Social Risk Factors and the Acceptance of Islamic Microfinancing in Northwestern States in Nigeria

Paradigm shift is made here from the adaption of traditional behavioral theories such Theory of Reasoned Action (TRA) and Theory of Planned Behavior (TPB) to the adaption of Conceptual Framework of Social Risk Factors for Value-based Payments (SRF-VBP) in modelling Islamic microfinance acceptance. The SRF-VBP has been used in Health Care Services Sector. This study rectifies a failure in the previous models to account for social risk factors in estimating the determinants of Islamic microfinance acceptance. The study modelled the influence of social risk factors – economic condition, cultural context, gender and social relationships to broaden the understanding of factors influencing Islamic microfinance acceptance beyond what is already known through the behavioral theories. Quantitative research design was employed. Data was collected from sample of 367 agribusiness microentrepreneurs. Through the deployment of the modified SRF-VBP framework, the data was analyzed using multiple regression analysis. The results revealed the relevance of social risks factors in explaining Islamic microfinance acceptance. Specially, within the socio-economic factors - income source was found to significantly influence Islamic microfinance acceptance but income level, financial condition and educational level were insignificant. For cultural context, both additional wives plan, and childbearing plan are positively significant. However, gender was found to be an insignificant determinant. Lastly, social relationship factors -marital status, existing number of wives and existing number of children were also found to be significant determinants of Islamic microfinance acceptance. The practical implication could be careful evaluation of social risk factors in providing the relevant finances to the agribusiness microentrepreneurs by Islamic financial institutions especially for profit-oriented ventures. This is to ensure that the finances are used for business empowerment purposes rather than solving self-enforced social problems and social ceremonies. It also highlights the need for Islamic social financing through Zakat and Qardul-Hassan financing to address genuine social risks issues in Muslims communities. The study expands the understanding on the determinants of Islamic microfinance acceptance through the deployment of SRF-VBP framework into Islamic finance literature. Earlier studies focussed on behavioral factors through the application of traditional behavioral theories. To the researchers’ knowledge the use of SRF-VBP framework to explain the influence of social risks factors on Islamic microfinance acceptance has not been availed in the literature.