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Factors affecting intention to use Islamic personal financing in Pakistan: Evidence from the modified TRA model

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  • Ali, Muhammad
  • Syed ali, Raza
  • Chin-Hong, Puah

Abstract

The present study is the first attempt in Pakistan to examine the determinants of Islamic personal financing by using a modified theory of reasoned action (TRA) model. This study uses the two major construct of TRA model, namely, subjective norm and attitude. Additionally, we modified this model by introducing three relevant factors: pricing of Islamic personal financing, a religious obligation and government support to predict the intention of Islamic bank customers about Islamic personal financing. Sample data were conveniently drawn from the Islamic bank customers with the help of self administered survey based questionnaire. The study sample comprised on 484 responses of full-fledge Islamic bank customers located in the biggest city of Pakistan. Out of 484 responses, we considered 471 responses and ignored 13 responses due to incomplete information provided by the customers. This data was statistically analyzed by employing Structural equation modeling (SEM). Overall, the results of the study suggest that pricing of Islamic personal financing and religious obligation have a negative and significant impact on the intention to use Islamic personal financing. Attitude and social influence were found to be positive, but insignificant predictors. In addition, government support is positive and significantly associated with the intention to use Islamic personal financing. This study has some practical implications for Islamic bank managers and the government of Pakistan. Furthermore, Islamic banks should capture the need of Islamic personal financing while government support may help in promoting this service for Islamic banks in Pakistan. This paper makes a unique contribution in the existing body of Islamic banking literature.The empirical findings of this study provide some future directions and is considered to be a pioneer study, which has laid a foundation in the context of Islamic personal financing in Pakistan.

Suggested Citation

  • Ali, Muhammad & Syed ali, Raza & Chin-Hong, Puah, 2015. "Factors affecting intention to use Islamic personal financing in Pakistan: Evidence from the modified TRA model," MPRA Paper 66023, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:66023
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    References listed on IDEAS

    as
    1. Ali, Muhammad & Raza, Syed Ali, 2015. "Factors affecting to select Islamic Credit Cards in Pakistan: The TRA Model," MPRA Paper 64037, University Library of Munich, Germany.
    2. Unknown, 1999. "1999 Fall," CWAE Newsletter, Agricultural and Applied Economics Association, Committee on Women in Agricultural Economics (CWAE), pages 1-11.
    3. Roszaini Haniffa & Mohammad Hudaib, 2007. "Exploring the Ethical Identity of Islamic Banks via Communication in Annual Reports," Journal of Business Ethics, Springer, vol. 76(1), pages 97-116, November.
    4. Henry Kaiser, 1974. "An index of factorial simplicity," Psychometrika, Springer;The Psychometric Society, vol. 39(1), pages 31-36, March.
    5. Ali, Muhammad & Raza, Syed Ali, 2015. "Measurement of Service Quality Perception and Customer Satisfaction in Islamic Banks of Pakistan: Evidence from Modified SERVQUAL Model," MPRA Paper 64039, University Library of Munich, Germany.
    6. Unknown, 1999. "1999 Spring," CWAE Newsletter, Agricultural and Applied Economics Association, Committee on Women in Agricultural Economics (CWAE), pages 1-17.
    7. Unknown, 1999. "1999 Winter," CWAE Newsletter, Agricultural and Applied Economics Association, Committee on Women in Agricultural Economics (CWAE), pages 1-12.
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    Cited by:

    1. Muhammad Y. Khan & Shahab Ud Din & Majid J. Khan & Anam Javeed, 2021. "Dynamics of selecting Islamic home financing," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5005-5016, October.
    2. Ali, Muhammad, 2015. "Bank profitability and its determinants in Pakistan: A panel data analysis after financial crisis," MPRA Paper 67987, University Library of Munich, Germany, revised 01 Nov 2015.
    3. Raza, Syed Ali & Shah, Nida & Nisar, Wasay, 2019. "Consumer Buying Behavior of Organic Food with Respect to Health and Safety Concerns among Adolescents," MPRA Paper 93570, University Library of Munich, Germany.
    4. Muhammad Ali & Syed Ali Raza & Chin-Hong Puah & Mohd Zaini Abd Karim, 2017. "Islamic home financing in Pakistan: a SEM-based approach using modified TPB model," Housing Studies, Taylor & Francis Journals, vol. 32(8), pages 1156-1177, November.

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    More about this item

    Keywords

    Key words: Personal financing; Islamic banks; customer’s intention; Pakistan;
    All these keywords.

    JEL classification:

    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics
    • G1 - Financial Economics - - General Financial Markets
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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