The Application of Sharia Accounting in Micro, Small, and Medium Enterprises to Enhance Financial Performance

Abstract

This study aims to analyze the implementation of sharia accounting in Micro, Small, and Medium Enterprises (MSMEs) and its role in improving financial performance. A qualitative research approach was employed using a descriptive case study design, as this design allows for an in-depth exploration of accounting practices, perceptions, and contextual factors underlying sharia-based financial management. The research was conducted in an Indonesian region with a strong Islamic economic environment and a high concentration of MSMEs. Data were collected through in-depth interviews, observation, and document analysis involving twelve MSME actors and five key informants selected purposively due to their direct involvement in accounting practices and expertise in Islamic accounting and MSME development. The findings indicate that the implementation of sharia accounting enhances financial transparency, accountability, and managerial discipline, which positively contributes to MSME financial performance. However, the study also reveals that implementation remains partial due to limited technical capacity and institutional support. The study recommends the development of simplified sharia accounting guidelines and targeted capacity-building programs to support broader adoption among MSMEs.