Perceptions and Realities: Investigating Barriers to Adopt Islamic Banking in Pakistan

Abstract

This study aims to identify the barriers to adopting Islamic Banking (IB) in Pakistan. This study is focused on three categories of banking customers: IB users, non-users, and those who use both IB and Convemtional Banking (CB). We utilize qualitative methods include in-depth interviews with IB Managers, scholars, and focus groups of the three consumers types. Findings revealed several barriers to broad-based adoption of Islamic banking in Pakistan such as: Lack of Trust, high adoption costs, perception that IB and CB are similar, lower returns, the state bank of Pakistan’s reliance on CB methods, and financial literacy gaps. This study stands out for its inclusion of focus groups with both users and non-users, as well as expert interviews, providing insights beyond literature review. Additionally, it offers user and non-user profiles valuable for customer segmentation and targeting.