Using Islamic Banking to Improve Financial Inclusion in Selected States of Northern Nigeria: The Case of Jaiz Bank PLC

Abstract

Financial inclusion research in Nigeria is generally centered on supply side analysis which makes it virtually impossible to understand the true situation in the country. This research looks at the demand side of financial inclusion in additon to the supply side analysis by focusing on availability, quality, accessibility, impact and usage of Jaiz Bank products and services. The triangulation method was adopted—in which both quantitative and qualitative data were collected. Factor analysis, reliability test and linear regression were applied. The findings indicate that Jaiz Bank offers quality products and services, which are available to all customers regardless of their religious beliefs, and with a satisfactory usage. All these constructs are found to be significant and positively related to financial inclusion. This study concludes that Jaiz Bank as the main Islamic Bank in Nigeria contributes to financial inclusion. It recommends that Jaiz Bank and other stakeholders should intensify awareness efforts regarding the advantages Islamic products and services offer.

1 Introduction

Delivery of inclusive financial services to economically disadvantaged members of the society has been gaining more attention worldwide since the early 2000s. This is consequent upon results of a number of research findings on the negative impact of financial inclusion strategies as well as its relationship with absolute poverty. It is necessary that the prime objective of public policy is to make banking and payment services available to the entire population indiscriminately. The realization of this in the recent past was the major reason for the consideration of measures and policies aimed at establishing global financial inclusion as a means of promoting world economic development and prosperity. Mehrotra et al. (2009) analyzed that access to financial services allows the poor to save money outside the house safely and helps to reduce the risk that the poor face as a result of economic shocks. Hence, providing access to financial services is increasingly becoming an area of concern and a buzz word for policy makers due to its obvious implications on socio-economic development.

The relevance of financial inclusion cannot be overemphasized; for instance, Ajakaiye (2012) highlights that it promotes economic growth and development through financial intermediation by channeling funds from the surplus to deficit units of the economy. It is established that a financial system with banks as the major component provides linkages for the different sectors of the economy and encourages a high level of civilization, expertize and economies of scale, and provides a conducive environment for the implementation of various government financial policies.

The quest for developing a financial system that is in compliance with Islamic law calls for the exploration of what Islamic products could offer. This is because Islamic finance is growing all over the world and so also is the demand for such financial products but the focus of such products is more on financial intermediation through banking and capital market, while the availability of financial vehicles catering for the poor is still in the early stage (Iqbal et al. 2012). The core values of Islam are built upon greater emphasis on social justice, inclusion and sharing of resources between the haves and have nots. Islamic finance addresses the issue of financial inclusion from two points of view: either through promoting risk sharing contracts that provide an alternative to conventional interest based products or through specific instruments of redistribution of wealth in the society, such as Zakkah, Sadaqa, Waqf and benevolence loan. Both modules complement one another in eradicating poverty as well as building a strong and healthy economy.

In line with the Central Bank of Nigeria (CBN) financial inclusion strategy, a regional license was granted to Jaiz Bank PLC in November, 2011 and the bank started operation in January 2012 as the first and currently the only full-fledged non-interest Islamic bank in Nigeria. Other conventional banks like Stanbic IBTC and Sterling Bank obtained a license to operate only Islamic windows. One of the objectives of Jaiz bank is to be at every part of Nigeria so as to provide banking services to a large segment of the society that are unbanked or excluded. The Islamic bank products are expected to bring into the banking sector a large number of people who had previously stayed away from the organized conventional financial services, due to their aversion to interest based products (Umar 2011). The interest-free banking system serves as a means of achieving financial inclusion and attracting foreign investment especially from the Middle East and Asian countries. It will also provide opportunity for manpower development, capacity building and healthy competition as well as fulfilling the demands and needs of not only the Muslim population but also the non-Muslims (Dogarawa and Bello 2014).

The financial exclusion problem in Nigeria is more pronounced in the north western and north eastern parts of the country. For example the north west has the highest population among the six geopolitical zones in Nigeria, but unfortunately this zone has the highest number (68%) of excluded adults as compared with the south west with only 19% (EFInA 2014). This ugly scenario prompted the government and other stakeholders to usher in various policies and plans to reverse the situation. Presently, the government has embarked on Sukuk finance for infrastructural development, for example road construction, but this is just segmental and a trial compared to full-fledged adoption of Islamic finance as far as financial inclusion is concerned.

