Acceptance of Islamic banking as innovation: a case of Pakistan

Abstract

Purpose This study aims to investigate the factors that determine the customer adoption of Islamic banking in Pakistan. Design/methodology/approach This paper aims to use a sample of 540 Islamic bank customers located in the biggest city of Pakistan (Karachi). This study is based on the diffusion of innovation (DOI) theory and analyzed the role of five attributes (compatibility, relative advantage, complexity, observability and trialability) along with the consumer awareness about the customer adoption of Islamic banking. Additionally, the present research also considers Islamic banking as a new idea (innovation) in Pakistan under the framework of DOI theoretical assumptions. The exploratory and confirmatory factor analyses are applied to the sample data. The theoretical framework is then tested using structural equation modeling. Findings The findings of the study revealed that all five attributes of the DOI theory are positively and significantly related to the customer adoption of Islamic banking. The customer awareness also proved its importance in the hypothesized model by representing a positive and significant relationship. Originality/value The present study provides a useful guideline for the Islamic bank managers and the academicians to better understand the customer adoption of Islamic banking.

Do academic and professional institutions promote the awareness and knowledge of Islamic banking and finance in Nigeria?

“…Briefly, the findings of these studies show the importance of awareness in the adoption of Islamic banking and finance. Hence, in line with the earlier relevant studies such as Thambiah et al (2013), Yahaya et al (2016) and Ali and Ching-Hong (2017), this study used the diffusion of innovation theory to explain whether academic and professional institutions promote the awareness and knowledge of Islamic banking and finance in Nigeria.…”

Predictors of Islamic bank adoption: Nigerian perspective

“…Furthermore, Yahaya et al (2014) see it as economic benefits that cover the elimination of interest burden, low bank/administration charges, profit/loss sharing and an ethical banking system. The use of relative advantage in this study is informed by the fact that literature shows its influence on adoption (Brown et al, 2003;Gerpott, 2011;Huang and Hsieh, 2012;Wang et al, 2012;Amin et al, 2013;Sarea and Hanefah, 2013;Echchabi et al, 2014;Ali and Puah, 2016;Jamshidi and Hussin, 2016;Kaabachi and Obeid, 2016;Mahdzan et al, 2017). However, Echchabi et al (2014) found that relative advantage does not H1.…”

“…Also, Ald as-Manzano et al ( 2009) argue that trust is a key variable that reduces the perceived risk of using internet banking. According to Ali and Puah (2016), trialability will eliminate uncertainty and reduce the risk of Islamic banking services, but this study argues that trust is the best construct because services are intangible. Also, Ald as-Manzano et al…”

“…Also, Ezeh and Nkamnebe ( 2018) conceptualized compatibility as a contributor to the perceived ease of use of the Islamic banking system. Many scholars have found a positive relationship between compatibility and adoption of innovation (Carter and Bélanger, 2005;Gerpott, 2011;Huang and Hsieh, 2012;Wang et al, 2012;Sarea and Hanefah, 2013;Amin et al, 2013;Echchabi et al, 2014;Kaabachi and Obeid, 2016;Ali and Puah, 2016;Mbawuni and Nimako, 2017;Shome et al, 2018;Aziz and Afaq, 2018). However, other scholars found that compatibility has no significant influence on the adoption (Brown et al, 2003;Maulana et al, 2018).…”

“…Other studies have applied the DOI theory in studying the adoption of Islamic banking. For example, Ali and Puah (2016) used it in Pakistan, Kaabachi and Obeid (2016) used it in Tunisia, also Mahdzan et al (2017) used it in Malaysia. However, the findings of these scholars cannot be generalized in other developing, as well as a pluralistic and secular country like Nigeria.…”