DATA ANALYSIS
The respondents participating in this exploratory study 50 percent were the entrepreneurs who were using conventional mode of financing, and 50 percent were the entrepreneurs who were using Islamic mode of finance. Some of them were using both conventional and Islamic mode of financing. Observation also used to know the reaction of respondents. The data were collected not in particular area or institution, to collect data we visit different Islamic and conventional Bank and some data were collected from the entrepreneurs in industrial area of Hayatabad Peshawar.
4.1 Observation
Some of the entrepreneurs were emotionally favoring Islamic mode of financing, according to their opinion if any thing, which is hallal to finance business it, is enough. It has a value to providing finance in hallal way, whether it is costly or not, but it is best for growth of business in hallal manner. According to their opinion if financial instrument is not hallal whether it is costly or not it is not good for business. The element of religious emotion was countable.
Secondly some of them were totally illiterate about the Islamic finance, according to their knowledge, it was just a word. According to their knowledge the existence of Bank was not possible without including the element of interest. In short the Islamic system of financing was only a myth. According to them it was only using of name of Islam to attract clients.
4.2 Personal Information
a. Type of Business
The type of SME are operating in Peshawar are Manufacturing, trading and services providers. The information shows that 60%, 30%, 10% of Manufacturing, trading and service providers have accounts in Islamic Banks. While 85%, 15% of Manufacturing and trading SMEs have Accounts in conventional Banks respectively.
Figure 4.1: Types of SMEs
b. Education Level
As figure 4.2 indicates that 55%, 30%, 10% and 5% are University level, college level, school level and illiterate they are using Islamic mode of finance respectively. The most were University level of respondents who are using Islamic finance.
In conventional side 45% are university level, 25% are college level, 10% are school level and 20% are illiterate who are using conventional financing system.
Figure 4.2: Education Level of Respondents
.c. Age
The frequency shows that more of the respondents who are using Islamic finance, their age were between 30 to 39 years. And remaining 30% were less then 30 years, 25% were between 40 t0 49 years and 5% were above 50 years.
The age of more users of conventional system were 40%, their age were between 40 to 49 years. Remaining 35% were between 30 to 39 years, 15% were less then 30 years, 10% were 50 years.
Figure 4.3: Distribution of Respondents according to their Age
4.3 Questionnaire Analysis
1. Knowledge of Islamic mode of Finance:
As shown in table 4.4 and figure 4.4, the 55% respondents (entrepreneurs) who using Islamic mode of financing have knowledge of Islamic finance and 45% using Islamic finance but have not enough knowledge of Islamic finance. The respondents using Conventional mode of finance 35% of them have knowledge of Islamic finance but using conventional financing system, 65% have no knowledge about Islamic finance and using conventional finance.
This table shows that only 27% of respondents have knowledge about Islamic finance and 55% have no. It means that more of the people have no knowledge about Islamic finance.
Table 4.4 Knowledge of Islamic Finance
| | Percentage | Frequency | Total f | Total % | ||
| Islamic | Conventional | Islamic | Conventional | | | |
| Yes | 55% | 35% | 11 | 7 | 18 | 27% |
| No | 45% | 65% | 9 | 13 | 22 | 55% |
| Missing | 0% | 0% | 0 | 1 | 1 | 2.% |
| | 100% | 100% | 20 | 20 | 40 | 100% |
Figure 4.4 Knowledge of Islamic Finance
.2. Usage of type of Instruments:
As the table 4.5a and Figure4.5a indicates that the most frequently used instrument is long term 55% of the respondent using this type of instrument. 25% are using Medium term, 5% are using short term and 15% are using conventional leasing.
In other side the Table 4.5b and Figure 4.5b indicates that the most popular instrument of Islamic financing system is Mudaraba 60% of Islamic Bank clients were using this, secondly 20% are using Ijara (Islamic leasing). 15% using Musharaka and 5% are using Murabaha.
