Sustainable Islamic SME Financing

Amadou Thierno Diallo () and Ahmet Suayb Gundogdu ()
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Amadou Thierno Diallo: Islamic Development Bank
Ahmet Suayb Gundogdu: Islamic Development Bank

Chapter 4 in Sustainable Development and Infrastructure, 2021, pp 57-75 from Palgrave Macmillan

Abstract: Abstract What is wrong with as-is SME financing? Funding for small and medium-sized businesses as it is applied today cannot deliver positive results for jobs and economic development. Regardless of the massive SME programs, the issues surrounding SMEs and their potential capacity to contribute to SDGs remain unclear. Financing for SMEs has decades of practice and critical aspects are not much reviewed from Islamic finance perspective. Financing needs of SMEs should be fulfilled with transaction-based financing with asset-based Murabaha, asset-backed Murabaha and Ijara. Cash lending for SMEs with mortgages should be avoided. The deposit banking business model does not support sustainability. Sustainable resource mobilization is possible with a crowdfunding business model and this requires transformation of Islamic deposit banks.

Keywords: SME funding gap; Two-step murabaha; Mudaraba; Working capital; Trade finance; CAPEX (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:pal:psibcp:978-3-030-67094-8_4

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DOI: 10.1007/978-3-030-67094-8_4

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