The role of Islamic Banking in Promoting Financial Inclusion, Malaysia as a Model

Abstract

Abstract According to the Islamic Finance Development Index report for the year 2022, Malaysia is considered one of the top five leading countries in Islamic banking in the Asian region. Islamic banking in Malaysia goes back more than 30 years. After the establishement of the first Islamic bank after the issuance of the Islamic Banking Services Law of 1983. Currently, the total Islamic banking assets represent 35.5% of the total banking assets and 41% is the share of Islamic banking system financing of the total financing. Murabaha is considered the dominant tool in Islamic banking transactions at a rate of 92.7%, and in addition to being a pioneer in Islamic banking, it was able to occupy the first ranks. In financial inclusion, especially in the Association of Southeast Asian Nations, where 85% of citizens have an account with a financial institution and 74% have debit cards, which supports the need to research the relationship between Islamic banking and financial inclusion in it. Therefore, the following research problem can be raised: Does Islamic banking contribute to enhancing financial inclusion in Malaysia? Relying on the descriptive and analytical approach in addition to the available statistics on the role of the Islamic banking sector and financial inclusion in Malaysia, work will be done to answer the research problem through three axes revolving around the conceptual aspect of Islamic banking, financial inclusion and then the role of Islamic banking in promoting financial inclusion in Malaysia.