Does financial inclusion interact with Islamic banking industry? Evidence from Saudi Arabia

Abstract

This thesis explores the interplay between financial inclusion and Islamic banking in Saudi Arabia. Recent empirical evidences, journal articles and policy reports showed the importance of financial inclusion in terms of access, usage and quality of financial services that financial institutions offer to individuals and businesses. An interesting question in this regard is: Does financial inclusion impact Islamic banking in Saudi Arabia. To answer this questions, I investigate whether the three aforementioned dimensions of financial inclusion matter to three challenges of Islamic banking, namely trust, product development and competition. Using a methodology based on a questionnaire, the results show that there is a limited impact of financial inclusion on Islamic banking in Saudi Arabia. However, the most striking fact is the clear dependence between the impact of quality of the three aspects of Islamic banking. This indicates that when Saudi Islamic banks improve the quality of products and services they offer their clients trust them more, they will be endowed with a higher product development ability, and can strengthen their competitive power