Kuala Lumpur: About 35 per cent of the Small and Medium Enterprises (SMEs) in the Middle East and North Africa are excluded from the formal banking sector, with an Islamic financing gap of $13 billion (Dh47.73 billion), Malaysian Prime Minister Najib Razak said on Tuesday.
Addressing more than 3,000 delegates at the Kuala Lumpur Convention Centre, Razak stressed on the importance of SMEs, and the role they play in the Malaysian economy, contributing more than 36 per cent of the country’s GDP (Gross Domestic Product) and nearly a fifth of its exports.
Across the Islamic world, there exist millions of small and medium enterprises, and they a lack of funding is among their majory challenges, Razak said. “Given their size, SMEs require greater assistance in terms of financial and other resources. And in this, I believe they can be greatly helped by another part of the business spectrum that will be Islamic finance,” he said.
As of last year, Malaysia’s total SME financing exposure in Islamic finance grew by 40.5 per cent year-on-year, to more than $10 billion.
Islamic finance, with its equity-based partnership schemes, offers a truly workable alternative to conventional banking, a partnership that also embeds the participating financial institution as a provider of advice and consultancy, he added.
“Islamic finance is currently gaining more and more visibility and is in a better position to assist the SME industry. Islamic finance, with its equity-based partnership schemes, offers a truly workable alternative to conventional banking, a partnership that also embeds the participating financial institution as a provider of advice and consultancy,” he added.
The total global Islamic financial assets are estimated at $2 trillion, though very miniscule compared to the total global assets.
“It is still very promising when one considers that Islamic finance has only started to gain traction in the last decade. In fact, it is worth recapping again its progress over that time,” Razak said.
