Islamic Financial Institutions And Their Impact On The Development Of Halal SMEs In Nigeria

Abstract

Islamic Financial Institution is considered Halal and Shariah-compliant institution that effectively developed and impacted the role of developing Small Medium Enterprises by sharing similar value, principle, and market activities under Shariah-compliant and business sector. Despite its similarities, there is still low penetration of Islamic financial institutions on the Halal business instrument. However, the business should not only concentrate on Halal business but also financing SMEs is essential. The purpose of the study is to investigate the impact of Islamic Financial Institutions on the development of Halal SMEs in Nigeria. A 350 survey questionnaire was distributed to the twenty (20) Halal Small Medium Enterprises using Structural Equation Modelling and random sampling as an essential investigation tool. The findings justified that the development of SMEs with a significant number of business units and financing from Islamic financial institutions indicates a positive direction and promotes the development of SMEs ' relatively and broader representation of the Halal industry. The study shows a general overview of the positive impact on Islamic financial institutions towards the financing Halal sector and addresses the rate of unemployment in Nigeria. The study recommends strategies for creating a partnership with Middle-East and Asian investors for more effective models and application techniques for financing SMEs and addresses the rate of poverty and unemployment in the country.

Islamic Social Finance In Addressing Poverty Reduction And Economic Growth: Using Structural Equation Modeling

“…Zakat is one of Islamic social financing that can play an essential role in overcoming difficulties by supporting societies. Besides, the institutions of Zakat can play a significant role in helping the government deal with vulnerability if they are properly institutionalized in the country (Muhammad & Bin Ngah, 2020). Note that implementing the government's Movement Control Order (MCO) in Malaysia resulted in Zakat institutions providing funds to assist people through the different programs for the victims of COVID-19 (Hambari et al, 2020).…”

“…Similarly, Ibrahim (2015) discovered that Zakat plays a significant role in mutual assistance to Muslim communities. Zakat assists in redistributing wealth, reducing inequality, alleviating poverty, and as well assist in demonstrating the willingness of rich Muslims to submit themselves to the commands of the Almighty Allah by worshipping Him and assisting in implementing His injunctions (Muhammad & Bin Ngah, 2020). Saad and Farouk (2019) study relating to Zakat management in Nigeria.…”

“…Waqf implies a devout and charitable donation. Generally, Waqf has been the mechanism for social development that incorporates maintaining and providing libraries, mosques, shops, scholarships, and educational institutions (Seman et al, 2021;Mohadi & Akli, 2022;Muhammad et al, 2023). Waqf serves as an instrument for eradicating poverty and the socio-economic development of Muslim societies.…”

“…It has established a network that covers all the areas of human life, such as education, religion, health, social, and economic sectors (Medias et al, 2022). Muhammad & Bin Ngah (2020) pointed out Waqf as a powerful concept discovered by scholars and Islamic scholars and considered an essential tool for the welfare of the masses. Waqf has long played an important role in various Islamic societies and social development.…”