Enhancing Financial Inclusion through Financial Literacy

Perceptions and Impact of Investment Deposits in Islamic Finance in Bosnia and Herzegovina

Abstract

This paper aims to examine the awareness and perceptions of depositors in Bosnia and Herzegovina regarding the features of investment deposits in Islamic finance. It evaluates the contribution of mudarabah-based deposits to the financial inclusion of Muslims and identifies factors influencing clients' decisions to place their funds in Islamic banks. The study employs a quantitative research methodology, utilizing an online survey distributed via LimeSurvey to collect primary data. The survey targeted bank clients in Bosnia and Herzegovina, and a non-random convenience sample was obtained by promoting the survey link on a Facebook page aimed at users in the region. Paid advertising was used to enhance visibility, and direct outreach was conducted in cities with Islamic bank branches to ensure a representative sample. The survey included questions on demographic information, awareness of investment deposits, understanding of Islamic finance, and attitudes towards banking risks and returns. The structured nature of the survey allowed for effective data collection and analysis to identify knowledge gaps and depositor attitudes. The findings reveal that a significant portion of respondents lack adequate knowledge about investment deposits, posing a critical barrier to their effective use for mobilizing savings and enhancing financial inclusion. Muslim clients identify interest as a significant hurdle to saving in conventional banks, with similar expectations and risk aversion observed in Islamic banking investment accounts. This research underscores the potential role of investment deposits in advancing financial inclusion by addressing knowledge gaps and examining factors influencing clients' decision-making processes. It highlights the need for increased awareness and education about investment deposits to facilitate their wider adoption among depositors, enhancing the understanding of leveraging Islamic finance principles to promote financial inclusion and meet the unique needs of Islamic savers and investors in Bosnia and Herzegovina.