The purpose of this research is to investigate determinants of SMEs’ intention to use Interest Free (Islamic) Micro Finance services and products by using TPB developed by Ajzen. The study also added two new variables (religiousity and awareness) in the Ajzens Model and investigates their effect on SMEs’ intention to use Interest Free (Islamic) Micro Finance services and products.
For this purpose, the researcher able to collect 282 questionnaires from the total 291 sample size and the collected questionnaires inserted into SPSS. To achieve the objective of the research, the Structural Equation Model (SEM) was applying factor analysis called exploratory factor analysis by reducing not producing useful factors. Before going into hypothesis testing, internal consistency measure such as Cronbach alpha reliability, composite reliability, Discrimant validity, convergence validity, collinearly diagnostic, model fit and indices has adequately dealt with. Apparently, all values for composite reliability and AVE calculated in this study meet the recommended threshold values
The empirical analysis supports TPB and prior research in the field of finance and other domains by confirming that attitudes, subjective norms and perceived behavioural control are significant predictors of SMEs’ intention to use IFMF services and products. Although religiosity showed a non-significant negative relation and is not a predicting factor of SME owner-managers’ intention to use IFMF services and products, awareness did show a significant positive relation and was an important factor in predicting IFMF services and products usage intention.
Table of Contents
CHAPTER ONE
INTRODUCTION
1.1. Background of the Study
1.1.1. Challenges for Utilizing the Full Potential of Islamic Finance for SMEs’ In Ethiopia
1.2. Statement of the Problem
1.3. Objectives of the Study
1.3.1. General Objective
1.3.2. Specific Objective
1.4. Hypothesis Development
1.5. Significance of the Study
1.6. Scope/Delimitation of the Study
1.7. Operational Definitions
1.8. Organization of the Study
CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1. Theoretical Literature Review
2.1.1. General Concepts and Definition
2.1.2. Definitions of Small and Medium Enterprises
2.1.2.1. Definition of SMEs in Ethiopia
2.1.3. Theoretical Foundations for the Financing Behaviour of SMEs’
2.1.3.1. Pecking Order Theory
2.1.3.2. Trade-Off Theory
2.1.3.3. Behavioral Decision Theory
2.1.3.4. Theory of Planned Behavior
2.1.4. Justification of Model Selected
2.2. Empirical Literature Review
2.2.1. Underlying Principles of Interest-Free Financing
2.2.1.1. The IF Business Is Based On Islamic (Sharia) Law
2.2.1.2. Paying or Receiving Interest (Riba) Is Forbidden (Haram)
2.2.1.3. Utmost Fairness in All Business Dealings
2.2.1.4. Transparency, Consensus and Contractual Agreement between Parties in All Business Dealings
2.2.1.5. Profit-And-Loss Sharing
2.2.1.6. Forbidden (Haram) Business Activities
2.2.2. Differences between Conventional and Islamic Microfinance:
2.2.3. Islamic Finance and Its Significance for SMEs’
2.2.4. Islamic Financing Products for SMEs’ and Country Experiences
2.2.5. Determinants of SME financing decision (Capital structure theory paradigm)
2.2.6. Determinants of SME financing decision (socio-psychological theory approach)
2.2.7. Empirical Reviews for Islamic Finance Customer’s Intention
2.2.7.1. Empirical Literature Review: at International Level
2.2.7.2. Empirical Literature Review: At National Level
2.3. Research Gaps
2.4. Theoretical Frame Work and Hypotheses Development
2.4.1. Theoretical Framework of SMEs’ Intention
2.4.2. Hypothesis Development
2.4.2.1. The Proposed Research Model
CHAPTER THREE
RESEARCH METHODOLOGY
3.1. Research Approach
3.2. Research Design
3.3. Data Source
3.4. Study Area/Organization
3.5. Target Population
3.6. Sampling Methods and Sample Size Determination
3.6.1. Sampling Methods
3.6.2. Sample Size Determination
3.7. Data Collection Method
3.7.1. Primary Data Collection
3.7.2. Secondary Information
3.8. Method of Data Analysis
3.9. Model Specification
3.10. Measurement of Constructs
3.11. Ethical Considerations
CHAPTER FOUR
RESEARCH FINDINGS AND DISCUSSIONS
4.1. Sample and Response Rate
4.2. Questionnaire Pilot Testing
4.2.1. Validity
4.2.2. Scale Reliability
4.3. Descriptive Analysis
4.4. Demographic Information of The Respondents
4.5. Data Analysis: Assessing The Quality of Data
4.5.1. Assessing The Sample Size
4.5.2. Assessing Common Method Bias
4.5.3. Assessing Missing Data
4.5.4. Assessing the Outliers
4.5.5. Assessing Linearity Assumption
4.5.6. Assessing Multicolinearity Assumption
4.5.7. Assessing Normality Assumption
4.6. Data Analysis: Factor Analysis
4.6.1. Exploratory Factor Analysis (EFA)
4.6.2. Confirmatory Factor Analysis
4.7. Discussions of Empirical Findings
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND IMPLICATION OF THE STUDY
5.1. Summary of the Study
5.2. Conclusion and Implication of the Study
5.3. Contribution
5.4. Limitations and Future Research
Objectives and Research Themes
The primary objective of this research is to examine the determinants of small and medium enterprise (SME) owner-manager intentions to adopt Interest-Free (Islamic) Microfinance services in the Siltie Zone of Ethiopia, utilizing the Theory of Planned Behavior (TPB) as the foundational framework.
