REPUBLIKA.CO.ID, JAKARTA - The dynamics of the global economy demand new and innovative approaches for countries in managing their economies, including the management of their public finances and their fiscal policies. Islamic economic paradigms can offer valuable insights and solutions to deal with these challenges.
Director General of the Islamic Development Bank Institute (ISDBI) Sami Al Suwailem said that MSMEs have an important position in the global economy. However, SMEs' access to financing is still a major obstacle.
“Risk sharing schemes and financing strategies for SMEs can be a solution to help SMEs grow,” he said at the Islamic Public Finance Role & Optimization event in Jakarta, not long ago.
Suwailem explained there are three ways to institute fair and equal financing schemes for SMEs or risk sharing. First, there should be a rating framework based on the risks of SMEs or microfinance institutions.
“Secondly, there is a capital market for SMEs; and third, there is a hedging mechanism,” he said.
He also recommended the provision of a complete and robust financing ecosystem framework, which includes sharia financing schemes, including financing guarantees or hedges.
In addition, a broad, fair and equivalent SME financing scheme or product is needed that is able to provide access to capital, manage risk optimally, and integrate with digital trading platforms. Thus, MSMEs can break down barriers and challenges in various fields.
“By building the SME capital market, we can reduce the information asymmetry between MSMEs, Sharia financial institutions, and investors,” he said.
Suwailem added that MSMEs are essential to address employment challenges in the developing world. In fact, the sector represents about 90 percent of listed companies worldwide. “They also account for more than 50 percent of jobs worldwide,” he said.
Suwailem details that in high-income countries, SMEs account for 50 percent of GDP and create more than 60 percent of jobs. Therefore, the empowerment of SMEs is not only important for developing SMEs, especially in developing countries, but also contributes greatly to the efficiency, productivity and added value of SMEs.
“In addition, MSMEs are also an important source of tax revenue,” he said.
