ISLAMIC ACCOUNTING REPORTING PRINCIPLES AND FINANCIAL PERFORMANCE OF MSMEs IN NIGERIA.

Abstract

Despite Micro, Small and Medium Enterprises MSMEs being important agent of economic
growth and are regarded as conduit of supply of human capital, innovations and
technological advancement. Its evidence that many of these MSMEs, languish in low
productivity, inadequate management and most importantly inadequate access to finance
and loan facilities. The aim of this study is therefore to seek the effect of Musharakah,
Mudarabah and Murabah on financial performance of MSMEs in Nigeria. The study
employed a survey research design. A total 100 copies of questionnaire were distributed to
customers of Jaiz bank. Data collected were analyzed using descriptive statistics to test the
significance of the explanatory variables (Musharakah, Mudarabah and Murabah). The
findings of the study revealed a significant increase of business market share which had a
mean of 2.19 and standard deviation of 1.066 and implementing Musharakah interest free
loans allowed enterprise to obtain a competitive edge. The Murabah also affected the
growth of MSMEs through reduced interest rate which had a mean of 2.11 and standard
deviation of 0.98. The study concluded that management team of MSMEs is able to improve
the financial performance and increased market competitiveness of MSMEs. The study
therefore recommended that the policy of Islamic accounting principles be upheld for better
performance in achieving intended goals of MSMEs