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Islamic finance and financial inclusion: measuring use of and demand for formal financial services among Muslim adults


  • Demirguc-Kunt, Asli
  • Klapper, Leora
  • Randall, Douglas


In recent years, the Islamic finance industry has attracted the attention of policy makers and international donors as a possible channel through which to expand financial inclusion, particularly among Muslim adults. Yet cross-country, demand-side data on actual usage and preference gaps in financial services between Muslims and non-Muslims have been scarce. This paper uses novel data to explore the use of and demand for formal financial services among self-identified Muslim adults. In a sample of more than 65,000 adults from 64 economies (excluding countries where less than 1 percent or more than 99 percent of the sample self-identified as Muslim), the analysis finds that Muslims are significantly less likely than non-Muslims to own a formal account or save at a formal financial institution after controlling for other individual- and country-level characteristics. But the analysis finds no evidence that Muslims are less likely than non-Muslims to report formal or informal borrowing. Finally, in an extended survey of adults in five North African and Middle Eastern countries with relatively nascent Islamic finance industries, the study finds little use of Sharia-compliant banking products, although it does find evidence of a hypothetical preference for Sharia-compliant products among a plurality of respondents despite higher costs.

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  • Demirguc-Kunt, Asli & Klapper, Leora & Randall, Douglas, 2013. "Islamic finance and financial inclusion: measuring use of and demand for formal financial services among Muslim adults," Policy Research Working Paper Series 6642, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6642

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    References listed on IDEAS

    1. Bianca Clausen & Aart Kraay & Zsolt Nyiri, 2011. "Corruption and Confidence in Public Institutions: Evidence from a Global Survey," World Bank Economic Review, World Bank Group, vol. 25(2), pages 212-249.
    2. Mohieldin , Mahmoud & Rostom , Ahmed & Fu, Xiaochen & Iqbal, Zamir, 2012. "The Role of Islamic Finance in Enhancing Financial Inclusion in Organization of Islamic Cooperation (OIC) Countries," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 20, pages 55-120.
    3. David G. Blanchflower & Phillip B. Levine & David J. Zimmerman, 2003. "Discrimination in the Small-Business Credit Market," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 930-943, November.
    4. Richard L. Peterson, 1981. "An Investigation of Sex Discrimination in Commercial Banks' Direct Consumer Lending," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 547-561, Autumn.
    5. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2003. "People's opium? Religion and economic attitudes," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 225-282, January.
    6. Kuran, Timur, 2005. "The logic of financial westernization in the Middle East," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 593-615, April.
    7. Grosjean, Pauline, 2011. "The institutional legacy of the Ottoman Empire: Islamic rule and financial development in South Eastern Europe," Journal of Comparative Economics, Elsevier, vol. 39(1), pages 1-16, March.
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    Cited by:

    1. Meslier, Céline & Risfandy, Tastaftiyan & Tarazi, Amine, 2017. "Dual market competition and deposit rate setting in Islamic and conventional banks," Economic Modelling, Elsevier, vol. 63(C), pages 318-333.
    2. Ansart, Sandrine & Monvoisin, Virginie, 2017. "The new monetary and financial initiatives: Finance regaining its position as servant of the economy," Research in International Business and Finance, Elsevier, vol. 39(PB), pages 750-760.
    3. Fungáčová, Zuzana & Weill, Laurent, 2015. "Understanding financial inclusion in China," China Economic Review, Elsevier, vol. 34(C), pages 196-206.
    4. Imam, Patrick & Kpodar, Kangni, 2016. "Islamic banking: Good for growth?," Economic Modelling, Elsevier, vol. 59(C), pages 387-401.
    5. Kumru, Cagri S. & Sarntisart, Saran, 2016. "Banking for those unwilling to bank: Implications of Islamic banking systems," Economic Modelling, Elsevier, vol. 54(C), pages 1-12.
    6. Ghosh, Saibal & Vinod, D., 2017. "What Constrains Financial Inclusion for Women? Evidence from Indian Micro data," World Development, Elsevier, vol. 92(C), pages 60-81.
    7. Evans, Olaniyi, 2016. "Determinants of Financial Inclusion in Africa: A Dynamic Panel Data Approach," MPRA Paper 81326, University Library of Munich, Germany.
    8. Herrala, Risto & Turk-Ariss, Rima, 2016. "Capital accumulation in a politically unstable region," Journal of International Money and Finance, Elsevier, vol. 64(C), pages 1-15.
    9. Evans, Olaniyi, 2015. "The Effects of Economic and Financial Development on Financial Inclusion in Africa," MPRA Paper 81325, University Library of Munich, Germany.
    10. repec:eee:finsta:v:31:y:2017:i:c:p:18-44 is not listed on IDEAS

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    Access to Finance; Banks&Banking Reform; Islamic Finance; Debt Markets; Emerging Markets;

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