Constructing Indicators For Islamic Financial Inclusion
Abstract
This study conceptualizes and proposes the measurement items and constructs for assessing the financial inclusion of Islamic finance. It proposes and validates the demand-side measurement tool for the financial inclusion of Islamic finance using four dimensions, i.e., quality, accessibility, usage, and satisfaction. The measurement instrument proposed in this study assesses the actual performance of Islamic finance towards total financial inclusion. The study was based on exploratory factor analysis of the questionnaire responses collected from 129 respondents. The questionnaires were distributed to the Zanzibar residents from February 2021 to March 2021. The questionnaires are adapted mainly from the Findex Survey (2017). The financial inclusion of Islamic finance can be determined using four dimensions (components); relevancy (quality) of Islamic financial services, accessibility of Islamic financial services, usage of Islamic financial services, and satisfaction with Islamic financial services. The study is limited to Principal Components Analysis as a factor analysis approach. Besides, the study has been conducted in Zanzibar, a semi-autonomous nation in East Africa. Therefore, more comprehensive studies are required in various areas for generalizing the results.
References
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Bongomin, G. O., and Ntayi, J. (2019). Trust: a mediator between mobile money adoption and usage and financial inclusion. Social Responsibility Journal, DOI 10.1108/SRJ-01-2019-0011.
Bongomin, G. O., Munene, J. C., Ntayi, J. M., and Malinga, C. A. (2018). Social network testing the predictive power of its dimensions in explaining financial inclusion of the poor in rural Uganda. African Journal of Economic and Management Studies, Vol. 9 No. 3, pp. 388-406.
Coakes, S. J. (2011). SPSS: Analysis without anguish: Version 18.0 for windows. 42 McDougall Street, Milton, Qld 4064: John Wiley & Sons Australia, Ltd.
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Demirguc-Kunt, A., and Klapper, L. (2012). Measuring Financial Inclusion: The Global Findex Database. http://econ.worldbank.org.: The World Bank Development Research Group Finance and Private Sector Development Team: Policy Research Working Paper 6025.
Demirguc-Kunt, A., Klapper, L., and Randall, D. (2013). Islamic Finance and Financial Inclusion: Measuring Use of and Demand for Formal Financial Services among Muslim Adults. The World Bank Development Research Group Finance and Private Sector Development Team; Policy Research Working Paper 6642.
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Furman, J. (2016). Financial Inclusion in the USA. New York: Council of economic advisers issues brief.
Goel, S., and Sharma, R. (2017). Developing a financial inclusion index for India. Procedia Computer Science, Vol. 122, pp. 949–956.
Harman, H. H. (1976). Modern Factor Analysis. Chicago: University of Chicago Press.
Hassan, M. K., Hossain, S., and Unsal, O. (2018). Religious Preference and Financial Inclusion: The Case for Islamic Finance. In Management of Islamic Finance: Principle, Practice, and Performance: International Finance Review, Vol. 19: Published online: 06 Nov 2018, pp. 93–111.
Iqbal, B. A., and Sami, S. (2017). Role of banks in financial inclusion in India. Contaduríay Administración, Vol. 62, pp. 644–656.
Iqbal, Z. (2014). Enhancing Financial Inclusion through Islamic Finance. Turkey: The World Bank Global Center for Islamic Finance Development: Turkey Financial Inclusion Conference.
Jouti, A. T. (2018). Islamic finance: financial inclusion or migration? ISRA International Journal of Islamic Finance, Vol. 10 No. 2, pp. 277-288.
Karp, N., and Nash-Stacey, B. W. (2015). Technology, Opportunity & Access: Understanding Financial Inclusion in the U.S. United States: BBVA: Working Paper, No .15/25.
Mahendra Dev, S. (2006). Financial Inclusion: Issues and Challenges. Economic and Political Weekly, Vol. 41 No. 41, pp. 4310-4313.
