Development, Social Change, and Islamic Finance in Contemporary Indonesia

SummaryThe global spread of Islamic finance has transformed the financial systems of many Muslim countries, but analysts know little about the factors that shape individuals’ demand for Islamic finance. This paper examines the socioeconomic origins of consumer demand for Islamic financial products, using original survey data from Indonesia, where a growing Islamic financial market coexists with a large conventional financial system. Modernization and globalization play critical roles in shaping individual use of Islamic financial products. Perhaps surprisingly, there is no evidence that Islamic piety has any systematic effect on consumers’ choice of Islamic versus conventional financial products.