The Impact of Islamic Microfinance on Small and Medium Enterprises (SMEs) in Somalia

Abstract

The goal of this study is to examine the influence of Islamic microfinance on small and medium enterprises in Mogadishu, as well as how to acquire strategies to accomplish concrete progress for SMEs in the country, as well as to reduce unemployment and generate small jobs. In this study, I employed qualitative analysis and excerpts from several articles to analyze this topic through similar themes or papers. Islamic microfinance is a significant tool for eradicating poverty and restoring hope to unemployed people, as well as converting them into entrepreneurs, resulting in a favorable image of society. The monies granted to SMEs by Islamic microfinance organizations form the backbone of business activities. Small companies in Mogadishu have benefited from the initiative, and it has saved the lives of many families; thus, continuing the program will unite the country. The major goal is to raise awareness about the IMF's good influence on SMEs in Mogadishu, Somalia, as well as how people perceive the IMF and whether they can profit from it properly. However, the impact of Islamic microfinance on small company operations in Mogadishu city is far less than what the city's market people expect. The obstacles facing Mogadishu in adopting ISMF include a shortage of ISMF, a lack of banks with sufficient financial resources to participate in SMES firms, and a high rate of ISMF imposed by financial institutions on SMES owners or entrepreneurs, and a lack of trust between banks and consumers. Entrepreneurs, on the other hand, achieve SMES operations by soliciting finances from various angels such as families, relatives, private companies, and charitable foundations.