The Malaysia-based Islamic Financial Services Board (IFSB) announced on Wednesday its plans to develop a technical note on financial inclusion, aiming to expand the reach of sharia-compliant banking to low-income consumers.
As one of the primary standard-setting bodies for Islamic finance, the IFSB’s technical note will address regulatory issues including Islamic microfinance, financial technology, and the integration of social finance. This initiative is funded by a grant from the Saudi-based Islamic Development Bank (ISDB) and will be implemented over the next three years, as stated during the IFSB’s annual conference in Kuwait.
Islamic finance, which has experienced rapid growth in recent years, is now under pressure to enhance its social responsibility by better serving farmers, small traders, and poor households. The IFSB’s guidance could significantly improve financial inclusion in majority-Muslim countries, where many less affluent individuals remain outside the formal banking system.
Millions of people in the Muslim world lack bank accounts due to poverty, poor education, and insufficient infrastructure, with religious reasons also playing a crucial role. Prior research by the International Monetary Fund has shown that religious concerns contribute to financial exclusion in countries such as Afghanistan, Iraq, and Tunisia.
(Reporting by Bernardo Vizcaino; Editing by Amrutha Gayathri)
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