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Can Islamic Banking Increase Financial Inclusion?
Report

Can Islamic Banking Increase Financial Inclusion?

Sami Ben Naceur, Adolfo Barajas and Alexander Massara
IMF, 2015
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Editorial Rating

7

Qualities

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  • Eye Opening
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Recommendation

Some Muslims may avoid formal banking relationships to keep from running afoul of Sharia, so the growing Islamic financial sector would seem a likely vehicle through which to serve currently unbanked Muslim consumers and businesses. But according to economists Sami Ben Naceur, Adolfo Barajas and Alexander Massara, there’s little evidence of a correlation between Islamic banking and Muslims’ financial inclusion. While its topic is weighty, the report suffers from a somewhat muddled and disorganized presentation. Nonetheless, getAbstract recommends it to bankers and economists for its insights into the Muslim world’s complicated relationship with banking.

Take-Aways

  • More than half of all adults on the planet don’t have bank accounts, and 5% of them cite religious reasons for their choice. That share is much higher in some Muslim states.
  • The fast-growing Islamic financial sector – whose assets have more than doubled since 2006 – attempts to address the spiritual concerns of Muslim consumers and businesses, but it’s unclear whether Islamic banking has actually expanded financial inclusion.
  • Although Islamic banking can impel the unbanked into formal financial relationships, the effect is only “weak and tentative” for some aspects of financial inclusion.

About the Authors

Sami Ben Naceur, Adolfo Barajas and Alexander Massara are economists at the International Monetary Fund.

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