Adoption Of Islamic Banking Research Articles

Navigating the Adoption of Islamic Banking in the Base of Pyramid Market of Pakistan

The purpose of this research paper is to examine the adoption of Islamic banking (AIB) in the Bottom of the Pyramid (BoP) Market of Pakistan. The study used theory of planned behavior to hypothesize the relationship of the attitude (ATT), subjective norms (SN), perceived behavioral control (PBC), and Islamicity of the Product (IoP) on adoption of Islamic Banking (IB). Exploratory research design was used with a total of 400 questionnaires were distributed using a multi-staged stratified sampling (random sampling within each stratum) approach of which 320 usable questionnaires were returned representing 80 percent response rate. Partial Least Square Structural Equation Modeling (PLS-SEM) approach was used to analyze the hypothesized relationship of the conceptual framework. Results indicated that attitude (ATT), subjective norms (SN), and Islamicity of product (IoP) explained notable effect on the adoption of Islamic banking comparatively the perceived behavioral control (PBC). The overall effect of ATT, SN, PBC, and IoP explained 39.3 percent on AIB within the context of BoP. The adoption of Islamic banking counts the aforementioned variables with their countable effects. The inclusive outreach and features explaining the Islamicity of the financial products can enhance the span Islamic banking market share. Islamic banking over the past decade has witnessed tremendous growth in Asian countries due to innovative financial offerings based on the Sharia Principles of Islam. This study contributed on how the Islamic financial products can be penetrated in the low-income markets like Pakistan with its specific focus in Southern region of the Punjab province. The theoretical framework of the study has demonstrated how the customer closely associated behaviors navigate the adoption of the Islamic banking.

Customer innovativeness in the adoption of Islamic banking in Malaysia

AbstractIslamic banking is a financial system that operates in accordance with Islamic principles, prohibiting the payment or receipt of interest (usury) and adhering to Shariah law. In order to ensure ethical and socially responsible financial practices, Islamic banks use profit and loss‐sharing arrangements rather than traditional interest‐based transactions. Islamic banking has gained substantial traction in Malaysia, driven by its alignment with the values of the predominantly Muslim population. However, the adoption of Islamic banking products and services still faces challenges related to consumer preferences and innovation attributes. This study investigates the mediating influence of customer innovativeness in the adoption of Islamic banking within the Malaysian settings. The study gathered responses from 436 respondents in Malaysia. Structural equation modelling was used to examine customer innovativeness's role in mediating the relationship between relative advantage, compatibility, observability and complexity and the intention to adopt Islamic banking. The study supports the hypotheses that customer innovativeness partially mediates the relationships between relative advantage, compatibility and observability of Islamic banking and the intention to adopt them. However, the study did not provide evidence for the mediation hypothesis concerning the complexity of Islamic banking. In conclusion, this study sheds light on the mediating role of customer innovativeness in Islamic banking adoption, aiding academia's understanding of consumer behaviour. Policymakers can use these insights to promote ethical financial practices, whereas the banking sector can adapt offerings to meet consumer preferences and enhance competitiveness.

An Investigation into Factors that Determine the Adoption of Islamic Banking and Finance: Evidence from Jalalabad, Afghanistan

The performance of its banks determines a country's economic success, as their key focus is to give support and cohesion to the financial sector regulation by acting as an intermediary between various parties such as individuals, organizations, and governments to conduct depositing and lending money operations smoothly. The majority of the population in Jalalabad, Afghanistan, prefers the non-Islamic banking system over the Islamic banking system due to their unawareness of Islamic services and products. This study aims to investigate the factors that determine the adoption of Islamic banking and finance in Afghanistan. The factors determining the adoption of Islamic banking and finance include religious awareness, social influence, relative advantage, and networking. These factors are considered independent variables, and the adoption of Islamic banking is considered a dependent variable in the current study. The data are collected through a self-administered survey questionnaire among 290 respondents. These respondents include employees of different organizations, students, shopkeepers, and residents of Jalalabad. The collected data was analyzed using correlation and regression analysis using SPSS 22.0. The findings of the study revealed that religion, awareness, and social influence have a significant impact on the intention of the respondents, whereas relative advantage and networking have an insignificant impact on the intention of respondents to adopt Islamic banking in Jalalabad, Afghanistan. Most studies suggest a need to educate the public about Islamic banking services and products, and the Islamic banking system must make greater efforts to compete with the conventional banking system in Afghanistan.

