OVERVIEW OF THE ISLAMIC MICROFINANCE ON MICROENTERPRISE GROWTH IN MALAYSIA

Abstract

This study examines the determinants of access to Islamic microfinance and its impact on the growth of microenterprises in Malaysia. Microenterprises are vital to Malaysia's economic development, but they face significant financial challenges, especially following the COVID-19 pandemic. While Islamic microfinance offers Sharia-compliant financial solutions without interest, many microenterprise owners lack awareness of these options or how to access them. The research addresses two main questions: what factors determine microentrepreneurs' access to Islamic microfinancing, and how does this financing impact microenterprise performance. Using advanced analytical methods, including logit models and propensity score matching, this study will collect data from microenterprises across Malaysia through surveys and interviews conducted over a two-month period from September to October 2025. The findings will help identify barriers to Islamic microfinance access and measure its effectiveness through key performance indicators such as sales growth, profitability, and employment generation. This research aligns with Malaysia's National Entrepreneurship Policy 2030 and will provide valuable insights for policymakers and financial institutions to improve Islamic microfinancing initiatives. By enhancing understanding of Islamic microfinance's role in supporting microenterprises, this study contributes to developing a more inclusive and resilient entrepreneurial ecosystem in Malaysia.