The Challenges of Islamic Trade Finance in Promoting SMEs in IDB Member Countries

Abd Elrahman Ali

No 1435-6, Working Papers from The Islamic Research and Teaching Institute (IRTI)

Abstract: Accessing financing is one of the most formidable challenges facing Small and Medium Enterprises (SMEs); particularly in the least developing member countries (LDMC) of IDB. Given their low capital base, the availability of financial resources is essential for the SMEs growth. This research attempts to investigate the challenges and limitations facing the use of Islamic finance to promote Small and Medium Enterprises (SMEs) in IDB member countries. Secondary data from member Countries were collected and analyzed to identify the binding constraints in using Islamic finance in promoting SMEs. The findings of this study show- that despite of the recent growth of the Islamic institutions and the development of new Islamic financing products, still there is no favorable environment for Islamic finance to play vital role in the development of SMEs in the IDB member countries. The main reasons might be due to the weakness in the development of trade and the Islamic financing infrastructures. Given the uprising unemployment in many member countries, this study makes specific recommendations to the governments, Islamic banks management as well as IDBG to contribute in removing the challenges associated with accessing the sources of financing to encourage Islamic finance to further promote SMEs.

Keywords: Islamic Financing; Smes’ In IDB Member Countries (search for similar items in EconPapers)
JEL-codes: G21 G28 G29 L25 O12 O16 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2014-01-19
New Economics Papers: this item is included in nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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