EXPLORING THE SOURCES OF ISLAMIC AND CONVENTIONAL FINANCE FOR SMALL AND MEDIUM ENTERPRISES IN SAUDI ARABIA

Abstract

Traditionally entrepreneurs and SME owners requires funding for their ventures. SME financing is one the fast-growing sector in finance industry. The lack of fund a shortage of paid-up capitals and credits make small and medium (SMEs) enterprise vulnerable to fluctuation in the supply and demand market economy. This study aimed to compare between the Islamic and traditional financing sources for SMEs in Saudi Arabia to increase awareness in the alternatives available in both conventional and Islamic financing, their characteristics and advantage and disadvantages of using the both methods. The study was using both primary and secondary data. Primary data was collected using a survey, distributed 100 SMEs owners. The results were analyzed using the percentages, tables and SPPS software. T-test was to check the hypothesis and Cronbach's Alpha was to check the reliability of the percentage tables. The finding of the study showed that most of SMEs owners preferred Islamic sources of funds and selected Ijarah and Murabaha as their favorite products.