Determinants of customer adoption of Islamic banking services in Algeria: An innovation diffusion perspective

Abstract

Islamic banking institutions face increasing challenges in attracting and retaining profitable customers, particularly in relation to new and unfamiliar financial products. This study aims to investigate customer attitudes toward Islamic banking services and how these attitudes influence their behavioral intentions to adopt such services. Taking the adoption of Islamic banking as the dependent variable, the research examines its relationship with seven key independent variables: relative advantage, compatibility, observability, complexity, perceived risk, perceived trust, and customer innovativeness. Primary data were collected through a structured questionnaire distributed to customers of several Islamic banks in Algeria. The data were analyzed using descriptive statistics and regression techniques. The findings indicate that four variables relative advantage, compatibility, perceived trust and customer innovativeness positively influence the adoption of Islamic banking. In contrast, the remaining three variables observability, complexity, and perceived risk did not show a statistically significant effect on adoption. Additionally, communication ability and product innovation were identified as underlying elements that reinforce the influence of the dominant factors. These results can support Islamic banks in designing more efficient and targeted strategies to enhance customer engagement, improve service adoption, and increase competitiveness in the financial sector.