Direct and indirect effects of customer financial condition in the acceptance of Islamic microfinance in a frontier market

Abstract

Purpose The study aims to identify a gap within the extant literature on the inadequacy of earlier extension of the theory of reasoned action (TRA) and theory of planned behavior (TPB) to accommodate the peculiarity of Muslims majority countries that experiencing poverty growth in modeling the factors influencing the acceptability of Islamic financial products and services. To address this gap, this study expands the aforementioned theories through the integration of customer financial condition through the analyzes of both direct and indirect effects. Design/methodology/approach The quantitative research design was deployed through data, which was collected from samples of microentrepreneurs within the agricultural sector of northwestern Nigeria. The data from this sample was analyzed through hierarchical regression analysis. Findings The findings confirmed significant direct effects of all the original TPB variables; attitude, subjective norms and perceived behavioral control on acceptance intention of Islamic microfinance. More pioneering, the study established a significant direct negative effect of customer financial condition on the acceptance of Islamic microfinance among agribusiness customers. It further established the indirect (moderating) effects of customer financial condition on the influence of subject norms and perceived behavioral control on acceptance intention of Islamic microfinance, however, such indirect effect was not established in relation to the influence of attitude. Research limitations/implications The findings implied that the providers of Islamic financial products and services should target Nigeria’s frontier market as a potential avenue for expanding their existing market share. More specifically, the agricultural sector of northwestern Nigeria could be given focus in such a marketing strategy. In terms of social impact, providing necessary finances to the agricultural sector will further enhance employment creation and reduce poverty in the northwestern region. Originality/value Despite several extensions of TRA and TPB in various settings, this could the first study which examined both direct and indirect effects of customer financial condition not only in relation to the acceptance of Islamic microfinance but also all other Islamic financial products and services.

Examining the influence of financial inclusion on investment decision: A bibliometric review

“… [ 80 , 88 ] Examine the impact of client financial circumstances on the adoption of Islamic microfinance, along with other Islamic financial products and services, and assess the potential for market expansion in the agricultural industry, aiming to generate a positive social impact through poverty reduction and job creation. [ 101 ] Explore additional ratios that can shed light on the profitability factors of various firms within the finance sector. [ 87 ] Exploring the inclusion of cultural variables and examining the impact of digitalization would be valuable avenues for further exploration in the field.…”

Religiosity and Intention to Adopt Islamic Financing: Individual Control as a Mediator?

“…(Purwanto, Abdullah, Ghofur, Abdullah, & Elizabeth, 2022) Adoption of Islamic microfinance in Indonesia an empirical investigation: an extension of the theory of planned behaviour 9. (Umar, Mas'ud, & Matazu, 2022) Direct and indirect effects of customer financial condition in the Acceptance of Islamic Microfinance in a frontier market 10. (Utomo, Sekaryuni, Widarjono, Tohirin, & Sudarsono, 2020) Promoting Islamic financial ecosystem to improve halal industry performance in Indonesia: a demand and supply analysis Several conclusions can be drawn from previous research regarding the determinants of intention to use Islamic financing.…”

The Governance Structure of Microfinance Institutions: A Comparison of Models of Sustainability and their Implication on Outreach

“…The amount of this higher loan ranges from BDT 30,000 (about USD 375) to BDT 200,000 (about USD 2500), and the users can apply for it once they have successfully repaid the lower loan (MFIs). Some of the ideas it promotes are: doing good things, obeying the law and not doing anything illegal, becoming self-reliant for success, raising wellness awareness, and getting an education [9,30]. Users of group loans are required to pay their complete financial responsibilities (principal amount with income) in 44 equal instalments every week, regardless of the loan they have taken out [30].…”

“…Several studies that were done not too long ago showed that MFIs' financial performance was going down. Because of this, it is essential to study how well MFIs work [9]. The Microfinance Banking (MFB) and NGO-MFIs' operational and financing techniques are precisely replicated by the RDS, but the sorts of operations and items offered by IsMFIs are distinct from those of MFB and NGO-MFIs.…”