Bypassing the Riba Friction: Mobile Teleconnectivity, Informal Channel Absorption, and Financial Inclusion in Islamic Economies

The Islamic prohibition of riba (interest) imposes a structural friction on formal banking adoption across Organisation of Islamic Cooperation (OIC) member states. This paper investigates whether rapid mobile telecommunications diffusion bypasses this friction — not by amplifying formal account ownership in Islamic economies, but by routing mobile-enabled financial activity through Shariah-compliant informal digital channels. Using an unbalanced panel of up to 160 countries across four Global Findex survey waves (2011–2021), we combine survey-year panel fixed effects with cross-wave difference-in-differences and a Bartik shift-share instrument. Three findings emerge. First, mobile penetration raises formal financial inclusion universally, but OIC economies convert equivalent mobile gains into formal account ownership at a significantly lower rate than secular economies — a pattern we term informal channel absorption and which is consistent with Shariah-compliant digital platforms absorbing mobile-enabled financial activity outside the formal banking system. This result is robust across multiple specifications, including MENA-only subsamples, additional controls, and a parallel trends test. Second, the absorption effect persists in high-digital-development OIC economies, suggesting that inadequate digital infrastructure does not fully account for the pattern and pointing instead toward a religion-specific mechanism. Third, mobile connectivity generates a delayed but positive effect on female labor force participation in OIC economies, diverging from secular economies at longer horizons. We acknowledge that the macro-level evidence presented here is consistent with — but does not definitively confirm — the informal channel absorption interpretation, and we discuss alternative explanations and directions for future household-level investigation. These findings suggest that standard financial inclusion metrics may undercount effective financial access in Muslim-majority economies, and carry direct implications for Islamic fintech regulation and OIC financial inclusion policy.