The Iranian Association of Islamic Finance held an international webinar on “The Effective Methods to Finance Small and Medium Enterprises (SME) and the Role of Public in it” on the 10th of September, 2024 at 2:00PM Iran Standard Time.

Speaker: Dr. Mohamed Eskandar Shah, Associate Professor of Islamic Finance, Hamad Bin Khalifa University, Qatar

SME Financing: The Challenges and Opportunities for Islamic Finance

The global risk environment is evolving, presenting existential challenges to many small and medium-sized enterprises (SMEs). In recent years, SMEs have contended with several significant risks, including the COVID-19 pandemic, climate-related threats, and geopolitical instability. While some businesses have managed to persevere, many have been forced to cease operations. These challenges are expected to persist, exacerbated by ongoing crises. SMEs are confronted with multiple difficulties, such as disruptions in supply chains, the urgent need for digital transformation, and talent shortages resulting from high employee attrition.

This presentation explores effective strategies to enable SMEs to navigate these challenges and enhance their sustainability and resilience. It is structured into two parts: the first addresses the transformation that SMEs require, while the second introduces an innovative tool to empower SMEs, with a focus on Islamic finance.

The first section examines the necessary policy interventions for the transformation of SMEs, covering customer engagement, supply chain management, and financial governance. In addition to outlining these three strategic pillars, the discussion emphasizes the pivotal role of digitalization as the key enabler of a comprehensive transformation strategy for SMEs. It highlights the primary issues associated with each policy area and propose solutions through comparative analysis with available market options. Moreover, this section will cover recent trends affecting SMEs.

The second part of the presentation focuses on innovations in SME financing, particularly the role of Islamic finance in addressing conventional financial challenges. It explores

best practices and the required transitions in Islamic finance to equip SMEs to become more sustainable and resilient in the face of macroeconomic shocks.