Many efforts were made by academic and non-academic researchers, governmental and non-governmental organizations as well other experts to enhance the outreach of financial inclusion to bring the marginalized and excluded population into its fold for mainstream economic activity which has not yielded much success. For example, several indicators had been used by different researchers to assess the extent of financial inclusion, of which the most frequently used has been the number of bank accounts per 1000 adults. Some other indicators are number of bank branches per 100,000 people, number of ATMs per 100,000 people, amount of bank credits as well as amount of bank deposits. Viewing these indicators critically while used individually, it can easily be understood that it provides only partial information. A report by the Word Bank (2006) indicated that the number of bank accounts per 1000 adults is higher in Russia but looking at the number of bank branches per 100,000 adults Russia ranks the lowest among the countries covered in the study. In the same line looking at the usage of the banking system in terms of the volume of credits and deposits as another indicator of financial inclusion, Argentina seemed to be having a very low credit ratio in spite of the density of bank accounts and bank branches per 1000 and 100,000 people, respectively. From the analysis of this report, no single indicator can be adopted as the sole measure of financial inclusion and some key issues of inclusion like quality of banks’ services as well as general customers’ satisfaction are left out. The reasons for this failure are yet to be fully ascertained which serves as an inducement for further research in the area.

Thus, it is against this background that this study examined the prospects of Islamic banking in improving financial inclusion in some selected states of Northern Nigeria using Jaiz Bank as the case study.

2 A Review of Concept of Financial Inclusion: Conventional Perspective

Financial inclusion is a concept that has been defined or understood by various scholars, committees and institutions to reflect the reality or the extent in which individuals in a given society are supposed to be financially included or why they are excluded. Hanning and Jansen (2010) perceived financial inclusion from an affordability point of view—were people able to afford the financial products or not? In the same way, Thraot (2009) defined financial inclusion as the provision of affordable financial services such as: access to payments services, savings, loans and insurance services by the formal financial system to those who were initially excluded. Financial inclusion is the delivery of financial services at affordable cost to sectors of disadvantaged individual members of the society. It could also be seen as the provision of a broad range of high quality financial products, such as: savings, credits, insurance, payment and provisions of all financial services that are relevant, appropriate and affordable for the entire population especially by the low income segment (Central Bank of Nigeria 2012).

Rayes et al. (2005) on the other hand opined that financial inclusion connotes a position where the majority of the population has broad access to quality financial products and services which include: loan, deposit services, insurance provision and payment system as well as financial education and consumer protection mechanisms. Furthermore, according to Aduda and Kalunda (2012) financial inclusion is the process of availing an array of required financial services, at a fair price, at the right place, in the right form and time without any discrimination to all members of the society by the service providers.

According to Sarma (2008), financial inclusion is seen as a process which allows ease of access to, or availability of and usage of formal financial systems by all adult members of the economy. It involves a process whereby all members of the economy do not find it difficult to open bank accounts, they can easily afford to have access to credit facilities and can conveniently and consistently use financial system products and facilities without much stress. Financial inclusion is also being considered as the process in which the person’s in-coming income is maximized and out-going money is controlled and he/she can easily exercise informed choices through access to basic financial services in a given country (Financial Inclusion Strategy 2009).

3 Empirical Review on Financial Inclusion via Islamic Banking Linkages

Ismail et al. (2015) used quantitative indicators to evaluate financial inclusiveness in Islamic banking. They identified various categories of poor people who need finance for their health, education and small business working capital, but they cannot be served using the available Islamic banks product structures. They argued that most of the Islamic banking debt based products are close, but relatively expensive substitutes, for instance in Pakistan. In the same line, Siddiqi (2014) argued that the role of debt needs to be drastically reduced and replaced by participatory modes of finance. Kayed (2012) observed that the activities of some Islamic banks in various Muslim countries have shown that the profit and loss sharing (PLS) model has not been given all the necessary attention. It was also argued that unless Islamic banking gradually moves away from debt like financing and stops acting like a financial broker just like conventional banks, Islamic banks cannot claim to be a substantive alternative of the conventional banking system (Siddiqi 2014).

In Pakistan for example, Naveed and Ali (2012) found that as many as 58.7 million people are living in multi-dimensional poverty with 46% of the rural population and 18% of the urban population falling below the poverty line. The study concluded that Islamic banks and conventional banks with Islamic branches can use their existing branch network to cater for the microfinance needs of the people.

Some researchers have tried to investigate the issue of financial inclusion from its demand side aspect and usage of financial services among Muslim societies. Naser et al. (1999) discovered that 70% of Muslims in Jordan revealed their preference for religious issues while selecting financial products; most of them cite religious reasons for not seeking a conventional loan. In Gaza for example 60% of respondents to a finance survey have shown a strong interest for Islamic products over conventional products while about 30% said Islamic products are preferred regardless of price (El-Gamal et al. 2011). However, in Malaysia Haron et al. (1994) discovered that there is not much difference between Muslims and others in the choice of their bank. In their findings they discovered that people choose banks based on quality of services, the speed of transaction as well as the reputation of the bank. But most of the empirical works on financial inclusion and demand side particularly from Middle Eastern and North African countries suggest that there is a demand for Sharia-compliant services among Muslims.

