[go: up one dir, main page]
Everand Logo

Welcome to Everand!

  • Discover millions of ebooks, audiobooks, and so much more with a free trial

    From $11.99/month after trial. Cancel anytime.

    Islamic Finance for SME's
    Islamic Finance for SME's
    Islamic Finance for SME's
    Ebook170 pages1 hour

    Islamic Finance for SME's

    By Hussein Elasrag

    ()

    Read preview

    About this ebook

    Since the Small and Medium Enterprises (SMEs) are important for the economy, the Islamic banks and Islamic financial institutions must play a significant role in financing these businesses. Supporting SMEs are one of the objectives of religious institutions, thus the most important goal of Islamic banks and Islamic financial institutions is to contribute to the economic and social development of the society. This study aims to analyze the appropriateness of the Islamic financial system for SME finance.

    LanguageEnglish
    PublisherHussein Elasrag
    Release dateNov 10, 2024
    ISBN9789774459016
    Islamic Finance for SME's

    Read more from Hussein Elasrag

    Related to Islamic Finance for SME's

    Related ebooks

    Finance & Money Management For You

    View More
    View More

    Related podcast episodes

    Related categories

    Reviews for Islamic Finance for SME's

    0 ratings

    0 ratings0 reviews

    What did you think?

    Tap to rate

    Review must be at least 10 words

      Book preview

      Islamic Finance for SME's - Hussein Elasrag

      Islamic Finance for SME`S

      Hussein Elasrag

      Copyright © 2016 Hussein Elasrag

      All rights reserved.

      Table of Contents

      LIST OF ABBREVIATIONS

      Introduction

      CHAPTER 1: Understanding SMEs

      SMEs Definitions

      1. Quantitative Criteria for Defining SMEs

      2. Qualitative Criteria for Defining SMEs

      SMEs distribution in various parts of the world

      Contribution of SMEs to employment and economic growth

      1- Contribution of SMEs to employment

      2- Number of SMEs in the total enterprise population, in the informal economy

      3. SMEs and job creation

      SMEs and Access to Finance

      CHAPTER 2: Understanding Islamic finance

      Fundamentals of the Islamic finance

      Shari'ah law defined

      Key Shari'ah principles and prohibitions relevant to finance

      Regulation of Islamic Finance

      Global Islamic financial infrastructure

      Islamic banking

      What is Islamic banking?

      Advantages of Islamic banking

      Challenges of Islamic banking

      The origin of the modern Islamic bank

      The Importance of Religion in Islamic Banking

      CHAPTER 3: Islamic Financing techniques for SMEs

      Basic Islamic financial instruments

      A. Trade with mark-up or cost-plus sale (Murabaha)

      B. Profit-sharing agreement (Mudaraba)

      C. Equity participation (Musharaka)

      D. Leasing (Ijara)

      E. Salam

      F. Istisna

      Islamic bonds (Sukuk)

      CHAPTER 4: key elements required to unlock the full potential of Islamic finance for SMEs

      (a) Creating an Enabling Environment

      (b) Developing the industry and markets

      (c) Ensuring financial stability

      References:

      This Book

      Small and Medium Enterprises (SMEs)  make up the bulk of the economic tissue of the economy. In developing countries, they represent the majority of employment, including female employment. Investing in SMEs is a long-term and smart strategy, with sustainable returns that multiply across regions, countries and societies. SMEs constitute the overwhelming majority of firms. Globally, SMEs make up over 95% of all firms, account for approximately 50% of GDP and 60%–70% of total employment, when both formal and informal SMEs are taken into account. This amounts to between 420 million and 510 million SMEs, 310 million of which are in emerging markets. Promoting access to finance for SMEs has been on the global reform agenda since the global financial crisis.  Nevertheless, SMEs consistently cite lack of access to finance as a severe constraint. Often, the costs and risks of serving SMEs are perceived to be too high by banks. Because of information asymmetries and the high costs of gathering adequate information to assess the creditworthiness of typical SME borrowers, banks are usually reluctant to extend them unsecured credit, even at high interest rates. Subsequently, many SMEs with economically viable projects, but inadequate collateral, cannot obtain the most needed financing from traditional lenders. The International Finance Corporation (IFC) reports that top banks serving SMEs in non-OECD countries reach only 20% of formal micro enterprises and SMEs, and just 5% in sub-Saharan Africa. Underscoring the scale of problems with access to finance, the Asian Development Bank (ADB) estimates that there is a global gap of US$ 1.9 trillion between the supply and need for trade finance alone. This gap widens especially at the ‘lower end of the market’, where almost half of SMEs requests for trade finance are estimated to be rejected, compared to only 7% for multinational corporations. According to The World Bank estimates, approximately 70 percent of all MSMEs in emerging markets lack access to credit.  While the gap varies considerably between regions, it’s particularly wide in Africa and Asia. The current credit gap for formal SMEs is estimated to be US$1.2 trillion; the total credit gap for both formal and informal SMEs is as high as US$2.6 trillion. According to several research studies in the last decade there are greater opportunities for development and growth of Islamic financial system because Muslim community is eager to take financial products and they are willing to spend their lives according to their religion. Islamic Finance is a promising solution to SMEs to meet the requirements of formal financing. And can prove particularly effective to facilitate access to finance for SMEs. Although there is a wealth of literature around Islamic finance and around finance in general for SMEs, literature that draws and connects these two areas together is limited. The purpose of this book is to investigate the opportunities of development and growth as well as the main challenges to Islamic finance for SMEs. This book will help to deepen understanding of the concepts of Islamic finance   as well as SMEs. In addition to evaluate how Islamic financial institutions can support SMEs.

      LIST OF ABBREVIATIONS

      Enjoying the preview?
      Page 1 of 1