Financial inclusion enhancement through the adoption of Islamic microfinance in Nigeria

This paper aims to examine the determinants of intention to adopt Islamic microfinance among prospective customers in Nigeria, to enhance access to formal financial services.

The quantitative study used the proportionate stratified random sampling technique to collect data from 450 respondents, using close-ended questionnaires. The data was analyzed using analysis of moment structures-structural equation modeling. The decomposed theory of planned behavior (DTPB) was used as the underlying theory to test 10 hypotheses.

Results showed the intention toward the adoption of Islamic microfinance is high in Nigeria. In total, 8 of the 10 study hypotheses were supported, out of which attitude, subjective norm and perceived behavioral control were found to have a positive and significant influence on the behavioral intention to adopt Islamic microfinance. Consequently, the study recommends the need for stakeholders in the Nigerian financial system to embark on enlightenment campaigns that will improve the public attitude on the role of Islamic microfinance banks in the promotion of financial inclusion and poverty reduction.

The study focused specifically on three selected states in Northern Nigeria that are predominantly Muslim. The findings and indeed the conclusions of the study, may not be suitable for generalization to other parts of the country.

The study found that three constructs: attitude, subjective norms and perceived behavioral control were found to affect behavioral intention. Thus, the Central Bank of Nigeria and Islamic financial institutions should tailor their enlightenment campaigns toward improving public attitude on the need to adopt Islamic microfinance banks to further enhance financial inclusion, and thus reduce the incidence of poverty. Islamic microfinance banks should complement their commercial products and services with Islamic social finance products such as Sadaqat, Zakat and benevolent loan, as is the practice in jurisdictions where Islamic finance is institutionalized.

The social implication of the study is its ability to determine factors that will enhance financial inclusion in Nigeria. This will assist in reducing poverty and income inequality.

The study was also able to extend the DTPB by introducing awareness as an additional latent construct in explaining attitude.