TY  - JOUR
T1  - The Viability of Profit and Loss Sharing Based Financing for Malaysian SMEs
AU - Promwichit, Veelaiporn AU - Mohamad, Shamsher AU - Hassan, Taufiq 
JO  - International Business Management
VL  - 7
IS  - 4
SP  - 278
EP  - 287
PY  - 2013
DA  - 2001/08/19
SN  - 1993-5250
DO  - ibm.2013.278.287
UR  - https://makhillpublications.co/view-article.php?doi=ibm.2013.278.287
KW  - Profit and loss sharing
KW  -SMEs
KW  -Islamic financing
KW  -access to financing constraint
KW  -financial data
AB  - Small and Medium Enterprises (SMEs) are vital to the economy. However, they still face financing difficulty in conventional financing due to insufficient collateral. This exploratory study seeks to address this issue by illustrating that pure Profit and Loss Sharing (PLS) that is based on the premise of social justice provides an opportunity to finance SMEs. However, SMEs might be concerned that PLS contracts will reduce their profit since Islamic financial institutions will share the returns based on the profit sharing ratio. This study employs financial data from 30 SMEs in Malaysia to calculate the profit sharing ratio and redistribution of net income between Islamic financial institutions and SMEs. This study then examine SMEs’ profit margin ratio from year 2002-2010. The findings show that SMEs have a more stable return per ringgit of sales with lower losses or higher profits through PLS based financing. The results demonstrate that SMEs are not worse-off in PLS based financing and suggest that PLS mode of financing is a viable financing option for SMEs.
ER  -