Mudarabah and Musharakah as a solution to financing SMEs: An ARDL approach

Abstract

Small and Medium Enterprises (SMEs) face various challenges at all levels that impede their development. However, the issue of access to financing remains the major challenge to overcome. This research investigates the possibility of considering some Islamic finance products as a solution to the problems encountered by SMEs when accessing financing. Indeed, this article aims to study the impact of Mudarabah and Musharaka, the main products used in Islamic venture capital operations, on the performance of SMEs in Malaysia, given that this country is a pioneer in Islamic finance. To do so, an empirical analysis using ARDL modeling in the Eviews software was conducted to model the impact of the key mechanisms of Islamic venture capital, Mudarabah, and Musharaka, on the performance of SMEs in Malaysia.