Mindra, R., and Moya, M. (2017). Financial self-efficacy: a mediator in advancing financial inclusion. Equality, Diversity and Inclusion: An International Journal, Vol. 36 No. 2, pp. 128-149.
Mindra, R., Moya, M., Zuze, L. T., and Kodongo, O. (2017). Financial self-efficacy: a determinant of financial inclusion. International Journal of Bank Marketing, Vol. 35 No. 3, pp. 338-353.
Mirakhor, A., and Iqbal, Z. (2012). Financial Inclusion: Islamic Finance Perspective. Journal of Islamic Business and management, Vol. 2 No. 1, pp. 35-64.
Mustafaa, D., Baita, A. J., and Usman, A. Y. (2018). Impact Analysis of Islamic Finance on Financial Inclusion and Economic Growth in Selected Muslim Countries: Lessons for Nigeria. International Journal of Economics, Management and Accounting, Vol. 26 No. 2, pp. 393-414.
Mzee, M. M. (2016). The Legislative Challenges of Islamic Banking in Tanzania. Journal of Law, Policy and Globalization, Vol. 45, pp. 131-137.
Naceur, S. B., Barajas, A., and Massara, A. (2015). Can Islamic Banking Increase Financial Inclusion? IMF Working Paper: International Monetary Fund, WP/15/31.
Nawaz, T. (2018). Lifting the Lid on Financial Inclusion: Evidence from Emerging Economies. International Journal of Financial Studies, Vol. 6 No. 5, pp. 1-8.
NFIF. (2018-2022). National Financial Inclusion Framework (NFIF), 2018 - 2022: Tanzania at a Glance. Dar-es-salaam: National Financial Inclusion Council.
Nuryakin, C., Sastiono, P., Maizar, F. A., Amin, P., Puspita, N., Pramono, W., and Tjen, C. (2018). Toward Higher financial inclusion rate: service quality, costs of access and awareness. Jakarta, 10430, Indonesia: Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM-FEB UI).
Omar, H. H., and Yussof, M. (2019). Central bank Impact on practicing Murabah financing in Islamic banks: The case of Tanzania. Banks and bank systems journal, Vol. 14 No. 1, pp. 81-93.
Omar, H. H., Yusoff, M. E., and Sendaro, A. A. (2017). Regulatory Framework for Islamic Banking in Tanzania. Jurnal Kemanusiaan, Vol. 26 No.1, pp. 32-41.
Oumaa, S. A., Odongob, T. M., and Were, M. (2017). Mobile financial services and financial inclusion: Is it a boon for savings mobilization? Review of Development Finance, Vol. 7, pp. 29-35.
Oz-Yalaman, G. (2019). Financial inclusion and tax revenue. Central Bank Review, Vol. 19, pp. 107-113.
RGoZ. (2017). Zanzibar Strategy for Growth and Reduction of Poverty (ZSGRP III), 2016-2020. Zanzibar: The Revolutionary Government of Zanzibar (RGoZ).
Salim, K. A. (2012, March 14). Islamic Banking in Tanzania: Hopes and Challenges. Retrieved from Islamic banking and Islamic Insurance:http://khalfanabdallah.blogspot.com/2012/03/islamic-banking-in-tanzania-hopes-and challenges.html
Salkind, N. J. (2010). Encyclopedia of research design (Vols. 1-0). Thousand Oaks CA: SAGE Publications, Inc. DOI: 10.4135/9781412961288.
Sarma, M. (2008). Index of Financial Inclusion. New Delhi: Working Paper, No.215, Indian Council for Research on International Economic Relations (ICRIER).
Sarma, M., and Pais, J. (2011). Financial Inclusion and Development. Journal of International Development, Vol. 23, pp. 613–628.
Sekaran, U., and Bougie, R. (2013). Research Methods for Business: A skill-building Approach; Sixth Edition. The Atrium, Southern Gate, Chichester, West Sussex, PO 98SQ, United Kingdom: John Wiley and Sons Ltd.
