JOURNAL OF LIAONING TECHNICAL UNIVERSITY

THE IMPACT OF ISLAMIC BANKING DEVELOPMENT ON FINANCIAL INCLUSION IN NIGERIA: AN EMPIRICAL ANALYSIS

Dr. Wasilat Fayokemi Adigun

Abstract

Islamic banking represents a financial system that operates in accordance with the principles of Shar?‘ah (Islamic law), and is rooted in the ethical foundations of Islamic economics. This system places a strong emphasis on moral conduct, social justice, and fairness in all financial transactions. A fundamental principle is the strict prohibition of riba (interest), which is considered exploitative and unjust. This study investigates the impact of Islamic banking development on financial inclusion in Nigeria, particularly among underserved populations. Previous studies, such as those by Zauro et al. (2017), suggest that Islamic banking bridge financial access gaps in Muslim-majority regions. However, empirical evidence specific to Nigeria remains limited. This study fills this gap by analysing the relationship between Islamic banking development and financial inclusion using recent data and robust econometric methods (time-series data from 2012 to 2023), it employs the Autoregressive Distributed Lag (ARDL) model to examine the relationship between Islamic banking assets, financing volumes, and financial inclusion indicators such as account ownership and access to credit. The findings revealed a positive and significant long-run relationship between Islamic banking development and financial inclusion, suggesting that Islamic banking play a pivotal role in addressing Nigeria’s financial exclusion challenges. Policy implications include enhancing regulatory frameworks and increasing public awareness to maximize the potential of Islamic banking.

Keywords: Islamic banking, financial inclusion, Empirical analysis, Impact, Nigeria