The Effect of Islamic and Conventional Banking on SMEs in Kenya

The main objective of this study was to compare the effects of conventional and Islamic banking products on the performance of small and medium enterprises in Kisumu, Kenya. Conventional and Islamic banking products are guided by different principles and therefore have different characteristics, terms and conditions which impact on the performance of the users of this products differently. The study utilized data from a sample of 300 SMEs collected using a mixture of convenient and random sampling methods. An equal number of 150 SMEs was surveyed in both systems. Findings from the study Indicated that while both Islamic and conventional banking products have a significant effect on SMEs performance, Conventional banking products tend to have a more significant effect on SMEs performance than Islamic products. This is due to the fact that both Islamic and Conventional users have different objectives for doing business.