From Religion to Returns: What Truly Motivates Islamic Banking Adoption in Pakistan?

Abstract

The objective of this research is to investigate the determinants that affect individuals' inclination to adopt Islamic banking practices in Pakistan and to ascertain whether awareness of Riba has any consequential impact on this association. A systematic review methodology was employed to collect pivotal data from 125 participants, comprising 26 males and 98 females. Utilizing Partial Least Squares Structural Equation Modeling (PLS-SEM), we analyze the influence of abstract standards, social impact, and strict commitment on individuals' likelihood of embracing Islamic banking. The results of our research indicate that emotional standards and social influence exert a significant effect on individuals' perceptions regarding Islamic banking. Notably, by incorporating knowledge of Riba as a moderating variable, we delineate our analytical focus. Additionally, we identify that mindset functions as a mediating variable between the dependent variable (intention to adopt Islamic banking) and the independent variables (emotional standards and social impact). However, we do not observe a direct correlation between intentions and the perceived financial risk, nor do we detect a relationship between knowledge of Riba and the intention to engage with Islamic banking. Moreover, it is posited that the influence of knowledge regarding Riba is negligible. The insights derived from strict commitment furnish practitioners and regulators with an essential understanding of the factors that shape individuals' intentions to utilize Islamic banking services. This study enhances the existing body of literature by elucidating how we may interpret the elements that influence individuals' mindsets and endeavors to adopt Islamic banking as a preferred monetary strategy.

Keywords: Social Influence, Subjective Norms, Religious obligation, perceived financial Risk, INT, and Knowledge of Riba.