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Determinants Of Islamic Financial Exclusion In Indonesia

Author

Listed:
  • Mohammad Mahbubi Ali

    (International Institute of Advanced Islamic Studies, Malaysia)

  • Abrista Devi

    (Ibnu Khaldun Bogor University, Indonesia)

  • Hamzah Bustomi

    (Pakuan University Bogor, Indonesia)

Abstract

The study aimed to uncover the determinants of Islamic financial exclusion in Indonesia by gathering responses from financially-excluded respondents. A total of 110 respondents were surveyed, representing five provinces: West Java, South Sulawesi, Aceh, East Kalimantan, and North Maluku. The criteria of the selected participants included those who were financially-excluded, those who did not own any Islamic financial products, those without savings or financing, and those with no capital market products. The study employs Confirmatory Factor Analysis (CFA) to identify indicators explaining Islamic financial exclusion determinants in Indonesia. The paper found that location is the key barrier to obtaining financing from and being able to build savings in Islamic banks/Islamic microfinance, while a lack of financial knowledge is identified as the critical barrier when dealing with Islamic capital market products. Overall, most respondents perceived human capital and products and services to be the two most significant determinants of Islamic financial exclusion in Indonesia, followed by infrastructure, policies and regulation, financial literacy, social influence, and religious commitment. The originality of the paper lies in its detailed insight into the perception of being financially excluded on factors leading to Islamic financial exclusion.

Suggested Citation

  • Mohammad Mahbubi Ali & Abrista Devi & Hamzah Bustomi, 2020. "Determinants Of Islamic Financial Exclusion In Indonesia," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 6(2), pages 373-402, May.
    • Handle: RePEc:idn:jimfjn:v:6:y:2020:i:2f:p:373-402
    DOI: https://doi.org/10.21098/jimf.v6i2.1093
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    Citations

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    Cited by:

    1. David Mhlanga, 2021. "Factors That Matter for Financial Inclusion: Evidence from Sub-Sharan Africa - The Zimbabwe Case," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 10, November.

    More about this item

    Keywords

    Islamic financial exclusion; Product and services; Human capital; Infrastructure; Policies and regulation;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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