Community Development Graduate Group

Religious law prohibiting the use of interest presents a particular challenge for Muslim business owners all across the United States. Recently, Islamic financing in America has gained much attention as it offers alternatives to the growing Muslim market in America. Little research exists, however, that assess the challenges (and their implications) that Muslim business owners face in accessing financial resources. This thesis addresses the question of how business owners have accessed capital in the absence of religiously appropriate financial products. The study investigates the role of religious commitment in shaping the decisions of a subset of Muslim business owners and offers a means to understand what factors best indicate one’s predisposition to use Islamic Financing Products.

To explore these questions, 19 small business owners within the Sacramento area, (identified via purposive, snowball sampling) were surveyed and interviewed. Overall, the sample demonstrated a high level of religious commitment and surprisingly the level of religious commitment did not necessarily correspond with past borrowing practices nor did it equate to one’s openness toward Islamic financing products.

Even though a large portion of my sample was found to have utilized non-interest bearing financing, a market of Islamic Financing Products was identified. Those who had used conventional products in the past or had experienced problems in obtaining financing seemed more inclined to such products. Additionally, a distinguishing characteristic of businesses willing to consider Islamic financing products were those that noted a religious influence on their product line, possibly uncovering a more religiously motivated decision than financing itself.