Islamic financial literacy in the world’s largest Muslim Economy: Rethinking the road to inclusive finance in Indonesia

Indonesia hosts the world’s largest Muslim population, yet its Islamic financial sector remains a modest player in the national financial system, and millions of Indonesians remain outside formal finance altogether. This commentary argues that the dominant strategy for growing Islamic finance in Indonesiaappealing to religious identity and Sharia compliance as the primary marketing propositionhas reached its natural limits. Drawing on a growing body of Indonesian and comparative evidence, I contend that religiosity influences financial choices in ways that are mediated, moderated and segmented, and therefore cannot by itself convert faith into sustained participation in Islamic finance. The missing lever is Islamic financial literacy understood as a multidimensional capability encompassing knowledge, attitude, behavior and awareness, rather than a narrow familiarity with religious prohibitions. Evidence from Indonesian micro, small and medium enterprises shows that Islamic financial literacy operates primarily through financial inclusion to improve business performance, implying that literacy building and inclusion infrastructure must be pursued jointly. I outline the policy architecture such a strategy requirescurriculum integration, fintech-enabled delivery, segment-sensitive communication and standardized measurementand identify research priorities. The argument repositions Islamic financial literacy from a peripheral educational concern to the central mechanism of inclusive Islamic finance. Keywords: Islamic financial literacy; financial inclusion; religiosity; Islamic banking; Indonesia