Customer adoption of Islamic banking and finance in Ghana : a structural equation modelling approach

Abstract

The Bank of Ghana, in its efforts to facilitate the introduction of Islamic banking and finance in Ghana, included non-interest banking services in the revised Banks and Specialised Deposit-Taking Institutions Act 930 in 2016. Nevertheless, general misconception about Islamic banking and finance has been a challenge in the adoption of this mode of finance in the country. Consequently, utilising a mixed method approach, this study was designed to explore factors which could improve customer preference and offer new understanding on customer adoption of Islamic banking and finance in the country. The first objective in this study was to examine the impact of key success factors (awareness, perceived risk and product choice) on Islamic banking and finance adoption (IBFA). Next, the study assessed the impact of attitude, perceived behavioural control, relative advantage, religious satisfaction and compatibility on IBFA. Additionally, the study examined the impact of attitude as a mediator in the relationship between key success factors and IBFA. Finally, the study examined the effect of attitude as a mediating variable between subjective norm and IBFA. Utilising the theory of planned behaviour (TPB) and innovation diffusion theory (IDT) together with key success factors, a model was proposed to explore customer adoption in the context of Islamic banking and finance. The model was tested utilising questionnaire data from 1,004 respondents who were bank customers from five different regions in Ghana. The data were analysed using Structural Equation Modelling (SEM). Qualitative data were also collected and analysed to support the interpretation of the quantitative results. The findings disclosed that awareness, religious satisfaction, attitude, perceived behavioural control and compatibility were instrumental in determining customer adoption of Islamic banking and finance. Also, attitude was evidently proven as a significant predictor as well as mediator. In that regard, the relationship between product choice and IBFA, as well as subjective norm and IBFA, were mediated by attitude. The qualitative findings revealed that, in general there was low awareness of Islamic banking and finance in Ghana though majority of bank customers showed interest in adopting the system. The model developed addressed the interrelationship between the factors, thereby providing a better understanding of customer preference. By identifying the drivers of IBFA among potential customers, this study, thus offered valuable insights to managers of Islamic banking and finance institutions to plan and target their products and services more effectively. Policymakers are also equipped with fresh information to formulate new approaches and improve IBFA going forward.