Shihadeh, F. H. (2018). How individual characteristics influence financial inclusion: evidence from MENAP. International Journal of Islamic and Middle Eastern Finance and Management, Vol. 11 No. 4, pp. 553-574.
Shinkafi, A. A., Yahaya, S., and Sani, T. A. (2019). Realizing financial inclusion in Islamic finance. Journal of Islamic Marketing, 1759-0833.
Shkeily, H. M., and Abdullah, N. (2021). Examining the nexus between Riba and Gharar and Islamic banking products among Zanzibar People. Sumerianz Journal of Business and Marketing, Vol.4 (1), 27-34.
The World Bank. (2018). Financial inclusion. Retrieved from The World Bank: http://www.wordlbank.org/en/topic/financialinclusion
Zhu, B., Zhai, S., and He, J. (2018). Is the Development of China’s Financial Inclusion Sustainable? Evidence from a Perspective of Balance. Sustainability 2018, Vol. 10, No. 1200, DOI: 10.3390/su10041200.
Zulkhibri, M. (2016). Financial inclusion, financial inclusion policy, and Islamic finance. Macroeconomics and Finance in Emerging Market Economies, DOI:10.1080/17520843.2016.1173716.
Ali, M. M., Sakti, M. R., and Devi, A. (2019). Developing an Islamic Financial Inclusion Index for Islamic banks in Indonesia: A cross-province analysis. Journal of Islamic Monetary Economics and Finance, 5(4), 691 - 712
https://doi.org/10.21098/jimf.v5i4.1098
Arora, R. U. (2010). Measuring financial access. Gold Coast, 4222, Australia: Griffith University: Discussion Papers economics, No. 2010-07.
Bank Negara Malaysia. (2018). Enhancing financial inclusion through Islamic finance. Kuala Lumpur: Bank Negara Malaysia.
Bhuvana, M., and Vasantha, S. (2016). Dimensions for measuring financial inclusion in the Rural Areas of Tamil Nadu. Indian Journal of Science and Technology, Vol. 9 No 32, pp. 1-8.
Bongomin, G. O., and Ntayi, J. (2019). Trust: a mediator between mobile money adoption and usage and financial inclusion. Social Responsibility Journal, DOI 10.1108/SRJ-01-2019-0011.
Bongomin, G. O., Munene, J. C., Ntayi, J. M., and Malinga, C. A. (2018). Social network testing the predictive power of its dimensions in explaining financial inclusion of the poor in rural Uganda. African Journal of Economic and Management Studies, Vol. 9 No. 3, pp. 388-406.
Coakes, S. J. (2011). SPSS: Analysis without anguish: Version 18.0 for windows. 42 McDougall Street, Milton, Qld 4064: John Wiley & Sons Australia, Ltd.
Costello, A. B., and Osborne, J. (2007). Best practices in exploratory factor analysis: four recommendations for getting the most from your analysis. Practical Assessment, Research and Evaluation. Permission, 10 (7), 1 - 10 (DOI: https://doi.org/10.7275/jyj1-4868).
Datta, S. K., and Singh, K. (2019). Variation and Determinants of Financial Inclusion and association with Human Development: A Cross Country Analysis. IIMB Management Review, DOI: https://doi.org/10.1016/j.iimb.2019.07.013.
Demirguc-Kunt, A., and Klapper, L. (2012). Measuring Financial Inclusion: The Global Findex Database. http://econ.worldbank.org.: The World Bank Development Research Group Finance and Private Sector Development Team: Policy Research Working Paper 6025.
Demirguc-Kunt, A., Klapper, L., and Randall, D. (2013). Islamic Finance and Financial Inclusion: Measuring Use of and Demand for Formal Financial Services among Muslim Adults. The World Bank Development Research Group Finance and Private Sector Development Team; Policy Research Working Paper 6642.
Demirgüç-Kunt, A., Klapper, L., Singer, D., Ansar, S., and Hess, J. (2018). Measuring Financial Inclusion and the Fintech Revolution: OVERVIEW. 1818 H Street NW, Washington, DC 20433: International Bank for Reconstruction and Development/the World Bank.
