Islamic Financing Effects on Small Medium Enterprises Competitiveness

Abstract

Islamic financing has been identified as an alternative to conventional financial services. However, the extent to which the Islamic financing model could drive small and medium enterprises' (SMEs) competitiveness has been a significant concern in the existing literature. Hence, this study investigates the impact of Islamic financing on SMEs' competitiveness.Adopting the survey research design, the study investigated 400 SME owners/managers in the Southern part of Nigeria. The study employed the ordinary least square regression in the analysis of data. The result establishes that Islamic finance is a significant driver of SMEs' competitiveness. The results specifically reveal that Islamic finance is critical in driving product price, customer experience, and quality of products. The practical implication of Islamic finance may reduce its operational cost since it comes at a no-interest rate while giving room for more innovative prices and customer-centric products at competitive prices. SMEs are to leverage on the opportunities provided by Islamic finance for them to adopt sustainable business practices

Investigating the Institutional Quality Integration with Islamic Banking Development in Promoting Entrepreneurship

“…It mainly offers risk-sharing contracts through partnership products, allowing entrepreneurs to share risk with banks. They do not need to be in debt entirely (Adelekan, 2021), the debt formed in Islamic banks is asset-based, and its cost is levied only in the case of returns from that venture or the successful use of usufruct of the leased item. Hussain et al (2015) considered equity, participation, and ownership as the ultimate principles that govern Islamic finance which provides equal opportunities to all (Khizar, 2022).…”

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

“…The success of a business cannot be separated from the performance of the business that has been done. Business performance can be measured through four indicators, namely: (i) sales development, (ii) working capital growth, (iii) customer growth, and (iv) increased profit (Adedeji, 2021). The average billing period and the average payment period as indicators and proxies of Working Capital Management positively impact a business' profitability (Enow & Brijlal, 2014).…”

“…The MSME sector has many obstacles and challenges, although MSMEs are one of the spearheads in increasing Indonesia's economic growth. MSMEs are deemed less qualified to obtain capital credit financing facilities, so MSMEs must rely on internal funds to start and run their business (Adedeji, 2021). These obstacles also occur in MSMEs in Tanjungpinang City.…”

“…Islamic financing has successfully promoted collaborative business capital funding to help vulnerable businesses, such as MSMEs, with difficulty accessing funding. Sharia capital financing has succeeded in increasing the competitiveness of MSMEs through efforts to encourage the application of innovative finance, which results in sustainable MSMEs development (Adedeji, 2021).…”

“…Based on previous research, it is clear that Islamic-based business capital financing has increased MSMEs' growth opportunities. Adedeji (2021) states that sha-ria-based business capital financing can encourage one aspect of working capital management: innovative financial management. This research is still not enough to empirically prove how the role of Islamic-based financing affects the management of working capital for MSMEs.…”