Beck and Brown (2011) used household level data for 29 economies in Eastern and Central Europe and found that Muslims are 8% less likely than non-Muslims to have a formal account. After documenting a gap between Muslims and non-Muslims in the use of bank accounts, they discovered that, discrimination may play a role in lowering the use of formal financial services among Muslims. Demirguc-Kunt et al. (2013), used novel data to explore the use of and demand for formal financial services among self-identified Muslims by taking a sample of more than 65,000 people from 64 economies. Results revealed that Muslims are significantly less likely than non-Muslims to own a formal account or save at a formal financial institution.

Fada (2012) used a cross-sectional data for a sample of 134 respondents, and applied an exploratory factor analyses to examine the viability of Islamic banking in the Gombe local government of Nigeria. The findings discovered that the advent of Islamic banking in the area could bring about economic benefit, as it will serve as a means of financial inclusion for those that are excluded as well as serve as a potential vehicle for fund mobilization, create more employment opportunities and encourage foreign investment especially from the Middle East. Dogarawa and Bello (2014) analytically found out that profit-risk sharing characteristic and socio-economic function of Islamic finance along with more effective regulation and supervision can help to reduce financial instability and promote faster development. Therefore Islamic finance should be given a trial alongside its conventional counterpart in Africa.

Researchers using Indonesian Islamic banks’ data from 2003 to 2014 and employing panel regression methodology found out that, financing rate has a negative impact on the Islamic bank financing technique (Zulkhibri and Sukmana 2016). Findings by Sami et al. (2015) analyzed existing country level information on the relationship between the development of Islamic banking and financial inclusion in Muslim countries, and revealed that various indicators of financial inclusion tend to be lower, and number of excluded individuals citing religious reasons for not using bank accounts is greater than in other countries. Therefore Islamic banking would be an effective avenue for financial inclusion.

Also, Ismail et al. (2015) explained how philanthropy instruments can increase financial inclusion from the Islamic point of view. They considered that philanthropy instruments could increase the range of financial services available to the underserved market. The more these instruments are available, the more the number of the poor to have an account with Islamic financial institutions. Additionally, using the poverty gap index, Nasim (2014) argued that revival of Zakat and Awqaf institutions and their enforcement will enable the Islamic Development Bank member countries to generate sufficient revenue for their all pro-poor expenditures which is expected to reduce the level of poverty and increase financial inclusion in various countries. The positive impact of Islamic finance on poverty reduction is manifested in the inclusion of those that have hitherto been excluded from financial services. Siddiqi (2014) also noted that the comparative advantage of Islamic finance is that there is a close link between real economic activities and Islamic finance which creates value for financial activities and inclusion.

Cross-sectional data was applied in a descriptive research method to describe the alternative financial inclusion strategy, the Islamic expectation in Ogun. The findings showed that Islamic microfinance in concert with the right fiscal and monetary policies framework, could contribute positively to poverty alleviation in Nigeria (Onakoya and Onakoya 2014). Similarly, a survey questionnaire was administered to poor Muslim households in Ilorin, Nigeria, and applied factor analysis and structural equation modeling by Adewale (2014) indicated that lack of financial inclusion had significantly and statistically impeded the financial inclusion strategies in Nigeria

4 Methodology

This research adopted a mixed method (triangulation) which is considered more suitable for this study. Triangulation involves the conscious application of quantitative and qualitative methodologies as a good solution to strengthen a research design where the logic is based on the fact that one single method cannot adequately solve the research problem at hand (Denzin 1998; Patton 1999).

The quantitative data is obtained through distribution of questionnaires to various Jaiz Bank customers. A multi-stage sample technique was adopted in which all the Northern states were taken as one large primary sampling unit, and three different geopolitical zones (North-West, North-East and North-Central) were considered at the second stage. Therefore, four states were selected (Abuja, Kano, Bauchi and Sokoto) to represent a three-stage sampling design. Instead of considering all Jaiz Bank branches in the selected states, one bank branch was taken in each state for the purpose of this research representing a four-stage sampling design. While for the qualitative data a semi-structured interview was conducted in which Heads of Operation, Sharia Audit Unit, Marketing and Risk department were chosen.

As a technique for the sample size determination, Yamane’s formula of 1967 was adopted, where 400 respondents were selected out of 285,476 Jaiz Bank customers. In order to minimize the problem of law rate of return of the questionnaire, 10% is added to 400 which made it 440 with the argument that the larger the sample size, the smaller will be the sampling error. For questionnaire administration, a “random arrival” method of sampling was adopted in this study. By this method the daily banking opening hours were divided into one-hour intervals. An interviewer was stationed within the bank’s premises and specific times within the hour were set to select customers at random.

