Factors Influencing Musharakah financing among SMEs in Yola North Local Government Area, Adamawa State, Nigeria

Abstract

This study examines the impact of entrepreneurial factors on the adoption of Mushārakah (Islamic partnership financing) among Small and Medium Enterprises (SMEs) in Yola North, Adamawa State, Nigeria. Despite the potential of Mushārakah as an alternative financing model, its adoption remains low due to various entrepreneurial and institutional challenges. Using a descriptive research method, data were collected through a structured questionnaire administered to SME owners and managers. The analysis reveals that, financial literacy, risk perception, religious beliefs, and regulatory awareness significantly influence the willingness of entrepreneurs to adopt Mushārakah. Findings indicate that while many SMEs recognise the benefits of Islamic financing, limited awareness and misconceptions hinder its adoption. The study highlights the need for targeted financial education and supportive policies to promote Mushārakah as a viable financing option for SMEs. The research provides valuable insights for policymakers, financial institutions, and entrepreneurs in fostering sustainable SME growth through Islamic financing.