Assessing the financial performance of SMEs through islamic financing schemes

This paper evaluates the financial performance of Small and Medium Enterprises (SMEs) of services sector in Malaysia, from the periods of 2003 to 2007. These firms have taken the Islamic guarantee schemes as provided by the Credit Guarantee Corporation Malaysia Berhad (CGC), which were introduced to meet the demand of entrepreneur for Shari´ah-compliant financing facilities. The results indicate that the firms were efficient and able to sustain profit, though some of the firms did not perform well. These findings suggested that the nature of Islamic financing should be changed from debt to equity financing, since equity financing could generate more income and the problem of non performing financing could be minimised.