5 Measuring Financial Inclusion

The model is structured to include questions on access to banking services by Jaiz bank customers, availability of Jaiz Bank products and services, usage of Jaiz Bank products and services by the customers, the quality of Jaiz Bank products and services as well as the impact of Jaiz Bank products in terms of financial inclusion (Fig. 4.1).

Fig. 4.1

Variables of financial inclusion. (Source: Researcher’s computation 2018)

This measurement is adapted from the work of Hanning and Jansen (2010), Aduda and Kalunda (2012), Serrao et al. (2012) and Salathia (2014). According to these researchers financial inclusion can be measured through the above mentioned variables. For example

• 1. Access, which can be seen as the ability of the customers to use the available financial products and services offered by financial institutions.

• 2. Usage, this goes beyond the basic acceptance or adoption of financial services but focuses more on the permanence and extent of the use of financial services and products.

• 3. Quality, this indicates the relevance of the financial products or services to the general need of the customers.

• 4. Availability, this has to do with how available the financial services and products are to the customers of financial institutions.

• 5. Impact, this is to measure changes in the lifestyle of the customers as a result of usage of financial services and products.

This information can be obtained from the demand side that is, by asking questions to individual customers or through the supply side which has to do with information obtained from financial service providers or the information from both sides like in the case of this research.

The questions are adapted from different sources and modification is made so as to capture some basic issues. Also, to fit into the study environment, as a form of validation of the questions, the researcher consulted two experts; one was an expert of Islamic banking while the other was a data analyst. Still on the process of coming with relevant questions, this questionnaire was subjected to a pilot survey among the academic staff of Ahmadu Bello University, Zaria who have accounts with Jaiz Bank. All the items are measured based on 5 point Likert Scale system.

Factor analysis is used in this study for a validity test to ensure that questions asked in the questionnaire are associated with the constructs under survey. Also a reliability test was conducted in which Cronbach’s alpha was used to measure the internal consistency.

5.1 Empirical Model

Here the model used by Salathia (2014) and Ghatak (2013) is employed to examine the effects of access, availability, usage and quality of Jaiz bank products and services on financial inclusion. These models predict that ABS, AVBS, UBS and QJBS are factors that determine financial inclusion through Jaiz Bank within the study area.

A linear regression model is employed to regress dependent variable financial inclusion (FI) on a set of independent variables (ABS, AVBS, UBS and QJBS), where ABS stands for access to banking services through Jaiz Bank, AVBS is for availabilty of banking services through Jaiz Bank, while UBS is for utilization of banking services through Jaiz Bank and QJBS stands for quality of Jaiz bank products and services.

The models are expanded as follows:

$$ \mathrm{FI}={\alpha}_0+{\alpha}_1{\mathrm{ABS}}_{\mathrm{i}}+{\alpha}_2{\mathrm{AVBS}}_{\mathrm{i}}+{\alpha}_3{\mathrm{UBS}}_{\mathrm{i}}+{\alpha}_4{\mathrm{QJBS}}_{\mathrm{i}} $$

(4.1)

For the final equation we take the mean value of each and every equation and arrive at

$$ {\displaystyle \begin{array}{c}\mathrm{Financial}\ \mathrm{Inclusion}={\alpha}_0+{\alpha}_1{\mathrm{access}}_{\mathrm{i}}+{\alpha}_2{\mathrm{availability}}_{\mathrm{i}}\\ {}\kern0.75em +{\alpha}_3{\mathrm{usage}}_{\mathrm{i}}+{\alpha}_4{\mathrm{quality}}_{\mathrm{i}}+{\mu}_{\mathrm{i}}\end{array}} $$

(4.2)

ABS measures items under access to banking services through Jaiz bank.

AVBS measures items under availability of banking products and services through Jaiz bank. USB measures items under usage to banking products and services through Jaiz bank.

QJBS measures items under quality of Jaiz bank products and services.

while FI stands for financial inclusion where the impact of financial inclusion through Jaiz Bank is used as a proxy and α₀ is a constant parameter which is the value of the dependent variable when all the independent variables are 0. While α_1, α_2, α₃ and α₄ are the estimated coefficients of the independent variables, μ_i is the error term which takes care of the other factors that might influence financial inclusion within the study area but not captured by the model.

