Factors Affecting Performance of Financial Inclusion in Islamic Financing’s Profit and Loss Sharing: Empirical Analysis on Moderating Effect

This study provides a comprehensive investigation into the determinants of Profit-Loss-Sharing (PLS) financing systems’ performance within the Islamic financial institutions in Bangladesh. It focuses on five primary determinants: government regulations, knowledge, moral hazard, collateral risks, and competitiveness, with an additional emphasis on the moderating role of Fintech inclusion. Our results show that these factors significantly impact PLS performance, highlighting the need for supportive regulatory environments, financial literacy initiatives, robust risk management strategies, and increased competitiveness in the Islamic finance industry. Furthermore, the study underscores the pivotal role of Fintech in enhancing operational efficiency and facilitating financial inclusion. These findings have substantial implications for policymakers, academics, and industry practitioners, underscoring the need to focus on these determinants to improve PLS performance. However, the study is not without limitations. The focus on Bangladesh restricts the generalizability of findings, and the use of secondary data might not fully capture real-world complexities of PLS operations. Future research should consider these limitations and include other potential determinants of PLS performance, explore the role of Fintech in-depth, and expand the geographic scope to offer a more global perspective.