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

Analysis of Perceived Usefulness, Perceived Ease of Use, Trust, And Sharia Financial Literature on The Adoption of Sharia Fintech By MSMEs

“…Hamed (2016) who said that having good Islamic financial literacy must be accompanied by good financial abilities, good financial skills and understanding of financial information. In addition, the results of other studies related to technology adoption show the same results as in the research of Zaman, et al (2017), Mahdzan, et al (2017) Albaity andRahman (2019), andAli, et al (2021) who examined regarding Islamic financial literacy on adoption or interest in using electronic Islamic banking.…”

“…The results of this study indicate that Islamic financial literacy produces power and is predictive in predicting individual intentions. Other research conducted by Zaman, et al (2017), Albaity and Rahman (2019), and research by Ali, et al (2021) also shows the results that Islamic financial literacy has an effect on the adoption of Islamic banking. The absence of research that raises Islamic financial literacy on the adoption of Islamic FinTech, makes researchers want to raise Islamic financial literacy as a variable to be studied and make it a research novelty.…”

Factors Affecting Customer Adoption of Islamic Banking Services: A Case From Pakistan

“…Previous research has indicated that customer AIB services are positively linked with compatibility (Ashraf et al, 2016;Lassoued et al, 2018). According to (Hassan & Aliyu, 2018) and (Ali et al, 2021), Moroccan clients' acceptance of Islamic banking is influenced by their level of knowledge about Islamic banks, perception of relative benefits of Islamic banking, as well as its adherence to market norms, lifestyle, and banking preferences. In this connection, hypotheses can be formulated based on prior research on service compatibility and customer intent to AIB services in similar or different contexts.…”

“…The Islamic banks were more likely to be used by devout Pakistanis. In this connection, when you have the respectable understanding of shariah and are familiar with Islamic banking and financing, you'll be able to make smarter financial decisions (Ali et al, 2021). As a result, following theory may be proposed: H5: Customers' intentions to AIB are positively influenced by their religious beliefs.…”

“…Thus, as result of the low acceptance of Islamic banking services, this literacy rate has been low as well. Customers' funding and financing needs are therefore met by Islamic banks through a wide variety of service developments (Ali, Muhammad, Hussain, Rehman & Rehman, 2021). Improving the bank reputation, perceived compatibility, perceived risk, religion and societal impact are all factors that influence customer willingness to AIB services in Pakistan.…”