase security and comfort in the issue of access to Islamic finance. Asset integration (Elasrag, 2016) and (Thaker, Kanan & Sakaran, 2019) between fund providers and fund users and the aspect of honesty becomes the basis for transactions in Islamic financing. Based on the framework above, the first hypothesis (H1) is taken that access to Islamic finance is quite good in terms of financing products based on the interest system, implementation of profit sharing, diversity of choice, and security.…”

“…The accessibility problems faced by micro businesses are also caused by the lack of awareness of entrepreneurs about the loan facilities provided by banks and government institutions (Thaker, Kanan & Sakaran, 2019). Technological advances and innovations have however influenced the banking industry.…”