Abstract

The purpose of this study is to examine the factors of low adoption of Islamic banking in Pakistan. The study identifies some variables (reason of choosing Islamic banks, knowledge of Islamic banks, service quality, customer satisfaction and bank image of Islamic banks) in Pakistan. The study uses survey questionnaires to gather information from bank managers of Islamic banks and customers of Islamic and conventional banks. By using random sampling technique data was collected. To explore the relationship of aforementioned variables, data was analyzed using structural equation modeling with partial least square (PLS). The findings of the study suggest that the adoption rate of Islamic baking is still low in Pakistan. The core reason for this is that consumers do not trust Islamic banks and consider their operations to be no different than conventional banks. There is a wide perception that the same good (conventional banking services) is being sold under the guise of Islamic banking. The study contributes to the existing literature of Islamic banking and its findings also suggest a need of enhancing Islamic banking practices and awareness.