Does Financial Inclusion Enhance SME Performance? Exploring the Transformative Potential of Islamic Fintech in Malaysia

The research examines the impact of Islamic fintech solutions on the financial inclusion of small and medium-sized enterprises (SME). Five independent variables are considered as exogenous construct, namely Islamic Crowdfunding Platforms, Islamic Peer-to-Peer (P2P) Lending Platforms, Islamic Mobile Payment Solutions, Islamic Microfinance Platforms, and Islamic Digital Banking Services. The dependent variable is the Financial Inclusion Performance of SMEs, measured using a Financial Inclusion Index. A survey is distributed to 310 respondents, who represent a diverse range of business types and natures. The findings reveal a significant positive relationship between Islamic Crowdfunding Platforms and the Financial Inclusion Performance of SMEs. This suggests that ICPs have the potential to provide alternative financing options for SMEs, enhancing their access to financial services. Conversely, the study does not find a significant positive relationship between Islamic P2P Lending Platforms and SME financial inclusion, indicating the need for further investigation into the factors influencing the effectiveness of IPPs in facilitating financial inclusion. Additionally, the research identifies a significant positive relationship between Islamic Mobile Payment Solutions and the Financial Inclusion Performance of SMEs. IMPS are found to improve accessibility and convenience for SMEs in conducting digital transactions. Similarly, Islamic Microfinance Platforms demonstrate a significant positive impact on SME financial inclusion, empowering SMEs to access credit and savings facilities. However, no significant positive relationship is observed between Islamic Digital Banking Services and SME financial inclusion. This suggests the presence of additional factors or challenges that limit the effectiveness of IDBS in promoting financial inclusion for SMEs. These findings contribute to the existing literature on Islamic fintech solutions and financial inclusion, emphasizing the importance of context-specific considerations. Further research is recommended to explore the dynamics and intricacies of these relationships and investigate additional factors that influence the effectiveness of Islamic fintech solutions in driving SME financial inclusion.