Strategies for the Islamic Financing of Muslim-Owned Small and Medium Enterprises (SMEs) in Singapore

The ecosystem of Small and Medium Enterprises (SMEs) in Singapore is one of the leading practices internationally. While many policies and support programs are in place to encourage the establishment of start-ups and SMEs in the city-state, there are still gaps in SME financing, particularly the financing of local Muslim-owned SMEs. Thus, the above concern about the underserved segment of Muslim-owned SMEs in Singapore has served as a motivation for this study. The aim of this research is to investigate how we can leverage on Islamic Finance for the Shariah-compliant financing of Small and Medium Muslim-owned enterprises. The key questions addressed in this research are threefold. Firstly, how are the financing needs of Muslim-owned SMEs currently being met? Secondly, what financing problems and challenges do Muslim-owned SMEs encounter in Singapore? Thirdly, how can Islamic Finance services be further developed to support Muslim-owned SMEs in Singapore? With the above research questions in mind, the researcher has sought for answers through a comprehensive study of the current landscape of SME financing in Singapore and a questionnaire of twenty Muslim-owned SMEs to identify their financing needs, their perspectives of Islamic Finance, and some of the financing challenges that they face. The results of the above approaches revealed that Islamic Finance services are limited in Singapore. Also, the questionnaire responses also show that entrepreneurs feel that there lies a great potential for Islamic Finance to better address the financing needs of the underserved segment of Muslim-owned SMEs. Regarding the financing challenges, they faced, common problems cited were their limited access to finance, rejection of loan applications, difficulties in producing supporting documents, limited opportunities for startups, and the lack of for Shariah-compliant financing. Lastly, the study concludes by proposing a strategic framework on how to integrate Islamic Finance into Singapore’s SME ecosystem, expand its range of services, and increase the level of awareness of the local population about Islamic Finance. The strategic framework proposes for the joint collaborations of key stakeholders at every level to ensure a successful strategy in Islamic Financing of SMEs in Singapore.