Exploring the Potential of Islamic Finance in Bridging the Financial Inclusion Gap: A Systematic Review of Literature: Exploring the Potential of Islamic Finance in Bridging the Financial Inclusion Gap

Bronson Mutanda; Bomi Cyril Nomlala

doi:10.13135/2421-2172/11201

Authors

Bronson Mutanda Manicaland State University Of Applied Sciences
Bomi Cyril Nomlala University of Kwa-Zulu Natal

DOI:

https://doi.org/10.13135/2421-2172/11201

Keywords:

Islamic finance, Riba, Conventional banks, Sharia, Muslims, Financial inclusion

Abstract

Financial exclusion remains widespread and continues to constrain the livelihoods of low-income groups and other marginalised communities worldwide. Islamic finance has expanded rapidly in both Muslim-majority and non-Muslim countries as an alternative means of accessing capital and financial services that comply with the prohibition of riba (interest) and broader Sharīʿah principles. By incorporating fairness, risk-sharing, and contractual discipline into financial transactions, Islamic finance aims to foster a more stable and inclusive economic order. This article presents a systematic review of the literature on the contribution of Islamic finance to bridging the financial inclusion gap, with a particular focus on its effectiveness, constraints, and emerging opportunities. Guided by the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) protocol, a structured search of the Scopus database identified 78 peer-reviewed articles published between 2013 and 2024, of which 29 met the inclusion criteria. The evidence suggests that Islamic banking, microfinance, social finance instruments, and Sharīʿah-compliant fintech can expand access to finance for both Muslims and non-Muslims seeking interest-free products, particularly in underserved market segments. Profit- and loss-sharing contracts, asset-backed modes of financing, and redistributive tools such as zakat and Islamic insurance (takaful) are highlighted as key mechanisms. At the same time, the review documents challenges, including low levels of Islamic financial literacy, regulatory and institutional constraints, uneven geographic penetration, and the phenomenon of financial migration, whereby customers shift from conventional to Sharīʿah-compliant institutions without necessarily increasing overall inclusion. The review concludes that, if appropriately supported by policymakers through enabling regulation, consumer protection, and investment in digital infrastructure, Islamic finance can complement conventional finance in reducing financial exclusion and advancing inclusive and socially just economic development. Future research should deepen comparative analyses across regions and products, and explore how Islamic finance can better serve women, youth, and micro-entrepreneurs facing multidimensional exclusion and inequality.

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Exploring the Potential of Islamic Finance in Bridging the Financial Inclusion Gap: A Systematic Review of Literature