Invigorating the Expansion Capacity of Small Manufacturing Firms Through Islamic Financing

Abstract

In Nigeria, the need to invigorate the capacity of small manufacturing firms for profitable expansion has remained on the front burner of researchers and prompted the need to embrace Islamic financing in Nigeria. This study examines the effect of zero or low-interest rates, advisory services from Islamic financial institutions, and prompt responses to granting of credit facilities on the expansion capacity of small manufacturing firms in Nigeria. A structured questionnaire was administered to registered small manufacturing firms in Nigeria. Structural Equation Model (SEM) was employed to analyse hypotheses. From the analysis of the study, there is evidence to conclude that zero or low-interest rate and prompt responses to granting of credit facility positively contributes to the expansion capacity of small manufacturing firms in Nigeria. However, advisory services from Islamic financial institutions do not significantly contribute to the expansion capacity of small manufacturing firms in Nigeria. This, therefore, implies that Islamic financial institutions do not engage the small manufacturing firms in strategic managerial support in addition to the funds from Islamic financial institutions. Arising from the findings of this study, this study hereby recommended that Islamic financial institutions should consider providing managerial support in addition to the zero-interest-rate and prompt payment of credit facilities; support is in the form of involvement of Islamic banks in the managerial operation of small manufacturing firms; Islamic financial institution should consider providing technical support in addition to funds from the Islamic financial institutions; Lastly, strategic decisions should be made in consultations with Islamic financial institutions and through due process.