Ernest and Young. (2017). Innovation in financial inclusion: Revenue growth through innovative inclusion. United Kingdom (UK): Ernst and Young Global Limited.
Field, A. (2015). Discovering statistics using IBM SPSS statistics. 1 Oliver's Yard, 55 City Road, London EC1Y 1SP: SAGE Publication Ltd.
FinScope. (2017). FinScope Tanzania: Insights that drive innovation. Dar-es-Salaam: FinScope Tanzania and Financial Sector Deepening Trust (FSDT).
Furman, J. (2016). Financial Inclusion in the USA. New York: Council of economic advisers issues brief.
Goel, S., and Sharma, R. (2017). Developing a financial inclusion index for India. Procedia Computer Science, Vol. 122, pp. 949–956.
Harman, H. H. (1976). Modern Factor Analysis. Chicago: University of Chicago Press.
Hassan, M. K., Hossain, S., and Unsal, O. (2018). Religious Preference and Financial Inclusion: The Case for Islamic Finance. In Management of Islamic Finance: Principle, Practice, and Performance: International Finance Review, Vol. 19: Published online: 06 Nov 2018, pp. 93–111.
Iqbal, B. A., and Sami, S. (2017). Role of banks in financial inclusion in India. Contaduríay Administración, Vol. 62, pp. 644–656.
Iqbal, Z. (2014). Enhancing Financial Inclusion through Islamic Finance. Turkey: The World Bank Global Center for Islamic Finance Development: Turkey Financial Inclusion Conference.
Jouti, A. T. (2018). Islamic finance: financial inclusion or migration? ISRA International Journal of Islamic Finance, Vol. 10 No. 2, pp. 277-288.
Karp, N., and Nash-Stacey, B. W. (2015). Technology, Opportunity & Access: Understanding Financial Inclusion in the U.S. United States: BBVA: Working Paper, No .15/25.
Mahendra Dev, S. (2006). Financial Inclusion: Issues and Challenges. Economic and Political Weekly, Vol. 41 No. 41, pp. 4310-4313.
Mindra, R., and Moya, M. (2017). Financial self-efficacy: a mediator in advancing financial inclusion. Equality, Diversity and Inclusion: An International Journal, Vol. 36 No. 2, pp. 128-149.
Mindra, R., Moya, M., Zuze, L. T., and Kodongo, O. (2017). Financial self-efficacy: a determinant of financial inclusion. International Journal of Bank Marketing, Vol. 35 No. 3, pp. 338-353.
Mirakhor, A., and Iqbal, Z. (2012). Financial Inclusion: Islamic Finance Perspective. Journal of Islamic Business and management, Vol. 2 No. 1, pp. 35-64.
Mustafaa, D., Baita, A. J., and Usman, A. Y. (2018). Impact Analysis of Islamic Finance on Financial Inclusion and Economic Growth in Selected Muslim Countries: Lessons for Nigeria. International Journal of Economics, Management and Accounting, Vol. 26 No. 2, pp. 393-414.
Mzee, M. M. (2016). The Legislative Challenges of Islamic Banking in Tanzania. Journal of Law, Policy and Globalization, Vol. 45, pp. 131-137.
Naceur, S. B., Barajas, A., and Massara, A. (2015). Can Islamic Banking Increase Financial Inclusion? IMF Working Paper: International Monetary Fund, WP/15/31.
Nawaz, T. (2018). Lifting the Lid on Financial Inclusion: Evidence from Emerging Economies. International Journal of Financial Studies, Vol. 6 No. 5, pp. 1-8.
NFIF. (2018-2022). National Financial Inclusion Framework (NFIF), 2018 - 2022: Tanzania at a Glance. Dar-es-salaam: National Financial Inclusion Council.
