Impact of Islamic banking on poverty alleviation and financial inclusion

Hamisu Ali; Abubakar Bamanga Raji; Ibrahim Hamisu

doi:10.65453/ijar.1101.1428

Authors

Hamisu Ali Adamawa State University, Mubi, Faculty of Social Sciences, Communication and Media Studies, Department of Economics, Adamawa State-Nigeria.
Abubakar Bamanga Raji Adamawa State University, Mubi, Faculty of Law, Department of Shariah Law, Adamawa State-Nigeria
Ibrahim Hamisu Polaris Bank Plc, Yola Branch, Adamawa State-Nigeria

DOI:

https://doi.org/10.65453/ijar.1101.1428

Keywords:

Financial inclusion, Islamic, Microfinance, Poverty alleviation

Abstract

This study examines the impact of Islamic banking on poverty alleviation and financial inclusion in Adamawa State, Nigeria, focusing on clients of Jaiz Bank in Yola and TAJBank in Mubi. Employing a mixed-methods research design, the study integrates quantitative data from structured questionnaires with qualitative insights to provide a holistic understanding of the role of Islamic finance in enhancing socio-economic outcomes. A total of 100 respondents were selected using simple random sampling, with key variables including income level, saving behavior, access to finance, financial development, financial literacy, and entrepreneurship status. Descriptive statistics reveal moderate levels of income, savings, financial development, financial literacy, and entrepreneurship among respondents, while access to finance remains relatively low, indicating gaps in formal financial inclusion. Correlation analysis shows strong positive relationships between income, savings, access to finance, financial development, and entrepreneurship, highlighting the interconnectedness of financial engagement and poverty reduction. Regression results further indicate that access to finance (β = 0.068, p < 0.040) and financial development (β = 0.053, p < 0.010) significantly enhance the Poverty Alleviation Index, while financial literacy (β = –0.032, p < 0.065) does not have a direct, significant effect. Hypothesis testing confirms that access to finance and financial development are critical drivers of poverty alleviation, whereas financial literacy alone is insufficient without practical access to financial services. The findings align with empirical evidence from Nigeria, Indonesia, Bangladesh, Mauritania, and South Asia, demonstrating the effectiveness of Sharia-compliant financial services in promoting income generation, savings, entrepreneurship, and inclusive economic participation. Based on the results, the study recommends expanding access to Islamic banking products, strengthening the financial sector through supportive policies and institutional capacity, and combining financial literacy programs with practical opportunities for engagement with Islamic financial services.

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