Adoption of Islamic Banking in the Base of Pyramid Market of Pakistan: An Economic Perspective

Authors

  • Muhammad Taimoor Hassan Department of Islamic and Conventional Banking Institute of Business, Management, and Administrative Sciences The Islamia University of Bahawalpur, Pakistan  
  • Rabia Anwar Department of Management Sciences Government Sadiq college women university Bahawalpur, Pakistan
  • Mehwish Shahid Department of Management Sciences Government Sadiq college women university Bahawalpur, Pakistan

DOI:

https://doi.org/10.62270/jirms.v5i2.62

Keywords:

BoP market, Theory of Planned Behavior, Islamicity of the Products, Islamic banking

Abstract

Purpose: The adoption of IB among the customers of the low-income market is not a widely accepted idea due to income and market size. This research paper aims to examine the direct effect on the adoption of Islamic banking (AIB) in the Bottom of the Pyramid (BoP) Market of Pakistan with its specific focus in the Southern region of Punjab. Moreover, the purpose of this research on the adoption of Islamic banking in the base of the pyramid market of Pakistan likely aims to understand how Islamic banking products and services can be tailored to meet the needs of low-income or financially underserved individuals and communities in Pakistan.

Design/methodology/approach: The study developed a conceptual framework underpinning theory of planned behavior to hypothesize the structural relationship of exogenous variables (attitude, subjective norms, perceived behavioral control, and the Islamicity of product) on the endogenous variable i.e., adoption of Islamic banking. The exploratory research design of the study was used to answer the research questions. A total of 400 structured closed-ended research questionnaires were distributed using a multi-stage stratified sampling (random sampling within each stratum) approach of which 320 usable questionnaires were returned representing an 80 percent response rate. The Partial Least Square Structural Equation Modeling (PLS-SEM) approach has been used using SmartPLS 3.0 to perform the measurement and structural model analysis of the hypothesized relationship in the conceptual framework.

Findings: Results indicated that attitude (ATT), subjective norms (SN), and Islamicity of product (IoP) explained a significant effect on the adoption of Islamic banking contrary to the perceived behavioral control (PBC) whose predictive power on the adoption of Islamic banking is comparatively lower. The overall effect of ATT, SN, PBC, and IoP explained 39.3 percent on AIB at the BoP. A comparative analysis of the adoption of Islamic banking in the base of the pyramid market of Pakistan with other regions can provide valuable insights into the factors influencing the uptake of Islamic banking among low-income populations and the effectiveness of different strategies for promoting financial inclusion

Practical implication: This study is cross-sectional hence the response rate may vary over time among the respondents. Further, the study used evidence from the respondents who have used at least Islamic banking (IB) once within the geographical settings of South Punjab only representing the BoP market of Pakistan, thus, the results can be generalized only in the settings of South region of the Punjab, Pakistan Islamic banking users.

Originality/value: Islamic banking (IB) over the past decade witnessed substantial growth in the Asian continent specifically in Muslim countries like Pakistan with its specific focus on the BoP market of the South Punjab region of Pakistan. Largely, negligible studies have been conducted to examine the collective effect of ATT, SN, PBC, and IoP on AIB after the formalization of the Islamic banking legal framework in Pakistan.

Published

06-06-2024

Issue

Section

Articles

How to Cite

Muhammad Taimoor Hassan, Rabia Anwar, & Mehwish Shahid. (2024). Adoption of Islamic Banking in the Base of Pyramid Market of Pakistan: An Economic Perspective. Journal of Innovative Research in Management Sciences, 5(2). https://doi.org/10.62270/jirms.v5i2.62