The Role of Micro, Small, and Medium Enterprises Toward Sustainable Development Goals Through Islamic Financial Institutions

Abstract

Research regarding the relation between MSMEs, IFIs and SDGs is interesting topic, many studies have been done. However, there are very scare that involved comprehensive approach. It is therefore aim of the study can be categories in two side. First side from demand perspective: to assess the perceptions and knowledge of MSMEs on their own capacities to access Islamic Finance Institutions and to identify factors why they use or do not use IFIs as source of financing. From supply side: to what extend the role IFIs to support MSMEs toward SDGs, and what are the possible strategies to deal with the problem related this issues. This research basically descriptive research by using mix method. From demand side used quantitative method by involving 384 respondents and semi structures interview to select the important person. The finding revealed that IFIs support MSMEs towards SDGs achievement in terms of poverty alleviation, industrial innovation, infrastructure, financial stability, economic growth, and income distribution. Currently, from demand side, the intention to use and access MSMEs to IFIs is still very low, but in the future could be better, if strategy is implemented such financial literacy that improve MSMEs understand the advantages and features of Islamic financial products. Besides that, the role of government concerns to support the regulations and policies. From supply side, support IFIs to strengthen the role MSMEs toward SDGs is fair, it is because the number of IFIs financing available to support MSMEs is quite enough in average just 50% from total financing. However, Islamic microfinance has good chance to support MSMEs financing needed by increasing their capacity, hence, the role of government very urgent. This study recommends for future research to explore important factor influenced the two sides supply side and demand side as well.