Islamic banking adoption: invoking the congruity paradigm

Purpose This study aims to explore whether customers’ perceived congruity between their self-concept and the brand personality of the Islamic banking system determines their intention to adopt Islamic banking services. Design/methodology/approach The authors use primary data collected through a structured questionnaire from 375 Malaysian bank customers. The scales were tested for psychometric soundness before the final data analysis. The authors examined the hypothesized linkages in the AMOS software package through structural equation modeling. Findings Customers’ actual self, ideal self and social self-congruity significantly predict their intention to adopt Islamic banking. However, the impact of actual self-congruity on Islamic banking adoption is stronger for publicly self-conscious customers. In contrast, public self-consciousness dampens the effect of ideal and social self-congruity on Islamic banking adoption. Originality/value Digressing from the conventional utilitarian position, this study offers a novel contribution to the Islamic banking literature by presenting an identity perspective of the determinants of Islamic banking adoption. The primary highlight of this study is the deployment of the congruity theory to emphasize the role of the customer’s self-concept in explaining her intention to adopt Islamic banking services.

Unveiling the Determinants of Islamic Mobile Banking Adoption: Evidence from Pakistan

Mobile Banking is a cutting-edge technological innovation in the banking industry that has greatly increased banking efficiency and boosted the overall quality of life for individuals. Financial firms are increasingly attracted to systems that enhance the quality of client service. This study aims to further our understanding of the adoption of Islamic mobile banking by utilizing the Technological Acceptance Model (TAM). This study presents a research approach that utilizes the Technology Acceptance Model (TAM) to investigate the factors that influence consumers' adoption of Islamic mobile banking. Consequently, it offers insights into the crucial factors that banking professionals must take into account to promote the integration of mobile technology in Islamic banking services. The data for this study were collected by a questionnaire survey and then analyzed using SPSS and Smart PLS 3.0, utilizing structural equation modeling (SEM). The study sample comprised 350 individuals who were customers of various branches of five Islamic banks, namely Meezan Bank Limited, Dubai Islamic Bank, Al-Baraka Bank Limited, MCB Islamic Bank Limited, and Bank AlFalah Islamic. After conducting data screening procedures, a final sample of 300 respondents was selected for analysis. The findings indicate that characteristics such as Perceived Usefulness (PU) and Perceived Ease of Use (PEOU) have a positive influence on the Intention to Use (INT), supporting the notion that PU has a positive impact on PEOU according to the Technology Acceptance Model (TAM). The research findings suggest that customers' adoption of Islamic banking is positively influenced by their intentions to utilize it, and these intentions are further enhanced by social influence.

Factors Influencing the Behavioural Intention to Adopt Islamic Banking in Pakistan with the Mediating Role of Attitude

In Pakistan, the understanding percentage of products offered by Islamic banks is less than 8%, and it is the biggest challenge for the Islamic financial system to increase the compassion level of people about their laws offered products and services. This study investigates the relationship between attitude, perceived behavioural control, perceived ease of use, perceived usefulness, subjective norms, and intention to investigate the low adoption of Islamic banking in Pakistan. The study also analyses the mediating role of attitude and willingness to adopt Islamic banking. Partial least square structural equation modeling was used to examine the hypotheses. The findings revealed that attitude, subjective norms, perceived ease of use, and perceived usefulness significantly impact the intention to use Islamic Banking. Similarly, subjective norms, perceived usefulness, and perceived ease of use significantly impact attitude. However, perceived behavioural control does not substantially affect attitude and intention to use Islamic banking. Moreover, the study also revealed a significant mediating role of attitude between subjective norms, perceived usefulness, perceived ease of use, and intention to adopt Islamic Banking. These findings indicate that Banks should target the public and start a campaign through electronic and print media. Banks should provide information about their rules and regulations, which are genuinely according to Shariah, ultimately leading to people's positive attitude toward adopting Islamic banking.

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

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.