Table 4.5a: Frequently used instrument of Islamic system
ConventionalType of instrument | Usage in Percentage % | Usage in figures f |
| Long term | 55% | 11 |
| Medium term | 25% | 5 |
| Short term | 5% | 1 |
| Leasing | 15% | 3 |
| Total | 100% | 20 |
Table 4.5b: Frequently used instrument of Islamic system
| Usage % | Usage f | |
| Musharaka | 15% | 3 |
| Mudaraba | 60% | 12 |
| Murahaba | 5% | 1 |
| Ijara(leasing) | 20% | 4 |
| Total | 100% | 20 |
Figure 4.5a Islamic instruments Figure4.5b Conventional instruments
.3. Effect of Finance on the monthly income:
Table 4.7 shows fluctuation in monthly income after using the particular mode of finance. According to Table 4.7 and Figure 4.7 we see that 60% respondent who are using Islamic mode of finance say that there is no change occur in their monthly income after using financial Islamic financial instrument, in other side 45% of respondent who are using conventional mode of financing say no change take place in their monthly income. There is a difference of 25% of respondent among conventional and Islamic clients.
In next raw we see 30% of Islamic instrument user and 55% conventional instrument users income increase, there is a difference of 15% among Islamic and conventional clients, it also goes in favor of conventional financing system.
The third information here is that 10% of respondent said that decrease occur in their monthly income after using Islamic instrument and 20% of respondent respond the same, it indicates that the 10% the loss is less in Islamic finance it may be because of profit and loss shearing principles implementation.
Table 4.7ffects of financial instruments on monthly income
| | Islamic % | Conventional % | Islamic f | Conventional f | Difference[1] % | Difference f |
| No Change | 60% | 25% | 12 | 5 | Con.35% | Con. 4 |
| Increase | 30% | 55% | 6 | 11 | Con.25% | Con. 5 |
| Decrease | 10% | 20% | 2 | 4 | Ism.10% | Ism. 2 |
| Total | 100% | 100% | 20 | 20 | 100% | 11 |
Figure: 4.7 Effects of financial instruments on monthly income
4. Change value in monthly income value of income:
The Table 4.8 and Figure 4.8 indicates that the monthly income increase 25% of Islamic financial instrument users and 40% of conventional financial instrument users less then 10%. In other side no decreases occur less then 10% who are using IFI and 20% respondent of CFI decrease. Here in one side the increase is in favor of conventional system and decrease is against the conventional system. It also indicates the element of risk and it’s shearing in Islamic financial system.
The respondents who are using IFI their income increase 11 to 29% were 37% and the respondent who are using CFI were 13% it indicates that the income increase of respondents who used IFI then CFI. The decreases occur less then 11 to 29% in the monthly income was 25% of respondent used IFI and 6% were CFI users.
Table 4.8: Change in value of monthly income:
| | | Islamic % | Conventional % | Islamic f | | Conventional f |
| | Increase | 25%[i]* | 40% | 2 | | 6 |
| Less then 10% | Decrease | 0% | 20% | 0 | | 3 |
| 11 to 29% | Increase | 37% | 13% | 3 | | 2 |
| Decrease | 25% | 6% | 2 | | 1 | |
| | Increase | 12% | 13% | 1 | | 2 |
| 30% to 49% | Decrease | 0% | 0% | 0 | | 0 |
| | Increase | 0% | 6% | 0 | | 1 |
| 50% above | Decrease | 0% | 0% | 0 | | 0 |
| Total | | 100% | 100% | 8 | | 15 |
*This Percentage obtain by number of respondent *100/ total number of respondent who use perticular system of financial instrument and respond as change occur in their monthly income. Example:2*100/8=25=25%
Figure 4.8 Change in value of monthly income:
.The monthly income increase 30 to 49% of 12 percent of IFI users and same value increase of 13% of CFI users, this is not a notable difference, although with respect of the value of increase it is more in favor of conventional system. No decrease occur at same value in Islamic neither in conventional.
Finally only 6% of respondent’s income increases 50% and there were no respondent of IFI user whose incomes increase more then 50%? No decreases occur at same value in both system users.
