Innovation and Challenges in Sharia Financial Services for Micro, Small and Medium Enterprises

Abstract

The purpose of this research is to investigate the creative ways and challenges associated with offering Sharia-compliant financial services to Micro, Small, and Medium Enterprises (MSMEs). Using a comprehensive literature review methodology, the article evaluates existing research, case studies, and industry reports to identify major advances and ongoing barriers in this field. The findings show substantial advances in ethical finance, risk-sharing systems, and interest-free models that adhere to Sharia standards. However, the study also reveals important gaps, such as legislative impediments, MSMEs’ lack of awareness and comprehension of Sharia financial products, and the need for financial institutions to enhance their competence. The gap analysis emphasizes the importance of policy reforms, specific educational programs, and strategic alliances to address these difficulties. This article emphasizes the potential of Sharia financial services to promote a sustainable and equitable financial environment for MSMEs, assuming that these deficiencies are addressed via collaborative efforts by all stakeholders.