Islamic Banking Products: Home Country Bias and Majority Out-Group Consumption

This study provides an overview of the incentives for Muslims and non-Muslims to adopt Islamic Banking (IB) products in non-Muslim developing country. Data is collected from a sample of 1,128 Mauritians. Religion is found to have a significant influence on the intention to adopt IB products. Our results support the prediction of the theory of reasoned action as an individual is more likely to adopt IB product if he/she understands the relevant concepts and terminologies. The adoption of IB products for Muslim customers is significantly associated with bank selection criteria. Further, we provide evidence of a home country bias related to a set of financial products, as well as tactics successful in overcoming the costs of the liability of foreignness in incentivizing cultural “out-groups” to adopt IB products. Our study contributes to the literature on the motivation of individuals to adopt IB products, which is highly relevant for Islamic banks worldwide that seek to offer similar products and attract new customers. We provide implications for bank marketing managers facing the challenge of increasing adoption of new financial services and products in markets where customers may not be aware of the associated benefits due to cultural, religious, or ethnic barriers.