Shariah-Compliant FinTech Adoption and Financial Inclusion among Small Businesses

Abstract

For small businesses, notably in low-banked communities, access to financial services has improved thanks, in part, to FinTech. But in the case of the Muslim small businessmen, financial inclusion should also be in accordance to the Shariah guidelines including the prohibition of interest, excessive uncertainty and non-compliant investment practices. The paper will explore various dimensions of digital payments, Islamic microfinance, mobile banking, crowdfunding, peer-to-peer financing and digital lending platforms to assess the adoption of FinTech and sharia compliant financial inclusion among the small business sector. It stresses that Shariah compliant FinTech can help ease financial constraints, help obtain working capital, facilitate business transactions and enhance trust in the formal financial system. The results indicate that small enterprises benefit from improved access to finance, quicker transactions, better bookkeeping and enhanced engagement in the digital economy when adopting Islamic FinTech services. But factors like lack of experience with digital products, few awareness of Shariah products, cyber-security issues, regulatory uncertainty, and trust remain a barrier to broad market penetration. The paper concludes that the potential for FinTech to contribute to Islamic financial inclusion is much higher if digital platforms are transparent, low cost, secure, and are accredited by trusted Shariah governance systems. In summary, Shariah-compliant FinTech presents a viable and feasible way of enhancing small business development and securing inclusive, ethical, and sustainable financial development.