The Role of Islamic Financial Product Innovation in Reduction of Financial Exclusion in Ethiopia

The aim of the chapter is to explain the strategic role of Islamic finance, which can be considered as financial product innovation, in combating financial exclusion in Ethiopia. It intends to assess the extent and the nature of religious-driven financial exclusion of Ethiopian Muslims and the level of their participation in the existing interest free window banking system introduced to the sector recently. In order to collect data for the research, mixed approaches such as questionnaires and semi-structured interviews are used. The questionnaire was distributed to 321 respondents in Addis Ababa in 2017 while the semi-structured interview was conducted with selected high-ranking bank officers. At the end of the analyses there are findings which show the extent of financial exclusion of Ethiopian Muslims due to the absence of alternative financial systems.