Abstract:
Although Islamic banks in Pakistan provided desiring opportunities to Islamic banking customers and the country at large, still the rate of customers’ adoption remained low in Pakistan. The adoption of Islamic banking products and services in Pakistan was explored in this study using Rogers's (2003) Diffusion of Innovation Theory to assess the effects of relative advantage, compatibility, complexity, service quality, and religiosity on customer adoption. This study also investigated the moderating effect of religiosity between exogenous and endogenous variables. For this purpose, the current study employed two statistical software packages for data analysis: SPSS (v. 23) for primary data screening and preliminary analysis, followed by SmartPLS (v. 3.1.2) for the assessment of the measurement model and structural model, including the moderating analysis. The study tested the direct influence of relative advantage, compatibility, complexity, and of service quality on adoption. A significant influence on adoption was noted by relative advantage, compatibility, service quality, and religiosity which support hypotheses H1, H2, H4 & H5. Hypothesis H3 didn’t support the study due to an insignificant relationship between complexity and adoption. A significant moderating effect of religiosity was observed between service quality and adoption and between complexity and adoption while an insignificant moderating effect was seen between relative advantage and adoption and between compatibility and adoption. Hypothesis H6a and H6b didn’t support the study while H6c and H6d supported the study. The results of this study also demonstrated that service quality was found as a very significant factor in customers’ adoption of Islamic banking in Pakistan. First, a positive link was established, and second, a considerably larger effect size supported the relationship's influence on adoption. This suggested that the service quality had the greatest impact on the adoption of Islamic banking services in Pakistan.
