An empirical investigation into Smes perceptions of credit guarantee corporation (Cgc)‎ Malaysia Berhad : a case study of the Islamic guarantee scheme in Malaysia

Abstract EN

Small and Medium Sized Enterprises (SMEs) are considered the backbone of most economies, whether developing or developed, due to their contributions to national output and employment.

In Malaysia, the government has formulated various strategies to enhance the development of SMEs.

One such strategy resulted in the formation of the Credit Guarantee Corporation, whose responsibility is to be a loan guarantor for the SMEs.

The phenomenal rise of Islamic banking and finance in the global market in recent years has prompted many financial institutions in Malaysia to start offering a line of SharÊÑah-compliant products in their effort to tap into the latest market opportunities.

SMEs now have a choice whether to take up Islamic loans and various other innovative SharÊÑah-compliant products or to use the conventional products in financing their business.

This paper reports an empirical study on the use of Islamic credit guarantee schemes among SMEs in Malaysia and analyses data from 87 respondents out of a total of 300 questionnaires sent.

The study investigates factors that explain their choice of the Islamic finance guarantee scheme as opposed to conventional ones offered by the CGC, their perceptions on the quality of services provided and on the expected role of the government.

The study reveals that there is still a low level of awareness and usage of Islamic guarantee schemes among the respondents.

This empirical study represents an early investigation into Islamic guarantee schemes among the SMEs in Malaysia.

The findings on the variables that influence their demand obtained from this study have practical implications for the government and the service providers in terms of product formulation and development, incentives, tax and policy creation.