Islamic Finance, Small and Medium Enterprises and Job Creation in Turkey: An Empirical Evidence (2009-2017)

Abstract

The aim of this paper is to investigate if Islamic finance can solve the funding problem of SMEs and facilitate access to finance for SMEs, and how can these last participate in job creation in Turkey in order to face the problem of unemployment. The paper adopts a Vector Autoregressive model (VAR) based on monthly data (2009-2017). The results revealed that Islamic finance is a golden opportunity and a sufficient alternative financial source for SMEs. In addition, as SMEs can reduce unemployment by contributing to the labor market. This study contributes to the existing literature by presenting a promising financing tool to the prospective borrowers of SMEs (farmers, underserved groups, and small entrepreneurs) which is Islamic financing. This alternative can be an effective tool for both muslim and non-muslim countries in regard that conventional finance is more expensive and SMEs are unable to pay high interest rates. It would also help in establishing low unemployment levels. This paper suggested that Islamic banks and Islamic financial institutions should converge more on the SMEs by providing funding to SMEs which would lead to boosting production and economic development.

The Impact of MSMEs Financing in Islamic Bank on Unemployment in Indonesia

“…There were three models formulated that distinguish the analysis of unemployment as a whole and unemployment in rural and urban areas. These models were developed from the models used by Folawewo & Adeboje (2017) and Benbekhti et al, (2021). The models were as follows:…”

“…These limited funds are confronted with the existence of conventional loans with interest rates and the difficulty of accessing these loans (Elasrag, 2016). This capital constraint becomes the main problem in the development of MSMEs, as they have limited access to financial services compared to large companies (Benbekhti et al, 2021).…”

“…Unfortunately, their findings stop at labor absorption without further analyzing the impact on unemployment. In Turkey, Benbekhti et al, (2021) discovered that SMEs financing in Islamic banks is proven to reduce unemployment as a result of an increase in productivity. These findings did not cover the empirical impact of MSMEs financing on unemployment in urban and rural areas.…”

Demand Prediction for Food and Beverage SMEs Using SARIMAX and Weather Data

“…This capability enables the model to account for the interdependencies among different demand-related factors, such as pricing, marketing efforts, and external economic indicators, leading to more comprehensive and accurate forecasts. VAR also have been used in several fields in SME topics, such as: job creation [22], hotel demand uncertainty [19], tax cut for labor demand [23].…”

Salam financing: from common local issues to a potential international framework

“…In fulfilling this objective, the IBs have been striving to formulate products which are not only Islamically compliant but also innovative to suit the needs of users and overall market (Abdul Aris et al, 2013;Todorof, 2018). Such stipulation in product formulation has been noted as challenging for IBs evidenced by the less diverse product offerings by IBs and the unavailability of specific financing product to cater underprivileged group like for example farmers (Hassan, 2015;Khir and Saeran, 2016;Meutia et al, 2017;Benbekhti et al, 2021).…”