The effect of financial literacy and social philanthropy functions on Islamic financial inclusion practices

Abstract

Although financial inclusion practices have been widely applied by Islamic banking institutions, the testing of factors affecting Islamic financial inclusion (IFI) is still limited. This study analyses the connections between financial literacy, social philanthropy functions, and IFI. The study sample includes 56 Islamic banks listed on the Indonesia Stock Exchange (IDX) during the 2015 to 2021 period. This study measures Islamic corporate social responsibility (CSR) as viewed based on two approaches: financial literacy and social philanthropy functions. Multivariate regression analyses are utilised for analysing the data and testing the hypotheses. The results showcase that financial literacy does not positively influence financial inclusion; by contrast, social philanthropy has both a positive and significant effect on financial inclusion. This study contributes to the existing literature by providing insights into the influence of Islamic CSR as a means of encouraging IFI. The managerial implications of these results may guide decision-makers, particularly governments and financial institutions when drafting regulations to consider the overall effectiveness of Islamic CSR in promoting improved Islamic financial literacy and inclusiveness within Indonesia.