Bank Financing for Small and Medium Enterprises in Nigeria: Mudharabah Vs Usury

Muhammad Jamiu Nuhu Adekola (), Olusegun Kazeem Lekan () and Sonny Emmanuel Braide ()
Additional contact information
Muhammad Jamiu Nuhu Adekola: Isa Kaita College of Education
Olusegun Kazeem Lekan: Federal University Dutsinma
Sonny Emmanuel Braide: Federal University Dutsinma

Acta Universitatis Danubius. OEconomica, 2018, issue 14(3), 23-32

Abstract: This paper presents a comparative analysis of the more viable SMEs financing in Nigeria. The study incorporates NPV technique to determine whether conventional banks usury is more viable than Islamic bank mudharabah financing for SMEs growth and innovation. Results based on the difference between the present value of entire loans receivable and the discounted loans payable from 2000 – 2017 sampled periods showed that mudharabah has a positive and higher NPV thus it is far better and more worthwhile for enterprises to grow and innovate than the usury source of finance. Therefore, this study suggests that SMEs should utilize Islamic bank mudharabah financing in order to raise profitable funds for investment, expand their businesses and acquire the latest technology that ensures their competitiveness and growth and that of the nation as a whole. Hence, this study concludes that mudharabah is a just source of finance that promotes equity, income redistribution and enhances growth and innovation of SMEs in Nigeria.

Keywords: Equity-finance; debt-finance; NPV; growth; innovation (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
http://journals.univ-danubius.ro/index.php/oeconomica/article/view/4549/4463 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:dug:actaec:y:2018:i:3:p:23-32

Access Statistics for this article

More articles in Acta Universitatis Danubius. OEconomica from Danubius University of Galati Contact information at EDIRC.
Bibliographic data for series maintained by Daniela Robu ().