DEVELOPING ISLAMIC FINANCIAL INCLUSION INDEX FOR ISLAMIC BANKS IN INDONESIA: A CROSS-PROVINCE ANALYSIS

Abstract

This study measures Islamic financial inclusion index in Indonesia based on three dimensions, namely: the accessibility, the availability, and the usage of Islamic banking services. Additionally, it also measures the relationship between Islamic financial inclusion index and human development index. The study found that the level of Islamic financial inclusion in Indonesia is relatively low at a national level. DKI Jakarta is the most financially inclusive province in Indonesia, followed by East Java and Nanggroe Aceh Darussalam. In contrast, East Nusa Tenggara has the lowest average of Islamic financial inclusion index. The findings of the present study suggest that the policy makers and Islamic financial industry should play greater role in improving financial access to low-income segment especially in the Eastern part of Indonesia, such as East Nusa Tenggara and Papua provinces.