Reimagining SME Finance: A Social Structuration Approach to Islamic Banking

Purpose: This study demonstrates that SME financial inclusion is a socially mediated process where the inclusive rhetoric of Islamic banking often diverges from the lived financing realities of small and medium-sized enterprises (SMEs) in Pakistan. By foregrounding SME perspectives, the paper reveals how trust in religious authority (Shariah Boards) can override technical financial opacity, fundamentally shaping how firms interpret and respond to institutional structures. It moves beyond traditional eligibility models to show how SMEs actively navigate a complex field of Islamic banks, government policy schemes, tax authorities, and Shariah boards to secure access to finance. Design/methodology/approach: The research adopts a qualitative, interpretive approach grounded in Strong Structuration Theory (SST) to analyse the recursive relationship between SME agency and institutional structures. Primary data were generated through 30 semi-structured interviews with SME owners, bank managers, regulators, and Shariah board members. SST provides the necessary lens to connect micro-level firm experiences with macro-level institutional architectures, offering a theoretically informed account of how financial access is socially structured within the context of Islamic finance in Pakistan. Findings: The findings reveal that access to Islamic finance is governed not only by formal eligibility criteria but also by SMEs’ subjective interpretations of trust, compliance risks, and institutional credibility. We find that SMEs utilise selective visibility and strategic informality as survival strategies, gaining or losing agency as they navigate perceived institutional threats. These dynamics demonstrate that financial inclusion is not a straightforward policy outcome but a contested, socially structured process in which informal practices often emerge to bridge structural gaps. Originality/value: This study advances critical accounting scholarship by theorising financial access as a socially situated interaction rather than a purely technical or transaction-based outcome. Applying SST to the empirical context of Pakistan offers fresh insights into the recursive relationship between institutional visibility, informality, and religious engagement. The study contributes to global debates on governance, legitimacy, and accountability by illustrating how moral and institutional trust influence financial inclusion, with critical implications for policymakers and regulators in emerging markets.