ISLAMIC SME FINANCING IN MALAYSIA
AN ANALYSIS OF PRODUCT OFFERINGS BY ISLAMIC BANKS
Keywords:
Islamic finance, SME financing, Shariah-compliant products.Abstract
Small and Medium Enterprises (SMEs) are vital to Malaysia’s economic growth, yet many faces persistent challenges in accessing suitable financing. Islamic finance, grounded in Shariah principles, presents an ethical and inclusive alternative to conventional financial systems, particularly for SMEs operating in the halal economy. This study aims to examine the Islamic SME financing products provided by Islamic banks in Malaysia. Using a qualitative content analysis approach, data were collected from annual reports, product disclosure sheets, and official websites of 16 Islamic banks operating in Malaysia for the year of 2025. The findings reveal that while most banks offer financing products such as term financing and working capital facilities, primarily structured around Tawarruq and Commodity Murabahah. There is limited use of equity-based or risk-sharing instruments like Musharakah or Mudarabah. Larger and more established banks tend to offer more diversified and specialized products, while others offer limited SME-focused services. The study concludes that although Islamic banks have made progress in serving SMEs, their offerings remain predominantly debt-based and conventional in structure. There is a need for greater innovation and customization to fully align Islamic SME financing with Shariah principles and the diverse needs of SMEs.
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