The Role of Islamic Banking in Financing Small and Medium Enterprises (SMEs) in the Gambia

Small and Medium Enterprises (SMEs) are the economic drivers and the key contributors to GDP worldwide. SMEs create job opportunities for both skilled and unskilled person and contributes to the growth and development of any economy in most developing economies The Gambia, not an exception. However, despite widespread developments in the SME sector in recent decades, the lack of access to finance remains a challenging obstacle for SME development. Islamic modes of financing can serve as a solution to the capital constraints faced by SMEs and can easily facilitate access to finance for SMEs in The Gambia. The general objective of this study was to obtain an informed understanding of the status of Islamic banking for the support of SMEs in The Gambia. The study adopted an exploratory research design. Primary data were gathered via questionnaire responses from 87 SMEs in the Gambia. The findings indicate that lack of access to finance remains a significant challenge for SMEs in The Gambia. Furthermore, the results show that internal sources of finance mainly SME owners' savings and assistance from family and friends were the primary sources of funding for SMEs start-ups. The findings also show that SMEs owners are willing and motivated to use Islamic modes of financing and would be primarily supported and employed if offered. The study makes recommendations to develop the SME sector and promote the use of the Islamic modes of finance in solving the financing constraints faced by SMEs. Furthermore, the existing Islamic bank may strengthen its product innovation to fully serve the financial needs of SMEs by providing Islamic modes of financing to meet the potential demand of SMEs.