FINANCIAL FACTORS INFLUENCING ADOPTION OF ISLAMIC BANKING BY CONVENTIONAL COMMERCIAL BANKS IN MOMBASA COUNTY
Abstract
The study looked at the financial factors that make conventional commercial banks in Mombasa County more likely to adopt Islamic banking. The study's goals to look at how loan availability, loan policy, loan cost, and loan payback time affect Kenyan commercial banks' use of Islamic banking. The study looked at commercial banks in the Mombasa CBD that offer Islamic financial services. Asset-Based View Theory, Transaction Cost Theory, and the Agency theory were used in the study. The study used descriptive survey research. The study used census method where by all of the 62 people who took part were used. The study employed closed-ended questions so that responses could be more easily categorized and interpreted. Kenya Methodist University's (KeMU) scholarly office gave the researcher permission to do the research and a letter of approval. The researcher also visited 31 traditional banks that offer Islamic banking services and asked for permission to do the research privately for a scholarly reason. The study found that increased loan accessibility and longer loan repayment periods positively influence adoption rates, suggesting that easier access to financial services and more flexible repayment terms encourage banks to adopt shariah-compliant practices. Conversely, stricter loan policies are found to have a negative impact on adoption, indicating that regulatory and policy frameworks play a crucial role in shaping banks' decisions. The study suggest underscores the importance of collaboration between conventional commercial banks and microfinance institutions to improve loan accessibility, leveraging MFIs' networks and experience with underserved populations. Additionally, the study suggests offering flexible repayment options to accommodate diverse financial circumstances, such as extended periods or customized schedules, making Islamic loans more attractive and accessible to a broader customer base.
Key Words: Islamic Banking, Loan Accessibility, Loan Policy, Loan Cost, Repayment Period
CITATION: Manal, S., Engondi, P., & Muli, S. (2024). Financial factors influencing adoption of Islamic banking by conventional commercial banks in Mombasa County. The Strategic Journal of Business & Change Management, 11 (3), 191 – 206. http://dx.doi.org/10.61426/sjbcm.v11i3.3017
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DOI: http://dx.doi.org/10.61426/sjbcm.v11i3.3017
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