The Prospect of Waqf in Financing Small and Medium Enterprises (SMEs) in Yemen

Abstract

The role of small and medium enterprises (SMEs) in economic development has been duly recognised. However, SMEs encounter a number of challenges. The most pressing obstacle SMEs face is the lack of finance. Therefore, it is extremely important to find new and suitable finance sources in order to support SMEs either in their establishment or growth phases. Waqf is regarded one of the best sources of finance in the Islamic financial system. There is much potential in its use to finance SMEs financing. The present study explored the prospect of Waqf as an Islamic financial instrument to finance SMEs. It further examined a proposed modified Waqf model and whether it was applicable in Yemen. The study has adopted a qualitative method in the form of semi-structured interviews with 6 experts from Waqf institutions and from SMEs developmental institutions. The experts interviewed are mainly SMEs owners, Waqf directors and beneficiaries specialized in the areas of Waqf and SMEs. The findings of the study indicate that Waqf appeared to be one of the most important instruments in financing such economic activities as it can play a crucial role in financing SMEs. Further, the study significantly contributed by suggesting a new method that will help in financing small and medium enterprises (SMEs) in Yemen. Thus, providing a finance for these firms will help to create more jobs for the low income, which in turn helps in the economic development.