Libyan Business Firm Attitudes Towards Islamic Methods of Finance

This paper investigates the attitudes of Libyan business firms towards Islamic methods of finance. A sample of 296 firms is surveyed using phone interviews during December 2007 and January 2008 to gather information on their awareness and perceptions of Islamic finance. The results indicate that most firms have knowledge about the existence of Islamic banking and finance, while more than two-thirds of respondents know the specific products of Musharakah (full-equity partnerships) and Quard Hassan (interest-free benevolent loans), often through personal informal lending. However, many respondents are uninformed regarding most other Islamic financing methods. Factor analysis is used to reduce the large number of explanatory variables used to determine business firm attitudes to just four determinants: namely, religion, profitability, business support, and unique services. Discriminant analysis shows that religion remains the primary motivation for the potential use of Islamic finance among business firms in Libya.