This paper aims to identify the external financial challenges of micro enterprises and later attempt to offer a viable alternative model of source of financing which is known as the integrated cash waqf-micro takaful (ICWMT) model for micro enterprises in Malaysia.
To achieve the first objective, this study adopted a quantitative approach. A convenience sampling and self-administered survey was used to collect the data from the existing micro enterprises. Descriptive analysis is used to analyse primary data collected from a survey using SPSS V27. Meanwhile, for the second objective, this research adopted content analysis approach. Under this approach, a thorough review of extant literature on financing issues faced by micro enterprises, as well as existing studies and models of cash waqf and micro takaful have been reviewed critically and used in the attempt of proposing an alternative model.
The findings highlighted that micro enterprises in Malaysia are hampered with the external financial challenges. Among the challenges are including high interest rate, strict documentation requirement, strict collateral requirement, insufficient of amount of financing, long loan durations and nature of business. Given the constraints of accessing external financial services, micro enterprises are looking for an alternative source of financing, in which this study has proposed. This study has proposed ICWMT model as a source of financing for micro enterprises. This model is expected to provide financial services by using cash waqf fund and micro takaful.
This paper is built based on empirical analysis and conceptual explorations of literature in the area of micro enterprises, cash waqf and takaful only. Although this paper has empirically demonstrated the external financial challenges among micro enterprises, the proposed model is not validated in terms of its acceptance, suitability, applicability and prospects.
The findings of this paper will provide micro enterprises with an alternative source of financing to start-up or expand their business by using cash waqf fund. Since this study has identified the external financial challenges of micro enterprises, it provides a signal for government and policymakers to address the former’s issue. Also, as this study proposed model with the involvement of non-profit organization, it helps the government to reduce its expenses for the development of micro enterprises.
This paper offers an additional literature on cash waqf especially from the Malaysian context. Furthermore, this paper adds to the literature on waqf. The paper proposes a viable alternative model for micro enterprises as a source of financing by using cash waqf fund. This model incorporates takaful arrangement between non-profit organization and micro enterprises.