6 Data Presentation

6.1 Response Rate

Out of 440 questionnaires distributed 394 were returned, which accounts for a response rate of 90% but out of this 394 returned questionnaires 24 were invalid because some significant parts of the questions asked were not completed by the respondents. The outstanding valid and usable questionnaires stood as 370 only, which accounted for 84% and is considered very adequate for the analysis in this study. As according to Sekaran (2003) a response rate of 30% is sufficient for a survey data (Table 4.1).

Table 4.1 Response rate for the questionnaires

6.2 Individual Item Reliability

Individual item reliability was assessed by examining the factor loadings of each construct’s measure (Duarte and Raposo 2010; Hair et al. 2012). Following the rule of thumb for retaining items with loadings between .50 and .70 (Hair et al. 2014), it was discovered that out of 66 items, 39 were retained while 27 were deleted because they presented loadings below the threshold of 0.50. Thus, those that were retained had loadings between 0.501 and 0.951 (see Table 4.2).

Table 4.2 Number of items retained

6.3 Regression Models for Financial Inclusion

The hypotheses were tested using the multiple regression models. In this study, the goodness of fit statistics, R (correlation value), R² and adjusted R² were the main criteria used in testing the hypothesis models. The unstandardized path coefficients (β) and corresponding t-values were also examined to test the significance and strength of the relationship between the dependent and independent variables.

From Table 4.3, the model summary provides the correlation coefficient and coefficient of determination (R²) for the regression model. As we have already seen from the table the coefficient of .717 suggests there is a strong positive relationship between ABS, AVBS, QJBS and UBS scores, but it is not more than 0.9 for one to suspect the presence of multi-collinearity among the variables, this is because according to Field (2005), to avoid multi-collinearity in the sample, the value of correlation should not exceed 90% between the predictors, that is (R >0.9).

Table 4.3 Summary of regression models table

While, R² = .514 suggests that 51% of the variance in FI can be explained by ABS, AVBS, QJBS and UBS. In other words since the value of R² is more than 50% the success of financial inclusion is strongly predicted by how successful ABS, AVBS, QJBS and UBS are.

From the ANOVA table we extracted F-statistics which has the P-value for the regression model as .000. This is an indication of a highly significant model; therefore, we can come to the conclusion that all the four independent variables jointly predict the percentage of financial inclusion through Jaiz bank.

Turning to coefficient values, the total value of the intercept (constant) stood at .316 depicting that the dependent variable (FI) will increase by approximately 31.6% when the influence of all other independent variables is held constant. Looking at ABS a 1% increase in it will lead to a 4.1 increase in FI as the relationship between the two variables is positive though not significant as the P-value is greater than 5% (p>0.05). Also a 1% increase in AVBS will lead to about 19.8% increase in FI; the relationship is positive and very significant as the P-value is .000. Going through the coefficient value of QJBS is an indication of a positive relationship with FI which means a 1% increase in it will lead to a 52.6% increase in FI and this relationship is very significant with a P-value as .000. Lastly from the model UBS indicates a significantly positive relationship with FI, therefore, from the table a 1% increase in UBS will lead to a 14.9 increase in FI; the significance level is very high with P-value as .000.

7 Discussion of Findings

After pre-tests of the normality test, test of outliers and multi-collinearity to ensure all the necessary conditions for regression analysis are set, the test is run and from R, to R² and F-statistics. The model is adequate for this analysis. Initially there were four constructs that made up financial inclusion and were therefore tested at their level of significance to find out if they really contribute to financial inclusion among the Jaiz Bank customers. Therefore, this research considers all these constructs to see how each one of them contribute significantly or not to the achievement of financial inclusion in Northern Nigeria through Jaiz Bank.

Hypothesis 1 tries to test whether access to Jaiz Bank products and services has significantly contributed to the issue of financial inclusion in Northern Nigeria. From Table 4.3, this hypothesis is rejected as the p-value is .415 which is far higher than the 5% level of the alternative hypothesis rate of acceptance. This analysis tallies with the findings under Jaiz Bank Islamic banking products awareness. This is a testimony that without knowing how the bank operates or what kind of products or advantages the bank offers, one cannot fully access these services. This result is in line with Ibeachu (2010) who found that people are being driven away from a product or services, when they considered the product as highly risky. In this regard, the insignificant value of access to banking services through Jaiz is because many depositors in Nigeria are used to conventional banks where one can deposit money and get interest in return without engaging in any business or sharing of any loss as the case may be. Also from the interview with some customers of Jaiz Bank some of them believed that since the bank is an Islamic bank, there should not be any stringent conditions in dealing with it. In fact some made the researcher understand that their thinking is that the bank should operate like a charity organization. The interview with Kano main branch Manager confirms this statement where he says:

We find it difficult to explain to customers that need similar products with that of conventional banks. Some customers think Islamic bank does not need any condition before you engage in transaction with, which are however needed seriously particularly because of the Shariah compliance

Also due to the fact that the bank is a new bank compared to other convention banks within the study area, the majority of the customers totally disagreed with some questions under ABS. For example more than 90% of the customers strongly disagree that the bank is conveniently located within their area, ATM service is nearby from their area and as compared to other banks, Jaiz Bank is closer to them. This lack of proximity prevents some individuals from fully accessing the available products and services of the bank.

