ERF 27th Annual Conference
Favoring the Small and the Plenty: Islamic Banking for MSMEs
No.
ERF27_66
Publisher
ERF
Date
May, 2021
Topic
G3. Corporate Finance and Governance
G2. Financial Institutions and Services
While MSMEs form the backbone of many countries, most of them suffer from limited access to finance. We extend the literature by examining whether Islamic banks, compared to their conventional peers, favor more the MSMEs credit market segment in Turkey. We do this by considering various aspects of the lending behavior towards MSMEs (total lending, foreign currency lending, loan commitments, loan quality, revenues, and cyclicality) across different MSMEs size categories (micro, small and medium-sized firms). Our results show that once we control for bank-specific characteristics, we find that Islamic banks are more engaged with MSME financing and generate more revenues from servicing MSMEs. However, concerning the quality of the MSME lending portfolio, no distinguishable patterns were observed between Islamic and conventional banks. Further, our results show that MSME lending by Islamic banks tend to be on average less cyclical than that of conventional banks.
Authors
Omneya Abdelsalam
Professor, Durham University
Research Fellows
Ahmet Faruk Aysan
Associate Dean for Research, Hamad Bin Khalifa...
Authors
Mustafa Disli
Assistant Professor at the College of Islamic...