A B S T R A C T
Article history:
Received 26 April 2023
Received in revised form
10 August 2023
Accepted 6 September 2023
Small and medium-sized enterprises (SMEs) play an increasingly vital role in
the economic advancement of nations. Nonetheless, these enterprises often
face challenges in accessing formal external funding channels. The
emergence of Islamic microfinance presents a potential solution to alleviate
the financial constraints confronting SMEs. Given the primary mission of
Islamic microfinance institutions (MFIs) to uplift the socio-economic status
of the underprivileged, it becomes imperative to scrutinize their influence on
SME growth. This study aims to ascertain the effects of Islamic microfinance
on SMEs in Mogadishu, Somalia. Employing a systematic random sampling
method, a carefully selected sample of 100 SMEs was determined. A
structured survey framework was developed to collect data, and data
analysis was conducted using the Statistical Packages for the Social Sciences
(SPSS). The study reveals that micro-savings significantly contribute to SME
augmentation, with comparatively limited impact from micro-insurance.
While many SMEs benefit from Islamic microfinance, there is a shortfall in
the attainment of required funding among beneficiaries. This research sheds
light on concerns related to borrower defaults, pre-financing screening
deficiencies, resource inadequacy, and the absence of governmental and
donor support in Islamic microfinance institutions. The implications extend
to future research opportunities, emphasizing the need for governmental and
stakeholder efforts to streamline financing acquisition from MFIs by relaxing
collateral requirements for SME borrowers