Factors Influencing the Customer’s Adoption of Interest Free Banking in Wegagen bank
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Date
2019-06
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Addis Ababa University
Abstract
Interest Free Banking has been a new concept in Ethiopia until 2011. In Ethiopia, it has been
almost six years when the first Interest free bank makes its start. Interest free banking is an
alternative banking system based on Islamic principles doing the business side by side the
conventional banking system. For this alternative IFB business, Wegagen Bank has to know the
awareness, understanding and perceptions of its customers towards the product and service of
IFB. The purpose of this research is to examine the level of awareness, understanding and
perceptions of Wegagen customers towards interest free banking product and service. In
addition, this study also aims to investigate if any demographic factors influence the awareness,
understanding and perceptions of interest free banking products and services of Wegagen Bank
customers. A total of 180 respondents from different branches in Addis Ababa are selected for
the purpose of this study. For the analysis, one way ANOVA and Pearson Correlation Coefficient
was adopted to analyze the results. The results show that the level of awareness towards Islamic
banking deposit products are considered as high however the level of awareness for financing
products are very low and it needs awareness campaign in promoting the features of IFB
financing to the target customers to enhance the level of awareness for financing products. The
understanding level towards Islamic products is very high except the understanding for Islamic
banking is available for Muslims and non-Muslims is very low and the bank should do in
increasing the understanding of Muslim customers by promoting the product is available for
both Muslim and Non-Muslim customers as far as the sheria principle is respected. As for
perception, the bank should exert its maximum effort in segregating the IFB business from the
conventional business because majority of the respondents perceive that the service of IFB is
similar to conventional banking system and having this perception by customers would adversely
affect the growth of the business by repealing potential customers from the bank. Another
correction action that will be taken by the bank to have the right perception by the customers is
that service delivery for IFB products should be right and do the business in compliance with the
religion principle as well as the NBE directives.
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Keywords
Factors Influencing, Interest Free Bankin, Wegagen Bank