An Islamic Finance Model for the Small and Medium-Sized Enterprises in France

Journal of King Abdul Aziz University, Islamic Economics, Vol. 26, No. 2, pp.153-180, 2013

28 Pages Posted: 4 Aug 2013

See all articles by Umar Aimhanosi Oseni

Umar Aimhanosi Oseni

International Islamic University of Malaysia (IIUM)

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Dorsaf Matri

University of Paris 1

Multiple version iconThere are 4 versions of this paper

Date Written: July 16, 2013

Abstract

The dominant effect of the global financial shockwaves ravaging the whole of Europe is becoming proverbial in the history of world economic crises. This has been largely due to untoward economic policies that have negatively impacted most economies in Europe. The recent European sovereign debt crisis experienced more in Greece, Italy, Spain and Portugal, and the most recent downgrade of France's credit rating by Standard and Poor's call for a rethinking of the existing economic policies. The need to foster innovation in Small and Medium-sized Enterprises (SMEs) and sustainably support the existing ones has remained a major challenge in France. With over 2.5 million SMEs in France, the recent report of the Institut Nationale de la Statistique et des Etudes Economiques [INSEE] reveals that one in every two new business fails in the long run. This paper examines the need to find credible alternatives for French SMEs to the collateral-based debt financing. Built on ethical business models, the Islamic SMEs and microfinance models are expected to foster innovation and sustainability to smaller economic players. Although, loans remain SMEs‟ main source of financing, banks require more collateral from entrepreneurs, and now provide lower financing compared to the period before the financial crisis. In this context of financial difficulties for SMEs, considering alternative models of financing such as Islamic financial products based on the profit and loss sharing has increased the interest of many European countries. While focusing on the econo-legal issues underlying any of such proposals, the paper considers the feasibility of Islamic venture capital as a credible alternative to bank's loans for SMEs within the existing French legal and regulatory framework.

Keywords: Islamic economics, venture capital, Islamic Finance, SMEs, France

JEL Classification: D6, E22, G1, G2

Suggested Citation

Oseni, Umar Aimhanosi and Hassan, M. Kabir and Matri, Dorsaf, An Islamic Finance Model for the Small and Medium-Sized Enterprises in France (July 16, 2013). Journal of King Abdul Aziz University, Islamic Economics, Vol. 26, No. 2, pp.153-180, 2013, Available at SSRN: https://ssrn.com/abstract=2305578

Umar Aimhanosi Oseni

International Islamic University of Malaysia (IIUM) ( email )

P.O. Box 10
Jalan Gombak
Kuala Lumpur, selangor 50728
Malaysia

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Dorsaf Matri (Contact Author)

University of Paris 1 ( email )

Paris
France

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