CONCEPTUALIZING AND OPERATIONALIZING ISLAMIC FINANCIAL LITERACY: A MULTIDIMENSIONAL FRAMEWORK

Abstract

Islamic financial literacy is a prerequisite for Muslim financial well-being. Despite the fact that Islam provides clear guidance on financial arrangements, Muslims, particularly in Malaysia, have demonstrated financial ineptitude as evidenced by poor financial behaviours and a high number of bankruptcies, which warrants due scrutiny by current research. Nevertheless, determining the actual level of Islamic financial literacy, let alone devising control measures, has been challenging due to the lack of a validated measurement model of Islamic financial literacy. Furthermore, the lack of a standard definition has hampered empirical research in this area. Therefore, this study aims to scrutinize the concept of financial literacy from Islamic standpoint prior proposing a standard measurement. Underpinned by the Theory of Family Resource Management (FRM), Islamic financial literacy is denoted by Islamic financial knowledge, Islamic financial attitudes, and Islamic financial behaviours. These three primary components are further broken down into three sub-components: Islamic financial products, Islamic philanthropy, and financial management. The proposed measurement of Islamic financial literacy would serve as a parameter for measuring the level of Islamic financial literacy of the community in various groups, allowing subsequent measures to strengthen it to be devised.