Another reason is that some customers have a perception that the products of Islamic Banks are expensive compared to that of conventional banks, especially in the case of Murabahah. This corroborates with the findings of Ismail et al. (2015), who argued that most of the Islamic banking debt-based products are close, but relatively expensive substitutes in Pakistan. Therefore, these customers’ perception will deter them from full access to all the services offered by banks. However, in contrast to this finding, Ghatak (2013) found accessibility to banking services as the major significant determinant of financial inclusion in India. Also in a similar finding, Salathia (2014) discovered that access to banking services is one of the significant factors that determine financial inclusion in five districts of India. Therefore, the issue here is how accessible the banking products are to the customers will determine whether it is a significant factor or not. One beautiful thing with this access to banking services through Jaiz bank is the positive relationship the factor has with FI which signifies that as access increases the level of financial inclusion will also increase.

Hypothesis 2 measures the relationship between availability of Jaiz Bank products and services (AVBS) in relation to financial inclusion. From the results it was found that availability of Jaiz Bank products and services is a positive and significant construct that determines financial inclusion in Northern Nigeria as the p-value is .000 (see Table 4.3). This finding is an indication that the products and services of Jaiz Bank are available to all customers. Being an Islamic bank does not make its services to be available to only one segment of the population (ie Muslims) but rather to all individuals. From the descriptive analysis segment of this study under religion of the customers, the presence of Christians among respondents is a good testimony that the bank covers all. This finding corroborates with the qualitative data obtained through interviews with Jaiz Bank Head of Operations, Head of Sharia Unit as well as the Marketing Manager Abuja main branch. For example, according to the Head of operations:

In regard to availability of banking products and services there is no limitation, is available to everyone regardless of his or her religion, these services could be accessed either through internet, ATM points or mobile banking.

Also the Abuja Branch Marketing Manager testified that the products of Jaiz Bank are available to all customers regardless of one’s religious belief. This finding is similar to that of Salathia (2014) who found that availability of banking services is a significant factor that determines financial inclusion. Evidently, the finding that Jaiz Bank products and services are available to all categories of customers has significantly improved the level of financial inclusion within the study area.

Hypothesis 3 is that the quality of Jaiz Bank products and services (QJBS) had improved financial inclusion in Northern Nigeria. This hypothesis is accepted even in terms of correlation between the developed hypotheses and financial inclusion in this study. It was found that QJBS has the highest level of relationship with FI. Also, from factor analysis, QJBS has the highest number of factors that remained after factor loading analysis. Form Table 4.3 it was discovered that 1% increase in QJBS could lead to more than 51% increase in FI with a highly significant positive relationship (p-value = .000). This result indicates that the more the quality of Jaiz Bank products and services the more people will be financially included through Jaiz Bank. The interview with the management of Jaiz Bank confirms this finding for example, the Head of Operations says:

Our products are unique in the sense that, Jaiz Bank is the first Islamic Bank in Nigeria, though this bank has many similarities with conventional banks’ products but it has a lot of flexibility like in terms of underlying contracts. So the quality of our products and services is standard, while in terms of financing Jaiz Bank has different system such as: Murabahah financing, Ijara wa iqtinah etc.

From this interview, it is clearly seen that the quality of Jaiz Bank products and services is standard and unique being the first Islamic bank in Nigeria. Therefore the customers considered this bank as the one that could allow them to do trading activates, due to its flexibility and a customer can utilize it based on Murabaha agreement to purchase a car to his own test or to use Ijarah to own a house, for instance. These trading opportunities are not available in the conventional banks.

Hypothesis 4 tries to measure whether usage of Jiaz Bank products and services (UBS) is a significant determinant of FI. From the results of regression analysis, this hypothesis stands accepted as the p-value is less than 5%. In fact the level of significance is very high, that is, p-value = .000. This result shows that as usage of banking services increases the level of financial inclusion will also increase due the positive relationship between the two variables. After accepting the basic banking services, usage focuses more on the permanence and depth of financial services and products use. Hence determining usage requires more details about the regularity, frequency and duration of use over a period of time which can best be measured through demand side survey data. Therefore this study exactly measured the usage through asking customers some set of questions about how frequent the use of Jaiz Bank services is and how regular is the use of the products among other things. The finding testifies that Jaiz Bank customers had accepted the bank and they use it for their day to day transactions. The usage of Jaiz bank products and services is an indication that customers really adopt this bank and the bank is trying to provide services that are efficient to the level of customers demand.

