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

Author

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  • Ali , Abd Elrahman Elzahi Saaid

    (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.

Suggested Citation

  • Ali , Abd Elrahman Elzahi Saaid, 2014. "The Challenges of Islamic Trade Finance in Promoting SMEs in IDB Member Countries," Working Papers 1435-6, The Islamic Research and Teaching Institute (IRTI).
    • Handle: RePEc:ris:irtiwp:1435_006
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    References listed on IDEAS

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    1. International Labour Office., 2012. "Global employment trends for youth : 2012," Global Employment Trends Reports 994802013402676, International Labour Office, Economic and Labour Market Analysis Department.
    2. International Labour Office., 2012. "Global employment trends 2012 : preventing a deeper jobs crisis," Global Employment Trends Reports 994679843402676, International Labour Office, Economic and Labour Market Analysis Department.
    3. Thorsten Beck & Asli Demirgüç-Kunt, 2004. "SMEs, Growth, and Poverty," World Bank Publications - Reports 11278, The World Bank Group.
    4. Pietro Calice & Victor M. Chando & Sofiane M. Sekioua, 2012. "Working Paper 146 - Bank Financing to Small and Medium Enterprises in East Africa: Findings of a Survey in Kenya, Tanzania, Uganda and Zambia," Working Paper Series 377, African Development Bank.
    5. Rocha, Roberto & Farazi, Subika & Khouri, Rania & Pearce, Douglas, 2011. "The status of bank lending to SMES in the Middle East and North Africa region : the results of a joint survey of the Union of Arab Bank and the World Bank," Policy Research Working Paper Series 5607, The World Bank.
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    Cited by:

    1. Saaid Ali, Abd Elrahman Elzahi, 2014. "The Effectiveness of Regulatory and Supervisory Framework of Islamic Microfinance in Sudan," Working Papers 1435-16, The Islamic Research and Teaching Institute (IRTI).

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    More about this item

    Keywords

    Islamic Financing; Smes’ In IDB Member Countries;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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