Abstract
The objective of this paper is to examine the influence of Islamic financing on the performance of small-medium enterprises in Lasanod Somalia. Many businesses obtain financings such as Murabaha, Microfinance, and Qard Al Hassana from Islamic banks operating in Somalia to raise funds and capital required to expand and run their businesses smoothly. This study employs a quantitative research approach. A total of 148 questionnaires were distributed and collected from Small Medium Enterprises owners and workers in Lasanod Somalia who obtained Islamic financing from local Islamic banks in Somalia. The responses were analyzed using SPSS 21. Descriptive statistics, correlation analysis, and bivariate regression analysis were conducted to investigate the impact of Islamic financing on the performances of businesses operating in Somalia. Small Medium Enterprises owners and workers believe that Islamic financing has helped their businesses to obtain the funds needed for their businesses to grow and expand beyond existing markets. Furthermore, this study suggests there is a positive relationship between Islamic financing and business performance. The finding of this paper is statistically significant.
Highlights
Formal financial institutions and the commercial banking sector have been missing in Somalia since the fall down of Somalia's central government in 1991
The objective of this paper is to examine the influence of Islamic financing on the performance of small-medium enterprises in Lasanod Somalia
The aim of this study was to explore the impact of Islamic financing on the performance of small and medium-sized enterprises (SMEs) in Lasanod Somalia
Summary
Formal financial institutions and the commercial banking sector have been missing in Somalia since the fall down of Somalia's central government in 1991. Before beginning the civil war, the financial sector of Somalia was formal and strong, including four financial institutions, namely, the Central Bank of Somalia, State Insurance Company, Somali Development Bank, and Commercial and Saving Bank (Mohamed, 2019). After the fall of the central government, privately-owned financial institutions began operating and providing basic financial services. They started with money transferring (earlier) and moved to the financial intermediary (Islamic banking) offering deposit and financing products. Somalia Islamic banks currently finance many private sector activities, including SMEs financing, Personal financing and home financing, by using modes of finance such as Murabaha, Musharaka, Mudaraba, Salam and Qarad Hassan (Adan, 2014)
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