Factors Influencing the Customer’s Adoption of Interest Free Banking in Wegagen bank

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Addis Ababa University


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.



Factors Influencing, Interest Free Bankin, Wegagen Bank