Islamic Finance

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.

One solution to both financial literacy and inclusion issues is through tech-based finance. Utilising technology can educate a wider range of the population as many countries with financial inclusion issues have high rates of mobile penetration. Further, this can provide access to capital, hence further improving financial inclusion (Bollaertetal, 2021). Over the last decade, mobile money accounts allowed 1.2 billion previously unbanked adults to gain access to financial services, reducing the unbanked population by 35% (Appaya, 2021).

Such utilisation of technology is supported by at least two factors: the significant behavior changes during the pandemic and the current Muslim demographic condition. With the former, most individuals’ behaviours have shifted to digital first channels. According to McKinsey, market share of digital products increased annually from 35% to 55% in 2020. For the latter, the global Muslim demographic is trending younger and more tech savvy than the global population average.

In conclusion, literacy is the bedrock of a finance industry including for Islamic finance. To improve the status quo needs the support of all market players. Lack of literacy impacts inclusion, which will impede sustainability and economic and social development.

At ALAMI, a tech-based alternative finance ecosystem established to solve the issues of financial literacy as well as financial exclusion, solving this issue is at the heart of our business.


Islamic finance
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Dima Djani