Financial inclusion, as considered by the World Bank, targets the individuals and businesses having āaccess to useful and affordable financial products and services that meet their needsātransactions, payments, savings, credit and insuranceādelivered in a responsible and sustainable wayā. However, the World Bank cites several challenges when about 200 million formal and informal micro, small and medium-sized enterprises in emerging economies lack adequate financing to thrive and grow (World Bank 2017). These enterprises are constrained by the absence of collateral, informality of the businesses and credit history. Women and rural and remotely located inhabitants are affected more than the others.
In the same direction, the Sustainable Development Goals (SDGs ) require that extreme poverty (people living under USD 1.25 a day) should be eradicated by 2030, ensuring that all men and women, the poor and the vulnerable, have equal right to economic resources and financial services, including microfinance, and their integration into value chains and market linkages. This objective requires that policy frameworks based on pro-poor and gender-sensitive development strategies, in both rural and urban settings, be framed to support accelerated investment in poverty eradication. The Islamic Development Bank (IsDB) and the UNDP (2016) collaborate on account of SDGs and have identified priority areas for coordinated action, including innovation, poverty reduction, sustainable energy and employment. The IsDB recognizes that the most significant driving factor to achieve SGDs rests with access to affordable finance, at the same time, taking into consideration its inefficiencies as evidenced by the financial crisis of the recent past. Although SDGs relate to various development areas, the role of Islamic finance in achieving the SDGs resonates with the core mandate of the IsDB Group.
This book is the outcome of the Thematic Workshop on Enhancing Poorās Capability and Financial Inclusion from Islamic Perspective, held from 11ā12 December 2017, co-organized by the Islamic Research and Training Institute (IRTI), a member of Islamic Development Bank Group, and the International Islamic University Islamabad. This workshop addressed different aspects of financial inclusion, such as SDGs and socio-economic development in Islamic framework, Islamic insurance (takaful ) and maqasid al-SharÄ«Źæah, the role of zakat in eradicating poverty and enhancing inclusion, processes and procedures for financial inclusion derived from empirical research, use of fintech for financial inclusion and the different views about income disparity caused as a result of using interest.
This book, titled Financial Inclusion from Islamic Perspective, is very essential reading to explain how Islamic financial inclusion tackles the problems of poverty and income inequality. The majority of the countries in the globe fall into low- and lower middle-income categories. This is also true for the IsDB countries and the countries in the Arab region. The countries with low income accommodate poorer, high-income inequality, unemployment and hunger. They spend less on health and the progress in education is slow. They have low access to finance. All these factors reinforce each other and consequently slow their progress in fighting poverty. Access to finance and financial services play pivotal role in poverty alleviation and achieving sustainable development. Accessing and using financial services to achieve financial inclusion is challenging to countries all over the world. These challenges are more severe in IsDB member countries due to the non-availability of funds or the shortage of responsible finance that could meet the communitiesā demand. Apart from the international community, Arab countries called for urgent financial inclusion strategies to check rising unemployment among the youth and women and reduce poverty among their communities. Moreover, the disadvantaged might face more challenges for financial inclusion, which may be associated with their financial capability, illiteracy, security and conflict, and the unavailability of demand-driven financial inclusion products. Hence, this study concentrates on financial inclusion from Islamic perspectives in Muslim countries.
Financial inclusion is an important element in the formulation of Sustainable Development Goals (SDGs ), the new development architecture that succeeds the Millennium Development Goals (MDGs ). In addition, it was given significant prominence at the United Nations Third International Conference on Financing for Development (FfD), held in Addis Ababa, Ethiopia, in July 2015. At the Group of Twenty (G-20), financial inclusion has been given greater prominence in the reform and development agendas (Annual Report 2014). According to Global Findex data (2011), 47 per cent of women and 55 per cent of men worldwide have an account at a formal financial institution, whether a bank, credit union, cooperative, post office or microfinance institution. The gender gap varies widely across economies and regions. Among the regions, South Asia and the Middle East and North Africa have the largest gender gaps, with women making about 40 per cent less likely than men to have a formal account. Financial inclusion or inclusive finance is where effort is made to ensure that all households and businesses, regardless of levels of income, can effectively access and use appropriate financial services they need to improve their lives. Financial inclusion incorporates a range of initiatives that make formal financial services available, accessible and affordable to all segments of the population, including women, rural populations, the poor, persons with disabilities and other disadvantaged groups (A. E. S. Ali 2019). Financial inclusion goes beyond improved access to credit to encompass enhanced access to savings and risk mitigation products and a well-functioning financial infrastructure that allows individuals and companies to engage more actively in the economy while protecting user rights (Triki, T. and I. Faye 2013). Financial inclusion is about the delivery of financial services at an affordable cost to the large sections of disadvantaged and low-income groups.
Moreover, it covers at least 8 out of 17 Sustainable Development Goals. These eight goals under the financial inclusion are very vital to IsDB member countries for which this book is dedicated. The first sustainable goal under fi...