With millions of people excluded from the financial system because of their religious beliefs, would adapting to their needs boost the numbers of financial inclusion? 

The arrival of the mobile phone seemed to usher in the possibility of universal financial inclusion. Mobile payments via text message that required only the most basic of devices brought cashless transactions to the previously unbanked for the first time. Since then, smartphones with their mobile wallets, apps and QR codes have all been perceived as solving the problem of bringing a bank account to people who, because of cost or geography, cannot get to a bank branch. 

Except all this was predicated on people being happy to use the bank accounts they were being offered. Across Asia, there are millions of people who shun bank accounts because they do not adhere to their religious beliefs. 

Under the rules of Islamic banking there are strict caveats on how funds are used, including the banning of interest being paid on deposits and any funds being used on services that are deemed haram (forbidden), including alcohol and gambling. Without a guarantee of the security of their funds, many people opted to forego bank accounts altogether. 

The recent mushrooming of Islamic banking could at last be the solution to bring people into the formal banking sector for the first time. Indonesia, for example, has a population of about 264 million, with 220 million Muslims. And while the country has 171 million internet users, as many as 100 million people are unbanked. A similar story is played out across Malaysia, Pakistan, Bangladesh and Afghanistan – and it disproportionately affects the most disadvantaged people in all of these countries. 

Without Islamic-compliant banking, their only solution is, as one commentator puts it, keeping their money under their mattresses. Holding funds wholly in cash is not only dangerous for the customer, it is also keeping vast sums of money out of the formal banking economy. These are funds that could be invested into activities considered to be halal (permitted), with the green sector likely a big beneficiary. 

But unless and until banking products operate in a way that comply with sharia law, all the technology in the world will not bring about full financial inclusion. 


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