Nuryakin, C., Sastiono, P., Maizar, F. A., Amin, P., Puspita, N., Pramono, W., and Tjen, C. (2018). Toward Higher financial inclusion rate: service quality, costs of access and awareness. Jakarta, 10430, Indonesia: Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM-FEB UI).
Omar, H. H., and Yussof, M. (2019). Central bank Impact on practicing Murabah financing in Islamic banks: The case of Tanzania. Banks and bank systems journal, Vol. 14 No. 1, pp. 81-93.
Omar, H. H., Yusoff, M. E., and Sendaro, A. A. (2017). Regulatory Framework for Islamic Banking in Tanzania. Jurnal Kemanusiaan, Vol. 26 No.1, pp. 32-41.
Oumaa, S. A., Odongob, T. M., and Were, M. (2017). Mobile financial services and financial inclusion: Is it a boon for savings mobilization? Review of Development Finance, Vol. 7, pp. 29-35.
Oz-Yalaman, G. (2019). Financial inclusion and tax revenue. Central Bank Review, Vol. 19, pp. 107-113.
RGoZ. (2017). Zanzibar Strategy for Growth and Reduction of Poverty (ZSGRP III), 2016-2020. Zanzibar: The Revolutionary Government of Zanzibar (RGoZ).
Salim, K. A. (2012, March 14). Islamic Banking in Tanzania: Hopes and Challenges. Retrieved from Islamic banking and Islamic Insurance:http://khalfanabdallah.blogspot.com/2012/03/islamic-banking-in-tanzania-hopes-and challenges.html
Salkind, N. J. (2010). Encyclopedia of research design (Vols. 1-0). Thousand Oaks CA: SAGE Publications, Inc. DOI: 10.4135/9781412961288.
Sarma, M. (2008). Index of Financial Inclusion. New Delhi: Working Paper, No.215, Indian Council for Research on International Economic Relations (ICRIER).
Sarma, M., and Pais, J. (2011). Financial Inclusion and Development. Journal of International Development, Vol. 23, pp. 613–628.
Sekaran, U., and Bougie, R. (2013). Research Methods for Business: A skill-building Approach; Sixth Edition. The Atrium, Southern Gate, Chichester, West Sussex, PO 98SQ, United Kingdom: John Wiley and Sons Ltd.
Shihadeh, F. H. (2018). How individual characteristics influence financial inclusion: evidence from MENAP. International Journal of Islamic and Middle Eastern Finance and Management, Vol. 11 No. 4, pp. 553-574.
Shinkafi, A. A., Yahaya, S., and Sani, T. A. (2019). Realizing financial inclusion in Islamic finance. Journal of Islamic Marketing, 1759-0833.
Shkeily, H. M., and Abdullah, N. (2021). Examining the nexus between Riba and Gharar and Islamic banking products among Zanzibar People. Sumerianz Journal of Business and Marketing, Vol.4 (1), 27-34.
The World Bank. (2018). Financial inclusion. Retrieved from The World Bank: http://www.wordlbank.org/en/topic/financialinclusion
Zhu, B., Zhai, S., and He, J. (2018). Is the Development of China’s Financial Inclusion Sustainable? Evidence from a Perspective of Balance. Sustainability 2018, Vol. 10, No. 1200, DOI: 10.3390/su10041200.
Zulkhibri, M. (2016). Financial inclusion, financial inclusion policy, and Islamic finance. Macroeconomics and Finance in Emerging Market Economies, DOI:10.1080/17520843.2016.1173716.
Published
2021-12-31
How to Cite
KHAMIS, Fauz Moh'd; BIN ISA, Mohamad Yazid; YUSUFF, Noraini.
Constructing Indicators For Islamic Financial Inclusion.
International Journal of Islamic Economics, [S.l.], v. 3, n. 02, p. 101-124, dec. 2021.
ISSN 2686-2166.
Available at: <https://e-journal.ejournal.metrouniv.ac.id/IJIE/article/view/3720>. Date accessed: 04 july 2024.
doi: https://doi.org/10.32332/ijie.v3i2.3720.
Section
Articles
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