Impact of Islamic Financial Literacy, Subjective Norms, Risk Perception and Perceived Behavioral Control on Adoption of Islamic Banking in Pakistan

Abstract

A nation’s economic success is largely dependent on the performance of their banks as they play a major role in regulating its financial sector to stability and cohesion by acting as an intermediary to various parties such as individuals, organizations and governments to conduct their borrowing and depositing activities. In Pakistan, a larger percentage of the population is employing conventional banks compared to Islamic banks due to factors such as unfamiliarity of products and services and inadequate marketing. This study examines the impact of Islamic financial literacy, subjective norms, risk perception and perceived behavioral control on adoption of Islamic banking in Pakistan. A quantitative research approach is employed in this research following the positivist assumption with a realist ontology and objectivist epistemology. Data was collected using a convenient sampling method. The data collection was carried out from online survey Google forms through survey from 311 individuals. The data has been analyzed by using Partial Lease Squares Structural Equation Modeling (PLS-SEM) technique. The result of the study reveals that behavioral, normative and IFL are significant determinants of adoption of Islamic banking in Pakistan. It has been found that behavioral beliefs are very important for Islamic banking adoption. As an implication, focusing on risk management while providing quality information to the customers towards Islamic banking products will lead to increase Adoption of Islamic banking in Pakistan.