Table 4.9 and Figure 4.9 indicates that 50% of respondents who utilize IFI and 65% of respondent who utilize CFI their business expend or their production increased, it shows 15% difference in favor of conventional system. No decreases occur in production and no contractions occur in business of both system users after utilizing instruments. 45% of user of IFI said no change take place in business, comparing 35% users of conventional system users.
| Type of Change | Islamic % | Conventional % | Islamic f | Conventional f |
| Expend/Production increased | 50% | 65% | 10 | 13 |
| Contract/Production decreased | 0% | 0% | 0 | 0 |
| No Change | 45% | 35% | 9 | 7 |
| Total | 100% | 100% | 20 | 20 |
Figure 4.9 Change in business volume after utilizing financial instrument
.6. Value of change in business or production
In table 4.10 and Figure 4.10 we see that increase take place in the business of 63% of respondent of IFI users and 38% of CFI users between 0 to 19%. Secondly increases take place in business of 18% of IFI users and 46% of CFI users between 20 to 29%. As table indicates that 30 to 39 % positive change occur in business of 9% respondents of IFI users and 7% of CFI users. Lastly no positive change take place between 40 to 49% in the business of IFI users but 7% of respondents business grew.
| | Islamic % | Conventional % | Islamic f | Conventional f |
| 0 to 19% | 63% | 38% | 7 | 5 |
| 20 to 29% | 18% | 46% | 2 | 6 |
| 30 to 39% | 9% | 7% | 1 | 1 |
| 40 to 49% | 0% | 7% | 0 | 1 |
| 50 and above | 9% | 0% | 1 | 0 |
| Total | 100% | 100% | 11 | 13 |
Figure 4.10: Changes in Business or production
.7. Satisfaction by bank
Table 4.11 shows that 90% respondent are satisfied by the services of Islamic Banks, as compare to 5% of respondent of conventional bank. Remaining 10% of Islamic bank are not satisfied due to high rate of financing (PLS Ratio). Remaining 95% of conventional client were not satisfied 85% of them due to not accordance of sharia, and 10% due to high interest rate.
Table 4.11 Satisfaction level after utilizing financial instrument
| | Islamic % | Conventional % | Islamic f | Conventional f |
| Satisfied | 90% | 5% | 18 | 1 |
| Service is poor | 0% | 0% | 0 | 0 |
| Not according to Islamic sharia | 0% | 85% | 0 | 17 |
| Rate is high | 10% | 10% | 2 | 2 |
Figure 4.11 Satisfaction level after utilizing financial instrument
. 
8. Respondent view about instrument for their business;
The question was asked that “how the financial instrument was for your business”. 20% of IFI user replied that it was fair, 60% respond it was good, 20% respond it was batter and 0% respond Best. In other side CFI user respond that 10% of them give category of Fair 70% good, 15% better and 5% best.
Table 4.12: Respondents views about instrument for their business;
| | Islamic | Conventional | Islamic | Conventional |
| Fair | 20% | 10% | 4 | 2 |
| Good | 60% | 70% | 12 | 14 |
| better | 20% | 15% | 4 | 3 |
| Best | 0% | 5% | 0 | 1 |
Figure 4.12: Respondents views about instrument for their business;
9. Comparison of cost of financing
Table 4.13 and figure 4.13 shows that no one IFI user and no CFI user has given category to rate of financing as very low and low. 70% of IFI user and 85% of CFI user said that rate is high. 30% of IFI user 15% of CFI user said it was very high. Considering all this, we can say that the rate of financing of conventional system is high as compare to Islamic system, we can compare here 70% of respondent who said high and 85% of CFI user who said high, here it mean that more of them considering interest rate high, but in other side 30% of IFI user said very high as comparing to 15% of DFI users it is in favor of conventional finance. It is a difference of 15% in both high and very high category. But very high is more countable then high. Here we can say that Islamic system rate is high then conventional system.