- Application of the Theory of Planned Behavior (TPB) to identify behavioral determinants such as attitude, subjective norms, and perceived behavioral control.
- Evaluation of the impact of religiosity and awareness as additional predictors within the modified TPB model.
- Investigation of the specific financial challenges and financing needs of SMEs in the Siltie Zone.
- Provision of empirical findings to support policy formulation and strategy development for financial institutions providing Sharia-compliant products in Ethiopia.
Excerpt from the Book
1.1.Background of the Study
The establishment of interest-free banking (IFB) has been the demand of the Ethiopian Muslims for a long time. This demand has been reflected to the concerned government bodies (including the regulatory body, National Bank of Ethiopia (NBE) in different occasions both individually and collectively (Ahmed, 2019).
Following the high demand for Islamic financial products and services, in 2008, NBE revises the “Licensing and Supervision of Banking Business” proclamation and issued a new proclamation that creates room for establishing Islamic financial institutions. The new proclamation is called “Proclamation No. 592/2008” and in this proclamation Article 22, Sub-article 2 states “The National Bank may issue a directive to regulate banking businesses related to non-interest-bearing deposit mobilization and fund utilization.” This is the turning point for Islamic finance history in Ethiopia. Following the release of proclamation No. 592/2008: Article 22, Sub-article 2, the organizers of Zam Zam bank was started selling the share to establish full-fledged Islamic banking and they could raise 137 million Birr within four months. In that time the minimum paid-up capital to establish a bank in Ethiopia was 75 million Birr (Zam-zam Bank, 2012). This outstanding performance indicated that the high demand for Islamic finance in Ethiopia.
Summary of Chapters
CHAPTER ONE: INTRODUCTION: Outlines the background of the study regarding Interest-Free Banking in Ethiopia, identifies the problem statement, research objectives, and the significance of the thesis.
CHAPTER TWO: REVIEW OF RELATED LITERATURE: Provides a theoretical foundation based on financial decision-making theories, specifically the Theory of Planned Behavior, and explores empirical studies on Islamic finance and SME adoption.
CHAPTER THREE: RESEARCH METHODOLOGY: Details the research design, sampling methods, data collection, and model specification used to investigate the determinants of SME intention to use Islamic microfinance services.
CHAPTER FOUR: RESEARCH FINDINGS AND DISCUSSIONS: Presents the analysis of quantitative survey data and structural equation modeling (SEM) results, verifying the hypotheses regarding the factors influencing SME manager intentions.
CHAPTER FIVE: SUMMARY, CONCLUSIONS AND IMPLICATION OF THE STUDY: Summarizes the key findings, draws conclusions on the applicability of the model in the Ethiopian context, and provides recommendations and future research directions.
Keywords
TPB, Structural Equation Model, Interest Free Microfinance (IFMF), SME, Siltie Zone, Islamic Banking, Religiosity, Awareness, Financial Decision-Making, Ethiopia, Attitude, Subjective Norm, Perceived Behavioral Control.
Frequently Asked Questions
What is the primary focus of this research?
The research investigates the factors and determinants influencing the intention of SME owner-managers to adopt Interest-Free (Islamic) Microfinance services in the Siltie Zone of Ethiopia.
What theoretical framework is used in this study?
The study primarily utilizes Ajzen’s Theory of Planned Behavior (TPB), which is augmented by incorporating religiosity and awareness as additional predictors to better explain the behavioral intentions of SME owners.
What is the key objective of this work?
The main goal is to identify whether non-financial and behavioral factors—namely attitude, subjective norms, and perceived behavioral control—predict the likelihood of SMEs adopting Islamic financial products.
Which scientific methods are applied?
The study uses a quantitative approach, specifically employing structural equation modeling (SEM) and exploratory factor analysis (EFA) to analyze data collected from 282 questionnaires.
What are the core thematic areas discussed in the main chapters?
The main chapters include a conceptual review of SME financing behaviors, the legal and economic landscape of Islamic finance in Ethiopia, and the empirical analysis of behavioral determinants.
Which keywords characterize the work?
Key terms include Theory of Planned Behavior (TPB), Structural Equation Modeling, Islamic Microfinance, SMEs, Ethiopia, and financial decision-making.
What role does religiosity play according to the study?
Interestingly, the study finds that religiosity does not significantly predict the intention of the studied SME owner-managers in the Siltie Zone to use interest-free microfinance products, suggesting other factors may have a stronger influence.
How does "awareness" impact the research results?
Awareness of interest-free financial products and services was found to have a significant positive relationship with the intention of SME owner-managers to use these services, highlighting the need for better information dissemination.
- Citar trabajo
- Zeynu Mohammed (Autor), 2022, Determinants of SMEs’ intention to use interest free microfinance service in Ethiopia. The case of Siltie Zone, Múnich, GRIN Verlag, https://www.grin.com/document/1253897
