The Role of Islamic Banks in Promoting Financial Inclusion: Challenges and Opportunities
Abstract
This paper examines the multifaceted role of Islamic banks in promoting equitable financial inclusion, focusing especially on both the difficulties and prospects they encounter in supplying monetary services to underserved communities. Islamic banks, adhering to equitable Shariah principles, offer an alternative to conventional banking systems by proffering interest-free wares and emphasizing social justice, balance, and shared risk. The paper explores how Islamic banks can contribute to inclusive financing by leveraging such principled financial products as profit-and-loss participation arrangements, microcredit, and interest-free loans, notably in regions where significant portions of the population lack access to banking. Despite holding potential, Islamic banks face various impediments, including low financial health, inadequate substructure, and inconsistent regulatory systems. However, emerging opportunities like the integration of innovative technologies and utilization of Islamic social investment tools may help Islamic banks to better serve more people
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