Table 4.13 Comparison of cost of financing
| | Islamic | | Conventional | Islamic | Conventional |
| Very low | 0% | | 0% | 0 | 0 |
| Low | 0% | | 0% | 0 | 0 |
| High | 70% | | 85% | 14 | 17 |
| Very high | 30% | | 15% | 6 | 3 |
| Total | 100% | | 100% | 20 | 20 |
Figure 4.13 Comparison of cost of financing
.10. Respondent’s preference in future;
The respondent ware asked which one you will prefer in future to finance your business. As table 10 and Figure 10 shows 95% of IFI user has will to use Islamic instruments, and 5% willing to change form Islamic to conventional system. Secondly 80% of CFI user willing to use interest free in future, and 10% are willing to use the same Interest based Instrument. It goes in favor of Islamic financial system.
| | Islamic | Conventional | Islamic | Conventional |
| Interest Free | 95% | 80% | 19 | 16 |
| Interest Based | 5% | 20% | 1 | 4 |
| Total | 100% | 100% | 20 | 20 |
Figrue 4.14 Preference of respondents among Islamic and conventional system
’11. Reason of choosing particular mode to finance business in future
Table 4.15 shows that 80% of the IFI user willing because of religious reason and 70% of CFI user has the same reason. 5% of IFI user and 10% of CFI user choose particular finance because of easy access and usage. 10% of IFI user and no CFI user show reason of low risk. No IFI user and 15% CFI user show reason of Low rate. This analysis shows that the main reason the man considers in mind while choosing financial mode to finance their business is the religion the second important thing is rate and the third is low risk and easy access to finance.
Table 4.15: Reason of choosing particular mode of finance in future
| | Islamic | Conventional | Islamic | Conventional |
| Religious reason | 85% | 70% | 17 | 14 |
| Easy access and usage | 5% | 10% | 1 | 2 |
| Low risk | 10% | 0% | 2 | 0 |
| Low rate | 0% | 15% | 0 | 3 |
Figure 4.15 Reason of choosing particular mode of finance in future
.The question was asked from the respondent to not consider religion while answering this question. As table 4.16 and Figure 4.16 shows that 30% of IFI user said that Islamic mode is best to finance business. 45% said conventional is best and 25% were indifferent. When the same question was asked from the conventional financial instrument users 10% of them said that Islamic is best, 70% said conventional is best and 20% were indifferent.
| | Islamic % | Conventional % | Islamic f | Conventional f |
| Islamic mode of finance | 30% | 10% | 6 | 2 |
| Conventional mode of finance | 45% | 70% | 9 | 14 |
| Indifferent | 25% | 20% | 5 | 4 |
| | 100% | 100% | 20 | 20 |
Figure 4.16 Best mode financing system, without considering religious factor
.13. 2-3% change in rate of financing (interest or P&L shearing ratio) can effect the decision of changing financing mode
As table and Figure shows that 2-3% increase or decrease in P&L shearing ration has no impact, 15% of IFI users, and 70% of CFI user said “Yes”. In other side 85% of IFI users and 30% CFI user said that 2-3% in crease in cost of finance can not effect the decision to change mode of finance. It goes in favor of Islamic mode of finance.
| | Islamic % | | Conventional % | Islamic N | Conventional N |
| Yes | 15% | | 70% | 3 | 14 |
| No | 85% | | 30% | 17 | 6 |
Figure 4.17 Can 2-3% increase in cost of financing rate effect decision to change mode of finance?
.After this simple analysis we come to know that impact of Islamic mode of financing and conventional mode of financing varies it has not an equal effect on SMEs.
So we reject H0: “The Islamic modes of financing and conventional modes of financing have an equal effect on SMEs.”
It is been proved that the Islamic modes of financing and conventional modes of financing have not an equal effect on SMEs.
And we accept H1: “The Islamic mode of financing and conventional mode of financing does not have an equal effect on SMEs”
Note: This analysis does not means that Islamic mode of Financing has no impact on Income or on Business volume. It has effect on business volume and on monthly Income but less as compare to conventional mode of financing.
[1] This difference is the difference between the figures of respondent of Islamic and conventional clients, “Con” and “Ism” means in favour of Conventional system or Islamic system.
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