In a verbal interviews with some customers of Jaiz Bank, they have indicated that they also prefer to use Jaiz Bank simply because the services use to be effective they normally cite example with the issue of ATM and internet efficiency as some of the reasons. In a nutshell usage of Jaiz bank services is found to be a significant factor that determines financial inclusion through Jaiz Bank. The more frequent people use the bank the more the bank will remain in the market and the more it will continue to provide financial services that will make people more financially included.

On a general note from the F-statistic value (96.520) and its corresponding p-value (0.000), the four constructs ABS, AVBS, QJBS and UBS jointly made up the financial inclusion construct within the study area and contributed significantly toward improving it. Therefore, they are the determinants of financial inclusion in Northern Nigeria through Jaiz Bank. This result is an indication that if access to banking services and products, availability of financial services and products, quality of the financial services and products as well as the usage of the financial services and products through Jaiz Bank could be improved, the level of financial inclusion within the study area will also be improved due the positive relationship between this financial inclusion and the other constructs. One of the findings of this research is that many people have joined the bank because of its adherence to religious principles, those who refused to bank with any conventional bank due to their aversion to interest now have no reason to be voluntarily excluded from the formal financial institutions.

These findings are in tandem with several previous studies in the area of Islamic banking and financial inclusion such as: Naser et al. (1999) who discovered that 70% of Muslims in Jordan give much importance to religious issues while choosing financial products; most of them cite religious reasons for not seeking a conventional loan also it was discovered that in Gaza, for example, 60% of the respondents to a finance survey have shown a strong interest for Islamic products over conventional products while about 30% said Islamic products are preferred regardless of price. But in Malaysia Haron et al. (1994) discovered that people choose banks based on quality of services, the speed of transaction as well as the reputation of the bank. But most of the empirical works on financial inclusion and the demand side, particularly from Middle Eastern and North African countries, suggest that there is a demand for Sharia-compliant services among Muslims. In Nigeria for example, Dogarawa and Bello (2014) analytically conclude that profit-risk sharing characteristics and socio-economic functions of Islamic finance along with more effective regulation and supervision can help to reduce financial instability and promote faster development.

Furthermore, this study discovered that, the availability of banking services and products, the quality of the products and services as well as the usage of the banking services through Jaiz had a significant impact on financial inclusion within the study area.

Therefore with all this evidence the bank has the full potential to include many unbanked individuals into the formal financial system, especially those that are voluntarily excluded from the system or those that are excluded as a result of not having full documents, as the bank offers first tier and second tier accounts for this category of customers.

8 Conclusion

From the research findings, we conclude that Jaiz Bank as a full-fledged Islamic bank in Nigeria has great potential toward ensuring a significant level of financial inclusion within the Northern part of the country and to a larger extent the country in its entirety. This as a result of how many individuals within the study area are becoming more aware about Islamic banking and the kind of opportunities Jaiz Bank offers. One important thing about this bank is how even Non-Muslims are availing the services and products of Islamic banking which is an indication in the near future the Nigerian society will take the full benefit of these products and invariably a significant portion of the total population will be fully included financially.

This study also concludes that for the achievement of full financial inclusion target in Nigeria as a whole, quality, availability, accessibility and usage of banking products and services must be improved at all times and be provided at affordable prices to all segments of the society regardless of the individual’s tribe, religion or financial status. Only with financial inclusion can real economic development be achieved. This will happen because financial inclusion helps in pooling up the funds which initially remain idle in the hands of those who are financially excluded, as this will help in capital formation. The capital formed will be put to productive investments and these investments will generate more wealth in the economy as well as provide job opportunities to the teeming Nigerian population. Thus the GDP will, in particular, be improved and the nation will prosper in general.

9 Recommendations

For Jaiz Bank as a full-fledged Islamic bank in Nigeria to continue to contribute its quota in terms of improving financial inclusion in the Northern region of country and Nigeria in general, the following recommendations are offered:

• 1. It was found in this study that Sharia compliance is one of the major reasons many customers joined Jaiz bank, but some of these customers are lamenting about the total Sharia compliance of the bank. Therefore the management and staff of Jaiz bank should intensify efforts to always ensure total compliance with all principles of Islamic law. Also the bank should create more means to make their customers more aware on how the Islamic banks deal with the issue of interest. This will make all those who previously refused to bank with any conventional bank, due to their aversion to interest, feel comfortable and safe to continue banking with Jaiz Bank and remain financially included.

• 2. The government and the Central Bank of Nigeria (CBN) as the chief financial regulatory agency in the country should give all necessary support to all institutions providing Islamic finance by ensuring no condition is imposed upon them that violates the rule of Sharia.

