Islamic banking has grown rapidly, yet questions remain on what most effectively predicts Muslim consumers' adoption of these Shari'ah-compliant banking. We compared two models for predicting the adoption of Shari'ah-compliant banking among Malay Muslims in Malaysia: the Theory of Planned Behavior (TPB, which reflects socio-cognitive factors) and Islamic Financial Literacy (IFL, which reflects knowledge-based factors). Survey data from 2071 Malaysian Malay Muslims were analyzed using covariance-based structural equation modeling, specifically path analysis, to assess the predictive strength of each model regarding intention and self-reported adoption behavior for Islamic banking. The TPB model explained a higher proportion of variance in intention (66.1%) and behavior (71.8%) compared to the IFL model (10.5% and 65%, respectively). Comparing the two models, IFL demonstrated greater parsimony, whereas TPB exhibited stronger explanatory power for intention. As for the implications, we highlight the need for financial institutions to address both knowledge gaps and the broader social and psychological factors concerning banking decisions. Recommendations for future research include integrating these perspectives, adopting longitudinal designs, and expanding cross-cultural validations.
Aminnuddin et al. (Fri,) studied this question.