Effectiveness of Musharakah Financing in Empowering Small Micro Enterprises

Abstract

The present study aims to analyse the effectiveness of musharakah financing for empowering micro-businesses in the perspective of entrepreneurs. This research is qualitative research using a critical analysis method. This study uses interviews as a research instrument to find out what factors affect the effectiveness of musharakah financing in empowering micro small business of BMT entrepreneurs in the Special Region of Yogyakarta. Entrepreneurs from two BMT in Yogyakarta had been interviewed. The results showed that BMT musharakah financing played an important role in the business development of Micro and Small Business, especially in terms of increasing business capital, easy access to take financing and a small amount of instalments. In addition, musharakah financing is effective in encouraging MSE empowerment, to increase the amount of merchandise inventory, add new types of products, expand businesses and add new equipment for business facilities. This study limits the ability to generate findings to a larger population of small-micro enterprises which obtain shariah financing from Islamic microfinance institutions (Baitul Maal Wat Tamwil) in Indonesia. The research findings can be used on how to empower small-micro enterprises with the Islamic financing and the development of Islamic microfinance institutions. This paper has contributed to the approach of empowering small micro-businesses with musharakah financing, which is considered to have a less contribution to BMT income. In addition, this study uses a critical analysis method to get a new perspective on the use of musharakah financing from the view of small entrepreneurs.

Impact of Islamic Financing on Working Capital Management of Micro, Small, and Medium Enterprises in Tanjungpinang City, Indonesia

“…Based on the data analysis and testing of these assumptions, it can be concluded that musharakah and murabahah financing positively affects MSME working capital management in Tanjungpinang City. This result restates previous findings on the significant roles of Islamic financing instruments in enhancing small and medium enterprises (Thaker et al, 2020;Hidayah et al, 2021), especially those in need of working capital but limited to current banking regulations.…”

Review of Musharakah Islamic Finance Articles in Indonesia-Malaysia Database and Scopus Bibliometrics

“…These articles were from 54 journals, 14 proceedings, two reviews, and a United Arab Emirates, Nigeria, India, and Afghanistan. Some articles were co-authored by Malaysian and Indonesian scholars, e.g., a study on musharakah for SMEs [22]. Some were authored by three scholars, two from Malaysia and one from Indonesia, e.g., [23].…”

Challenges and ways forward for the Malaysian SMEs in the Halal food industry: a systematic review

“…Lenders are unlikely to fund SMEs due to their high risk of failure. SMEs wishing to borrow money should expect to pay high-interest rates due to their higher risk profile [44]. Many people will only be able to qualify for the loan if lenders want collateral as a condition of approval.…”