Indonesia Conference Directory

This paper evaluates the extent to which Islamic banks support SMEs financing as compared to conventional banks. The evaluation is conducted using dynamic panel regression estimations, where the sample includes aggregate level data from Indonesian Islamic and conventional banking industries. The results provide evidence that, there is no indication that Islamic banks are more SMEs friendly than conventional banks. Most SMEs do not have access to credit, or have limited access to credit. SMEs limited access to finance reflects the interaction of demand, supply, institutional, regulatory, and other policy factors that are a hindrance for the growth of SMEs. SMEs also lack awareness and knowledge regarding Islamic banking products and what products may suit their requirements.