Barriers to the adoption of Islamic banking: a bibliometric analysis

PurposeThe adoption of Islamic banking (AIB) among customers has remained in the limelight due to its significance in the strategic marketing of Islamic banking (IB) services. Although researchers have devoted a significant effort to investigating the drivers of AIB, little is known about the exclusive barriers hampering AIB. Accordingly, this paper aims to examine the underlying barriers to the adoption of Islamic banking (BAIB) and categorize them into different research clusters using bibliometric analysis.Design/methodology/approachThe data was collected from 132 articles published in Scopus database between 2007 and 2022 and analyzed using VOSviewer to explore BAIB.FindingsThe findings clustered the barriers to AIB into three groups, namely, efficiency of IB products and services (service quality, Shariah compliance level, availability of services), behavioral (knowledge and awareness, religiosity, trust and intention) and personal attributes (innovativeness, understanding of mobile/internet banking and technology acceptance) factors of Islamic bank customers.Research limitations/implicationsThe sample size of this study is relatively small, as the data was imported from Scopus database only to perform Bibliometric analysis. Future studies may use larger sample size by retrieving data from other databases such as Web of Science and PubMed to develop better research clusters of BAIB.Practical implicationsThe dynamic business environment and unprecedented changes in consumer behavior require managers creating suitable conditions to foster adoption of their services and capture a better market share.Originality/valueFollowing the findings of this research, future research avenues are identified for strategic embeddedness and global development of IB by overcoming BAIB.

Faithful Finance: Unlocking Banking Islamization in Afghanistan

This paper explores the challenges and prospects associated with the adoption of Islamic banking in Afghanistan. Despite the global growth and acceptance of Islamic banking by approximately 50 countries by 1997, Afghanistan only embraced it between 2008–2009. The decision to convert conventional banks to Islamic ones, driven by the involvement of interest rates (riba) in the prevailing system, necessitates a thorough examination of the challenges and the need for an appropriate response. The study employs qualitative, analytical, and exploratory methods, reviewing secondary sources and conducting unstructured interviews with key stakeholders, including officials from the Da Afghanistan Bank (DAB), staff of Islamic banking institutions, experts in Islamic banking and finance, and consumers. The findings reveal that the challenges in promoting Islamic banking in Afghanistan are more complex and multi-layered than commonly understood, stemming from the legal system, regulatory capacities and mindset, banking services, and public perception. The paper emphasizes the importance of addressing these challenges comprehensively to safeguard the already fragile economic and financial sector. Failure to do so may lead to further deterioration. This research contributes to the existing body of knowledge by shedding light on the unique challenges and prospects of Islamic banking in Afghanistan, providing valuable insights for policymakers, regulators, and practitioners in shaping an effective transformation strategy.

DETERMINANTS OF CUSTOMER SATISFACTION AND ADOPTION OF ISLAMIC BANKING IN PAKISTAN

Islamic banking system is gaining popularity however little is known about issues and barriers in adoption of Islamic banking. This study aims to understand determinants of customers’ satisfaction and adoption of Islamic banking in Pakistan. Data were collected from the sample of users of Islamic banking in major cities of Pakistan. A total of 276 responses were analyzed using multiple regression techniques through SPSS. Results suggest that religious values and service quality have positive impact on satisfaction of Islamic banking customers whereas factors like inadequate information, language barriers, and trust deficiency were negatively related to customer satisfaction. Customer satisfaction was positively related to adoption of Islamic banking. Findings of this study suggest that managers of Islamic banking should envisage policies to keep abreast their customers with useful information, remove language barriers by explaining complex terms into simple language and maintain service quality to enhance consumer trust. This study is among few studies that have incorporated multiple and diverse factors for necessary for the adoption of Islamic banking

Analyzing the linkage between Islamic financial literacy and Islamic banking services adoption: evidence from Turkey

PurposeThe purpose of this study is twofold. First, this research explores the level of Islamic financial literacy of customers in the context of Islamic banking. Second, this study examines the determinants of customer adoption of Islamic banking in Turkey.Design/methodology/approachThis study gathered sample data from 409 participants determined using the purposive sampling method. In the study, first, the reflective measurement model is used to examine the reliability, validity and multicollinearity problems of the variables. Then, AMOS structural equation model (SEM) is used to reveal the relationship between Islamic financial literacy and Islamic banking services. Additionally, this study performed both descriptive and inferential analysis to understand customer literacy about Islamic banking and their adoption behavior of Islamic banking.FindingsThe results obtained from descriptive assessment indicate that Turkish customers of Islamic banking possess sufficient literacy about Islamic banking. Moreover, the results from SEM indicate that the adoption of Islamic banking by customers is significantly predicted by the role of Sharia Board management, Islamic banking and purpose of financial institution, religious factor and legitimacy of Islamic financial system.Research limitations/implicationsThis study focuses only on the level of knowledge and perceptions of customers who have accounts in Islamic banks or financial institutions in Turkey. It does not focus on the level of knowledge and perception of Muslims who do not have accounts in Islamic banks and financial institutions.Originality/valuePrevious studies on Islamic banking are mostly studies that investigate customers’ perceptions of the Islamic banking system and why individuals prefer Islamic banks. In particular, studies examining the relationship between individuals’ Islamic financial literacy level and Islamic banking preferences are limited. This study is considered to be an original study as it investigates the relationship between the Islamic financial literacy level of individuals and their adoption of Islamic banking services in Turkey.

