Effects of Relative Advantage, Complexity, Social Influence, and Awareness on Islamic Banking Adoption in Bangladesh

Abstract

Bangladesh’s Islamic banking sector has witnessed notable growth, boasting ten fully-fledged Islamic banks operating through a network of 1,659 branches. This development is particularly intriguing given the nation’s extensive banking infrastructure, featuring 61 scheduled banks and 11,153 branches as of December 2022. The contrast becomes even more striking when considering the substantial Muslim population, accounting for 91% of the country’s inhabitants, totaling a staggering 165 million. However, despite this demographic presence, Islamic banks in Bangladesh held only 27% of the nation’s banking assets as of 2021. This study delves into the factors impeding the expansion of Islamic banking in the country, despite its 33-year presence. Through a survey of 407 respondents and the application of Partial Least Squares Structural Equation Modeling, the research explores the relationships between perceived relative advantage, complexity, social influence, awareness, and the intention to adopt Islamic banking. The findings shed light on the potential avenues for further growth in this sector and the importance of raising public awareness to bolster Islamic finance in Bangladesh.