This study investigates the pivotal role of Islamic finance in fostering the growth of Small and Medium-sized Enterprises (SMEs) in Libya, a sector crucial for economic diversification and lessening dependence on the oil industry. With SMEs facing significant funding barriers despite the sector's potential, this research fills a gap in the literature concerning the practical implementation of Islamic financial structures within Libyan SMEs. The primary objective is to assess the effects of determinants of attitude and intention to adopt Islamic finance among these enterprises. The study developed a conceptual framework incorporating five independent variables knowledge and awareness, religious obligation, business support, reputation, and financial constraints with attitude towards Islamic finance as the mediator and adoption of Islamic finance as the dependent variable. Employing snowball sampling, data was collected from 305 respondents across various Libyan SMEs. Structural Equation Modelling techniques were utilized to analyse the data and test hypotheses. The findings underscore the significance of knowledge, awareness, and religious obligation in shaping positive attitudes towards Islamic finance, which in turn facilitates its intention to adopt. The research highlights the need for improved management within the Islamic SME finance sector to enhance growth and sustainability. This study not only contributes to academic literature but also offers practical insights for policymakers and financial institutions aiming to bolster the Islamic financing framework within Libya’s SME sector.
Abdussalam S. A Edderwish (Sun,) studied this question.