Analytical Study of the influence of Relative Advantage and Compatibility on Customers’ Adoption of Islamic Banking in Pakistan

Although Pakistani Islamic banks offered consumers of Islamic banking and the country at large desirable opportunities, customer adoption remained low in Pakistan. Rogers' (2003) Diffusion of Innovation Theory was used in this study to examine the effects of relative advantage and compatibility on customer adoption of Islamic banking goods and services in Pakistan. The study looked at how adoption is directly impacted by relative advantage and compatibility. Relative advantage and compatibility were found to have a considerable impact on adoption, supporting hypotheses H1 and H2.

Impact of Adoption of Islamic Banking on Consumer Perceptions: A Case of Pakistan

Knowledge, awareness and religious beliefs plays a vital role in the adoption of Islamic banking towards consumer perception. This study aims to identify the impact of adoption of Islamic banking towards consumer perceptions in Pakistan. In this study, primary data is used collected through questionnaire filled by 306 respondents. Adoption of Islamic banking is categorized on the basis of three dimensions including consumer’s knowledge, awareness & religion which measured by demographic analysis through questionnaire. Descriptive statistics, regression analysis, correlation analysis and reliability analysis are major techniques used for hypothesis testing. This quantitative research concluded that there is a significant and positive impact of knowledge, awareness and religious beliefs on consumer perceptions. There is a low positive but directly related relationship of knowledge, awareness and religious beliefs with consumer perceptions. The conclusion of the current study is that awareness and religious beliefs are directly related with consumer perceptions and the maximum consumers have less knowledge and awareness about Islamic banking because of absence of marketing strategies and advertisement. It would be best to focus on the marketing strategies and advertisements in order to increase the adoption rate of consumers towards Islamic banking

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

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.

Islamic banking, efficiency and societal welfare: a machine-learning, agent-based study

PurposeThis paper models the benefits of Islamic banking on the efficiency of the banking sector and on societal happiness. This paper aims to examine how the adoption of Islamic banking to various degrees affects economics outcomes.Design/methodology/approachThis study uses machine-learning tools to build a happiness function and integrate it in an agent-based model to test for the direct and indirect welfare effects of implementing Islamic banking principles.FindingsThis study shows that even though Islamic banking systems tend to reduce economic activity, financial stability and societal happiness is improved. Additionally, a banking sector using Islamic principles across all its members is better equipped to handle banking crises because contagion to both economic activity and societal welfare is greatly reduced. At the same time, adoption of the profit-and-loss sharing (PLS) paradigm by banks may also slow down economic growth.Research limitations/implicationsThe findings extend existing literature on the advantages of Islamic banking, by quantifying the welfare benefits of the PLS paradigm on happiness and financial stability.Originality/valueTo the best of the authors’ knowledge, this paper is the first to combine agent-based modelling with machine learning tools to examine the benefits of the Islamic banking model on financial stability, social welfare and unemployment.

ADOPTION OF ISLAMIC BANKING IN FINANCIAL SATISFACTION : STUDY ON BANK SYARIAH INDONESIA YOGYAKARTA REGION

The main purpose of this study was to examine the effect of Islamic financial literacy, religiosity, bankreputation, and risk attitude on the adoption of Islamic banking. Examine the mediating role of the adoption ofIslamic banking on the influence of Islamic financial literacy, religiosity, bank reputation, and risk attitude onfinancial satisfaction. The statistical analysis model used mediation regression. The research population was1.033.264 and the sample was 336 Bank Syariah Indonesia customers in the Jogjakarta region. The samplingtechnique used was random sampling, a data collection method using a questionnaire. The mediationregression analysis tool uses SEM-PLS. The results show that: Islamic financial literacy has a positive effecton the adoption of Islamic banking products. Bank reputation has a positive effect on the adoption of Islamicbanking. Religiosity has a positive effect adoption of Islamic banking. The risk attitude affects the adoption ofIslamic banking. Adoption of Islamic banking mediates the effect of Islamic financial literacy, bankreputation, religiosity, and risk attitude on financial satisfaction. The results of the study add to the literatureand the results of empirical studies of Islamic financial management. Provide recommendations for IslamicBank policies, namely: policies to increase Islamic financial literacy, bank reputation, risk attitude, adoption ofIslamic banking, and financial satisfaction to improve the welfare and performance of the bank.

