Importance of utilising Islamic fintech to solve the challenges facing the Islamic economy

Dima Djani is the CEO of ALAMI.

In creating a thriving economy and finance sector, developing financial literacy is vital. According to the OECD, financial literacy is the key for financial stability, economic growth, and sustainable development. Beyond the conventional finance industry, Islamic finance has developed to be a significant industry with $3.6 trillion in assets globally. However, Islamic financial literacy seems to be at a much lower level. In Indonesia, for example, the conventional literacy index has reached 38%, but the Islamic literacy index is only 9% (OJK, 2019). And unfortunately, support from Islamic financial institutions in particular is lacking to help tackle the issue.

One of the consequences of low literacy is halting the progress of financial inclusion. Hassanetal (2021) claimed financial knowledge creates a significant impact on financial access. The World Bank perceives such matters as immediately critical, since lack of financial inclusion is an impediment in realising the Sustainable Development Goals (SDGs) by 2030 through decreasing extreme poverty and improving welfare. From an Islamic perspective, literacy would also create social impact by strengthening ethos and morality more broadly.