The social and cultural impact on firms’ access to finance in an Islamic environment

In this chapter, the focus is on the extent to which firms in a sample of Islamic countries face obstacles to accessing finance. Specifically, the chapter provides an account of the determinants of firms’ access to finance in the sample of Islamic countries. A set of firm-level survey data, based on private sector firm responses, is used to analyse the impact of firm-level and country-specific factors on the extent to which firms in the sample of Islamic countries face constraints to finance. Further, the analysis introduces country-level factors and examines the impact of those factors at different levels of economic, financial, institutional and human development of the sample countries. The results suggest that certain firm characteristics, such as age, size and foreign ownership, predict financing constraints, while others, such as sectoral activity (that is, manufacturing), external audit of accounts, government ownership and internal funds-based investment have predictive power that varies along different institutional conditions and in accordance with the model specification.