Partnership As an Approach to Finance SMEs

Abstract

Financing SMEs is considered one of the most important tools in middle east. To support SMEs, and sustain their business, the existence of financial solutions that comply with the Islamic rules will provide more alternatives for SMEs to finance their short-term obligations represented in profit and loss sharing tools (Musharakah and Modaraba). This study is based on using partnership as an approach to finance SMEs. The study was conducted in Kingdom of Bahrain. Recently, many financial institutions started to adopt many Islamic financial tools. The purpose of this study is exploring how the partnership is different from the traditional financial solutions and the impact of it on nonbanking financial institutions and on the financial services.  The study was conducted through a five-points Likert scale questionnaire as the research instrument. The respondents of the study are the employees in nonbanking financial service providers and SMEs in Bahrain. The statistical techniques used in the study are Correlation Analysis, General Linear Model Structural Equation Methods and Path Analysis. The results showed a strong positive and significant correlation between partnership, non-banking financial institutions, financial services and SMEs. The study provides suggestions and recommendations for SMEs in Kingdom of Bahrain to have more alternatives to finance their operations.