HOW SHARIA FINANCING CAN IMPROVE THE WELFARE OF MSMES: AN ANALYSIS FROM THE BEHAVIORAL SHARIA FINANCE PERSPECTIVE

Muhammad Haris Riyaldi; Teuku Muhammad Syahrizal; Khairil Umuri

doi:10.47663/ibec.v4i1.397

Authors

Muhammad Haris Riyaldi Universitas Syiah Kuala
Teuku Muhammad Syahrizal Universitas Syiah Kuala
Khairil Umuri Universitas Syiah Kuala

DOI:

https://doi.org/10.47663/ibec.v4i1.397

Keywords:

Sharia financing, MSMEs, behavioral finance, welfare, Islamic finance, financial inclusion

Abstract

Micro, Small, and Medium Enterprises (MSMEs) play a critical role in the economic development of many countries. Despite their importance, MSMEs face significant challenges, particularly in accessing appropriate financing. Sharia financing, grounded in Islamic principles such as profit-and-loss sharing and prohibition of interest (riba), offers a promising alternative. This study explores how sharia financing can enhance MSME welfare through a behavioral finance lens, emphasizing the influence of religious values, trust, and risk perception on financial decision-making. Using a qualitative literature review approach, this research synthesizes findings from reputable international and national journals. The results highlight that Sharia financing increases MSMEs' welfare by aligning financial products with their religious beliefs and behavioral tendencies, thereby improving financial inclusion and business sustainability. Challenges such as low financial literacy and product awareness remain and require targeted interventions. The study provides theoretical and practical insights for Islamic financial institutions and policymakers aiming to promote Sharia financing for MSMEs.

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