Globalization, Digitalization, and Financial Inclusion in Islamic Banking

Abstract

The rapid growth of Islamic banking and the evolution of financial technology have posed significant challenges to Sharīʿah-compliant banks. Addressing these challenges is crucial given the increasing global interest in Islamic banking as an alternative to conventional banking. This chapter explores the role of financial technology and digital globalization in Islamic banking, examining primary challenges and strategies for overcoming them. The chapter highlights the necessity of improving the digital experience and strengthening infrastructure and human resources. It also identifies risks associated with digital financial inclusion, such as third-party involvement, the use of agency networks, rising costs, and data privacy and security concerns. The chapter recommends that policymakers and decision-makers enhance efforts to develop legislative frameworks, systems, policies, and regulatory structures to support the use of financial technology and digital financial inclusion in Islamic banking.