• 3. Regarding the accessibility to Jaiz bank products and services, effort should be made to make all these unique products affordable to all customers. More branches and ATM points need to be opened, especially in the rural areas so as to reduce the distance between individual customers and the bank branches. Proximity is very essential in ensuring financial inclusion among the people.

• 4. The products of Jaiz bank should be made available to all categories of customers regardless of tribe or religious belief. Where possible more products should be made available for customers who could not satisfy one condition or the other. The issue of first tier and second tier accounts should be giving necessary attention as this is an avenue to bring more people into the circle of financial inclusion.

Appendix: Summary of Measurement Scales

Constructs	Measures	Sources
Access to Banking Service	• Jaiz Bank is conveniently located within your area • Employees of Jaiz Bank are easily accessible when needed • ATM service is nearby from your place • Financial services are accessible to disabled customers • You can easily have access to the bank manager when the need arises • Transaction timings are convenient • Account opening formalities are easy • This is the only bank in your area • As compared to other banks, this bank is nearest to you • Bank is easily approachable in case of emergencies • Jaiz Bank has sufficient staff to meet its customers’ requirements • You have easy access to the information which is useful • Overall, you are satisfied with your access to banking services	Salathia (2014), Sarma (2008)
Availability of Banking services	• Financing is available in the bank • Attractive saving schemes are available • Debit card facility (ATM) is available • Financing is available within time limit • New cheque or passbook are issued as and when asked for • Procedure involved in getting finance is easy • New bank products/services are advertised frequently • Field workers promote various products/services • Jaiz Bank staff are helpful in making information available regarding new products/services • Help desk/assisting staff is available for filling withdrawal/deposit form • Overall, you are satisfied with the availability of Jaiz Bank products and services	Salathia (2014), Sarma (2008)
Usage of Banking Services	• You save money frequently • You withdraw money frequently • You frequently use credit facilities of the bank • You are a regular visitor of the bank • You are using the bank for the payment of insurance (Takaful) • You are using the bank for the settlement of obligations toward a third party • You are using the bank for depositing money • You are using banking services because of its free interest system • Advance services of the bank are frequently used by you • In terms of usage the Profit and Loss Sharing (PLS) system of Jaiz bank has no practicality issues • Overall, you visit the bank regularly for saving, withdrawing, borrowing, etc.	Salathia (2014), Sarma (2008)
Quality of Jaiz Bank Services	• Jaiz Bank has modern looking equipment. • The physical facilities at Jaiz Bank are visually attractive. • Staff of Jaiz Bank are neat in their appearance. • Materials associated with Jaiz Bank services (pamphlets or statements) are visually attractive. • Jaiz Bank transaction timings are convenient. • When a customer has a problem, Jaiz Bank staff show a sincere interest in solving it. • Jaiz Bank follows a quick problem solving approach • Jaiz Bank staff provides services at the time they promise to do so. • Staff of Jaiz Bank give prompt services to customers. • Staff of Jaiz Bank are always willing to help customers. • Staff of Jaiz Bank are cooperative, friendly and knowledgeable. • The behavior of staff in Jaiz Bank instills confidence in customers. • Jaiz Bank staff possess sufficient banking information. • Staff of Jaiz Bank have the knowledge to answer customers’ questions. • Jaiz Bank staff give customers individual attention. • Jaiz Bank has operating hours convenient to all their customers. • Jaiz Bank staff have their customers’ best interest at heart. • Sharia compliance of Jaiz Bank is satisfactory. • The overall quality of Jaiz Bank services is satisfactory.	Lau et al. (2013)
Impact of Financial Inclusion	• Islamic financial products have improved my living condition. • Islamic banking has facilitated the expansion of my business. • Islamic banking improves my financial inclusiveness. • Jaiz Bank has increased access to education of the society. • Islamic financial institutions engage the Muslim communities in active economic participation (through payment of Sadaqa, Waqf & Zakah). • Jaiz Bank has led to progress of Northern Nigeria. • Jaiz Bank has the Northern Nigeria sustainable for further progress. • Jaiz Bank has led to the increase in the production of goods and services in the area. • Jaiz Bank has increased economic activities in each sector. • Jaiz Bank has reduced level of stress in your life. • Jaiz Bank has increased per capita income of your family. • Jaiz Bank has created new employment opportunities. • It is expected that Jaiz Bank can meet the financial needs of Muslims and other Non-Muslims alike. • Overall, Jaiz Bank has led to the economic development of Northern Nigeria. • In general, the role of Islamic finance in improving financial inclusion in Nigeria cannot be overemphasized	Salathia (2014)