Abstract
Financial inclusion is considered a driver for inclusive economic development, through promoting investment, entrepreneurship, employment, education and healthcare. Therefore, it can reduce income inequality and poverty, and empower women in order to achieve inclusive economic development. Yet, 31%, or 1.7 billion, of the global adult population are financially excluded, six percent of which cited religious reasons for their exclusion. However, Islamic finance, which has recently gained prominent acceptance across the globe, is considered a viable method to promote financial inclusion, especially amongst developing economies, such as Nigeria. Despite this development, the impact of compliance with Islamic finance principles and the use of Islamic finance products on enhancing access to formal financial services remains unexplored in the Nigerian context.
Therefore, this study seeks to investigate compliance with Islamic finance principles, the use of Islamic finance products, and its impact on promoting financial inclusion in Nigeria. To do so, the study explored the theoretical background of Islamic finance and its relationship with financial inclusion; the determinants of financial inclusion, the influence of individual perceptions on the use of Islamic finance products, and the impact of Islamic finance in enhancing financial inclusion in Nigeria. The study employed both qualitative and quantitative methods and used both primary and secondary data. Statistical analysis was employed using STATA and EViews to examine the determinants of financial inclusion, the influence of individual perceptions on using Islamic finance products, and the impact of Islamic finance on promoting financial inclusion. The perceptions of experts, regulators and operators are measured through the qualitative analysis of semi-structured interviews.
Findings of the study suggested that Islamic finance has a positive relationship with financial inclusion, which was noted through both qualitative and quantitative analysis. The empirical investigations conducted in the study revealed that the determinants of financial inclusion (gender, age, income and educational attainment) influence financial inclusion. This means the greater the age, income, and educational attainment alongside being a male increases the likelihood of financial inclusion. In the use of Islamic finance products (IFPs) three of the variables suggested similar influences, except for educational attainment, which indicated that the higher the educational attainment of an individual, the lower their likelihood of using Islamic finance products. In accordance with the conceptual model of the study, the perceptions amongst adults generally indicated an influence on their use of Islamic finance products. The exception was perceived government benefits, which have a negative influence on the use of Islamic finance products, whilst the result revealed that there is substantial compliance to Shariah principles by both regulators and operators. The findings further revealed that Islamic finance products have no significant impact on financial inclusion in Nigeria.
This thesis has contributed both theoretically and empirically to the literature of financial inclusion by examining the determinants for using Islamic finance products and the impact of Islamic finance on promoting financial inclusion in Nigeria. This was achieved by quantitatively measuring and qualitatively considering the impact of Islamic finance on financial inclusion through the perceptions of individuals and stakeholders and their use of Islamic finance, as proxied by Islamic banking deposits in Nigeria. Therefore, the study contributed to the policy direction on financial inclusion and Islamic finance in Nigeria.