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

In: Empowering the Poor through Financial and Social Inclusion in Africa

Author

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  • Abdelrahman Elzahi Saaid Ali

    (Islamic Development Bank)

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 SMEs’ growth. This research attempts to investigate the challenges and limitations facing the use of Islamic finance to promote 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 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 a 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 to removing the challenges associated with accessing the sources of financing to encourage Islamic finance to further promote SMEs.

Suggested Citation

  • Abdelrahman Elzahi Saaid Ali, 2022. "The Challenges of Islamic Trade Finance in Promoting SMEs in IsDB Member Countries," Springer Books, in: Empowering the Poor through Financial and Social Inclusion in Africa, chapter 0, pages 103-117, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-00925-9_7
    DOI: 10.1007/978-3-031-00925-9_7
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