Decision to Adopt Islamic Banking: Examining the Effects of Disposable Income and Islamic Financial Literacy

Abstract

The issue of consumer behavior in deciding to adopt Islamic banking is always developing in various cases and time periods, because this phenomenon is growing rapidly along with the accelerated development of Islamic banking itself. This study aims to estimate the effects of Disposable Income and Islamic financial literacy on the decision to adopt an Islamic bank, especially in the case of business actors in traditional markets. This research is quantitative research with an associative approach which is carried out based on a survey of 134 market traders at a traditional market in the border area in the city of Bukittinggi, West Sumatra, Indonesia in 2023. The data in this study were cross-sectional data which were analyzed using Multiple Linear Regression. The findings conclude that the decision to adopt Islamic banking is positively influenced by disposable income and Islamic financial literacy, with a small effect of 10.9%. These findings contribute to the stake holders in Islamic banks that the analysis of consumer behavior in deciding transactions at Islamic banks needs to be considered in formulating market share development strategies. Socialization and education efforts among traders are needed to increase the intention to use Islamic banks.