Small and Medium-Sized Enterprises (SMEs), Islamic Bank, and Religiosity

Abstract

This paper attempts to examine the role played by Small and Medium-sized Enterprises (SMEs) in absorbing workforce in North Sumatra. This paper argues that the SME sector succeeded facing the impact of the economic crisis in 1998, 2008, and the European crisis in 2011. Based on the findings of this study, it can be concluded that education, labor force, financing, profit sharing, and religiosity have simultaneously given a positive impact on SMEs in North Sumatra. Even though it is influential, the coefficient of elasticity for profit, financing, education, labor force, and religiosity is inelastic towards the development of SMEs in North Sumatra. The findings imply that Islamic banks are unable to deal with the SMEs market. Thus, it requires serious attention from Islamic banks to play important role in developing SMEs in North Sumatra.