Contributing 60 percent to the gross domestic product (GDP) and 97 percent to the national workforce, small-and medium-scale enterprises (SMEs) are the backbone of the Indonesian economy. Despite their crucial roles, SMEs are still facing persistent issues.
The first issue is that SMEs have limited access to finance. Until 2014, from nearly 60 million SMEs, only 30 percent had access to finance — 23 percent from banks and 7 percent from non-bank financial institutions (NBFIs). Asymmetric information between borrowers and lenders is the major impediment of this terrible condition.
Having no collateral and financial statements — two common tools to overcome asymmetric information — stifles SMEs’ access to finance.
To surpass this issue, Islam offers an abundance of potential social funds calledwaqf (Islamic end...
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