Small and medium enterprises (SMEs) play a vital role in the growth of the economy and have become a major concern for government and policy makers in developed, as well as in developing countries. Given the stated importance of SMEs in generating economic growth in Kuwait, it is essential that SMEs have access to sources of finance. However, access to finance is one of the major constraints to SME development, and is frequently mentioned in the entrepreneurship literature. This study aims to evaluate how Islamic financial institutions can support SMEs in Kuwait.\ud
The study adopts a qualitative approach that was articulated through a case study design. The case here is the phenomenon of SME financing as enacted by two organisational forms. This research uses two comparative cases; the cases are formed around the nature of the financing organisations in Kuwait and the interaction of SME owners with these organisations. Twenty face-to-face semi-structured interviews were conducted with members of three different groups: SME owner-managers, managers of financial institutions, and Sharia board members to explore their opinions and perceptions with regard to the role of Islamic finance for SMEs.\ud
The main findings indicate that, in Kuwait, access to finance remains a principal challenge for SMEs. Furthermore, collateral is one of the main problems they face when obtaining finance from Islamic banks. The findings suggested that without government support, the banks would not be able to finance SMEs, and therefore, specialised SME finance institutions were more compatible than other Islamic banks with small and medium enterprises. In addition, the study showed that Islamic finance instruments were more suitable than commercial instruments. It also showed that integrating zakat, charity, waqf, and qard hassan would be helpful to the SME sector in Kuwait.\ud
The findings add to the understanding of the role of Islamic finance and contribute to knowledge about SME development, using Islamic finance methods, in Kuwait. This could encourage the government to adopt related policies in order to improve access to finance for SMEs