Role of Islamic banking in Financial Inclusion; A Regional Analysis

Abstract

Financial inclusion is emerging topic in these days. This study investigates that how Islamic banking affecting financial Inclusion. This study also identifies the role of control variable how they are playing their role for enhancing the financial inclusion. Islamic banking which provide Riba free services playing its role especially in Muslims Countries so it is important to promote Islamic banking so we can increase financial inclusion. This study used panel of 28 countries which were selected from OIC countries where Islamic banking prevail further we subdivided countries on basis of 2 regions Asia and Africa in which 14 are situated in Asia and rest in Africa, over the period 2005-2014. Results are estimated by application of Fixed and Random Effect Panel Regression technique suggested by the Hausman test. Results confirm that Islamic banking is more contributing in borrow side with respect to other dimensions of financial inclusion Depositors and Branches. Results shows that in both region Asia and Africa GDP is positively and significantly impacting on financial inclusion. And there is need to develop more confidence among people to improve financial inclusion for both region. Result also show that people feel hesitation to deposits in banks. At branches side lerner index show positive and significant impact which tells that as banking competition increase then more branches opens so that financial access will increase