Determinants of Islamic fintech adoption and its contributions to financial inclusion in Indonesia : a case study of Islamic peer-to-peer financing platforms

Abstract

FinTech has the potential to significantly promote financial inclusion, defined as access to and use of formal financial services, particularly for underserved and marginalised communities. The low financial inclusion rate in developing countries, particularly in OIC member states such as Indonesia, poses a challenge that requires innovative solutions. This study aims to (1) examine the key factors influencing the adoption of Islamic P2P financing platforms using the Unified Theory of Acceptance and Use of Technology (UTAUT) model; (2) explore the socio-cultural and religious factors that drive adoption from beneficiaries’ perspective; (3) investigate how Islamic P2P financing contributes to financial inclusion in Indonesia based on insights from FinTech; (4) identify key challenges and the most effective strategies for developing Islamic P2P financing within the context of financial inclusion from the stakeholders’ perspective. A mixed-methods approach combining qualitative and quantitative methods was used to provide a comprehensive understanding of the topic. The UTAUT constructs were used to assess the acceptance of FinTech as a dimension of financial inclusion. This data was analysed using Partial Least Squares Structural Equation Modelling (PLS-SEM) to assess the behaviour of 231 beneficiaries in the research sample. Additionally, a qualitative method examined the socio-cultural and religious factors influencing beneficiaries' adoption of the Islamic P2P financing service platform. In-depth interviews with providers and key industry stakeholders yielded further qualitative insights, employing thematic analysis and the Interpretive Structural Method (ISM) to explore the development and challenges of Islamic P2P financing platforms as a financial inclusion tool. The findings revealed that key factors influencing user adoption of Islamic P2P financing service platforms include effort expectancy, performance expectancy, social influence, and perceived value. In contrast, perceived risk and facilitating conditions do not have a significant effect on behavioural intention to use Islamic P2P financing platforms. Additionally, the exploration of socio-cultural and religious values, particularly perceptions of debt, financial literacy, and trust in Sharia-compliant platforms, reveals their pivotal role in shaping user acceptance, positioning Islamic P2P financing from the beneficiaries' perspective. On the supply side, the study identified accessibility, usage, and quality of services as fundamental dimensions of financial inclusion, emphasising the necessity of technological innovation, regulatory frameworks, and digital financial literacy to support long-term adoption. The study also uncovered several key challenges in achieving comprehensive financial inclusion, including legal and regulatory constraints, scalability concerns, risk management, trust, security and privacy, digital literacy, and financial literacy gaps. These challenges highlight the need for stakeholder collaborative efforts to enhance user engagement and optimise platform capabilities. This study provides a comprehensive understanding of the role of Islamic P2P financing in improving financial inclusion in Indonesia and offers practical recommendations for beneficiaries, platform providers and regulators as the key stakeholders to strengthen the Islamic FinTech ecosystem. Ultimately, Islamic P2P financing has the potential to bridge gaps in financial accessibility, promote ethical finance, and foster inclusive economic growth in Indonesia. Keywords: Islamic FinTech, Financial Inclusion, Islamic P2P Financing Platform, UTAUT, Mixed-Method.