Determinants of Islamic Financial Inclusion in Indonesia: A Demand-Side Analysis

Abstract

The low number of Islamic financial inclusion has been a major problem to the Indonesian government because of the country has the largest Muslim population globally. This study aims to examine the Islamic financial inclusion determinants by collecting information from Muslim respondents. The determinants used include Islamic financial literacy, trust, financial self-efficacy, and social influence. The survey involved 215 respondents from West Java, Lampung, South Kalimantan, Gorontalo, and West Nusa Tenggara. All the participants involved in the study were included in Islamic financial institutions. Furthermore, the Exploratory Factor Analysis (EFA) and the Confirmatory Factor Analysis (CFA) methods were applied to classify Islamic financial inclusion determinants, while the Structural Equation Modelling was used to test the hypothetical relationships. The results showed that social influence is a significant determinant of Islamic financial inclusion in Indonesia. Therefore, policymakers and the Islamic financial industry need to improve social influence through campaigns that involve local culture and public or religious figures to enhance inclusion. Future studies need to provide other validated constructs to assess Islamic financial inclusion from the demand and supply aspects.