Determinants of Islamic banking adoption among non-Muslim customers in a Muslim zone

PurposeThe purpose of this study is to establish the relationship between relative advantage, social influence, trust, compatibility, knowledge and adoption of Islamic banking among non-Muslim bank customers in a Muslim zone of Nigeria.Design/methodology/approachUsable questionnaires were received from 350 participants. Structural equation modeling is used to assess the relationships between latent unobserved constructs. Composite reliability and average variance extracted were used to test the reliability and validity of the instrument. This study uses the correlational research design to test the hypotheses.FindingsThe findings indicate that relative advantage, social influence, trust and compatibility significantly influence adoption of Islamic banking among non-Muslim customers in a Muslim zone of Nigeria. However, knowledge of Islamic banking operations does not significantly influence adoption of Islamic banking.Originality/valueThe existing literature focuses on factors that influence the adoption of Islamic banking, without due emphasis on non-Muslims. The religious divides of Nigeria compel this research to determine the factors that influence the adoption of Islamic banking among non-Muslim customers. Hence, this research seeks to bridge the gap in the existing literature by embarking on an investigation using innovation diffusion theory to identify factors influencing the adoption of Islamic banking among non-Muslim customers in the Nigerian context.

Attitude and Islamic banking adoption: moderating effects of pricing of conventional bank products and social influence

PurposeThe purpose of this study is to establish the relationship between attitude and the intention to adopt Islamic banking in a Christian-dominated country and whether such a relationship is moderated and boosted by pricing of conventional bank products and social influence.Design/methodology/approachThis study adopts a cross-sectional and correlational design as data were collected between July and September 2019. Data were collected using a questionnaire from a sample of 384 adult individuals with bank accounts in conventional commercial banks from which 300 responded, indicating a response rate of 78%.FindingsThe findings of this study indicate that attitude is significantly associated with the intention to adopt Islamic banking. This relationship is moderated and boosted by the pricing of conventional bank products and social influence. The interaction of pricing of conventional bank products with attitude is positive and significantly influence the intention to adopt Islamic banking. The interaction of attitude and social influence is significant but negatively related with the intention to adopt Islamic banking.Research limitations/implicationsThis study uses quantitative data which sometimes misses certain information and limits the respondent’s opinions on the study variables. A mixed method research needs to be conducted on pricing of conventional bank products, social influence, attitude and adoption of Islamic banking to gather the respondent’s opinions on the variables.Practical implicationsIB being an alternative source of financing of business in most parts of the world, existing bank customers, international funding agencies and religious leaders could mount pressure on government to speed up the licensing of institutions interested in offering Islamic banking services.Social implicationsUganda being a secular state and having finalized Islamic banking laws in early 2018, it is surprising that there is no bank that has so far started offering Islamic banking products.Originality/valueThis study provides an initial empirical evidence from a Christian-dominated country on the moderating effect of pricing of conventional bank products and social influence in the relationship between attitude and intention to adopt Islamic banking.

Empirical Study on Adoption of Islamic Banking System Using Quantitative Method: A Case Study of Afghanistan

Although the background of the banking system goes back as far as 1933, Islamic finance is still new in Afghanistan. The history of the first full-fledged Islamic bank began as recently as 2018 with the conversion of Bakhtar Bank, a conventional bank, to the Islamic Bank of Afghanistan (IBA). There have been numerous studies done worldwide, but no empirical study has examined the subject of Islamic banking adoption in the specific context of Afghanistan. Therefore, this present study investigates the adoption of Islamic banking in Afghanistan, using a case study of Herat province, based on Rogers’ (1983) Diffusion of Innovation Theory, to determine the impact of awareness, product knowledge, religiosity, relative advantage, compatibility, and complexity on the adoption of Islamic banking. A quantitative approach to the stratified convenience sampling method was used in this study. Questionnaires were distributed to 334 bank customers and the responses analyzed using SPSS v22. The multiple regression analysis finding indicated that product knowledge, relative advantage, and religiosity significantly and positively influenced the adoption of Islamic banking. It is suggested that the government and financial institutions should support Islamic banking with beneficial policies and initiatives to enhance the knowledge of the public about the significance of Islamic banking activities.

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

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.