Exploring the Role of Islamic Finance in Supporting SME Growth: A Review Study

Small and medium-sized businesses (SMEs) are the primary drivers of economic growth, leading to the creation of new jobs, the introduction of new products and services, and the development of innovative, environmentally sustainable technologies. Their activities help to stabilize the economy and significantly reduce the number of people living in poverty. Having said this, the fact remains that many SMEs are still not getting enough funding, a situation that not only halls the expansion but also threatens the very existence of these businesses. Islamic finance, which is the Shariah-compliant version of the conventional interest-based loans, is a feasible alternative that is inclusive as well as ethical. The restrictions of the study will be documents and publications that are from 2020 to 2024 in connection with the utilization of Islamic products in supporting the growth of SMEs. It highlights the limitations that organizations, including the promotion of financial education, are encountering, the impact of legislative frameworks, and how they act as barriers to the takeup of Islamic finance by SMEs. As per the results obtained, the infusion of Islamic finance in the SMEs' business plans can be expected to be a catalyst for equitable economic growth, the concomitant decrease of financial exclusion, and the creation of an entrepreneurial spirit. However, further empirical evidence is needed to quantify the local differences and to measure their effects over the long term.