Journal of Integrated Socio-Economic Systems and Islamic Finance

Vol. 2 (2026)
Articles

Islamic Financial Institutions and Financial Inclusion: A Comparative Study of Malaysia and Indonesia

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  • Shamimi Mohd Zulkarnaini,
  • Rusni Hasan
Shamimi Mohd Zulkarnaini
Centre of Excellence for Islamic Social Finance, INCEIF University, Kuala Lumpur, Malaysia
Rusni Hasan
IIUM Institute of Islamic Banking and Finance (IIiBF), International Islamic University Malaysia, Kuala Lumpur, Malaysia

Published 2026-05-22

Keywords

  • Islamic finance,
  • Financial inclusion,
  • Malaysia,
  • Indonesia,
  • BMT,
  • Zakat,
  • waqf,
  • Islamic social finance,
  • Digital finance,
  • Value-Based Intermediation (VBI)
    • ...More
    Less

How to Cite

Islamic Financial Institutions and Financial Inclusion: A Comparative Study of Malaysia and Indonesia . (2026). Journal of Integrated Socio-Economic Systems and Islamic Finance, 2, 12-19. https://doi.org/10.65638/2978-8196.2026.02.02

Abstract

Abstract: This paper will compare and contrast heights of financial inclusion strategies adopted by Islamic Financial Institutions (IFIs) in Malaysia and Indonesia and specifically discuss Islamic social finance instruments, digital finance and community-based models. By using thematic analysis applied to a variety of policy documents, as well as institutional and implementation strategies, a qualitative comparative approach that is based on secondary data, the study analyzes policy documents and institutional and implementation strategies. The findings indicate that Malaysia follows a policy-based, centralized, and robust regulatory coordination, digital enablement, and integration of Value-Based Intermediation (VBI) and Islamic social finance tools. By contrast, Indonesia uses a decentralized and community-based model, which is powered by Islamic microfinance institutions, including Baitul Maal wat Tamwil (BMTs) with strong grassroots penetration but with issues in terms of standardization of governance and digital readiness. This research study is of value because it presents an integrative analytical model that connects the governance systems, digital integration, and Islamic social finance in determining the financial inclusion outcomes. It sheds light on significant trade-offs between efficiency and inclusiveness, centralization and flexibility, and provides policy relevant insights towards improving inclusive Islamic finance ecosystems.

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