Islamic Banks Propose Shared Risk Fund to Unlock SME Capital

Small and medium-sized enterprises often hit a wall when seeking long-term capital, hampered by thin credit histories and high issuance costs. A new collaborative study from the Islamic Development Bank Institute and the Asian Development Bank Institute proposes the Ṣukūk Enhancement Fund to bridge this gap through collective risk-sharing.

Editorial·June 17, 2026·reads: 3,547

Islamic Banks Propose Shared Risk Fund to Unlock SME Capital

Unveiled at the 20th IsDB Global Forum in Baku, the proposed mechanism moves away from traditional reliance on government guarantees. Instead, it utilizes a shared protection framework where individual ṣukūk issuers contribute to a pool. This collective structure bolsters the risk profile of issuances, offering investors greater security while lowering barriers for smaller firms that have historically struggled to tap into Islamic capital markets.

Dr. Sami Al-Suwailem, Acting Director General of the IsDB Institute, noted that the model mirrors the foundational Islamic finance principles of mutual support and direct links to real economic activity. By pooling risks, the system aims to create a more resilient market environment. ADBI Dean Professor Bambang P. Brodjonegoro emphasized that this shift is critical for developing economies, where SMEs serve as the primary engine for job creation and growth.

Quantitative testing, including rigorous Monte Carlo simulations, suggests the framework remains stable even under various economic stress scenarios. Beyond immediate capital access, the report positions the fund as a structural improvement for Islamic finance. By fostering a more inclusive and stable ecosystem, the initiative seeks to encourage broader private sector participation and sustainable growth across emerging markets without compromising Sharīʿah compliance.