“Islamic banking finance to small entrepreneurs: a case of Kenya”, Mohammed Nurul Alam and Nurulavn Binte Noor
Mohammed Nurul Alam Faculty of BBA (Accounting) Yorkville University, Canada Email:email@example.comfirstname.lastname@example.org Nurulayn Binte Noor Research Assistant and Student Wilfrid Laurier University, Canada Email: email@example.com.
Purpose: The purpose of this paper is to delineate Islamic banking finance and its impact on SMEs (Small and Medium Enterprises) and micro entrepreneurs in a particular country context.
Design/methodology/approach: An Institutional Network theoretical frame of references is used to study this particular phenomenon. The research methodology applied in the study is of a qualitative nature. A multiple explanatory case study is adopted as a research strategy in order to focus on contemporary phenomenon within the real life context of SMEs and micro entrepreneurs.
Findings: Among others, the findings include the extent to which interest free financing by Islamic banks contributes to developing network relationships between the lenders and the borrowers and other related economic actors in a society. The findings also reveal the impact of societal sector institutions in accelerating the Islamic financing activities in a particular socio-cultural environment.
Research limitations/implications: The study mainly relates the Islamic banking finance to SMEs and micro entrepreneurs by the First Community Bank, the leading sharia-based bank in Kenya.
Practical implications: Since lending organisations under the Islamic Financing System (IFS) renders services to their clientele without interest, the lender-borrower relationships are featured by a close supervision of their borrowed funds. While lending funds to its customers, the Islamic banks invest funds under different investment modes of funding such as the Mudaraba, Musharaka, Murabaha and Bai-Muajjal.
Originality/value: The study is based on the socio-cultural context of Kenya where the paper premised on its theoretical perspective and ‘Institutional-Network Approach’ in the field of Islamic finance towards SMEs and micro entrepreneurs.
Keywords: SMEs; Micro Entrepreneurs; First Community Bank; Kenya; Institutions; Network Relationships; Lender-borrower relationships; Islamic Banking; Mudaraba; Musharaka; Murabaha.