Direct and indirect effects of customer financial condition in the acceptance of Islamic microfinance in a frontier market

Purpose The study aims to identify a gap within the extant literature on the inadequacy of earlier extension of the theory of reasoned action (TRA) and theory of planned behavior (TPB) to accommodate the peculiarity of Muslims majority countries that experiencing poverty growth in modeling the factors influencing the acceptability of Islamic financial products and services. To address this gap, this study expands the aforementioned theories through the integration of customer financial condition through the analyzes of both direct and indirect effects. Design/methodology/approach The quantitative research design was deployed through data, which was collected from samples of microentrepreneurs within the agricultural sector of northwestern Nigeria. The data from this sample was analyzed through hierarchical regression analysis. Findings The findings confirmed significant direct effects of all the original TPB variables; attitude, subjective norms and perceived behavioral control on acceptance intention of Islamic microfinance. More pioneering, the study established a significant direct negative effect of customer financial condition on the acceptance of Islamic microfinance among agribusiness customers. It further established the indirect (moderating) effects of customer financial condition on the influence of subject norms and perceived behavioral control on acceptance intention of Islamic microfinance, however, such indirect effect was not established in relation to the influence of attitude. Research limitations/implications The findings implied that the providers of Islamic financial products and services should target Nigeria’s frontier market as a potential avenue for expanding their existing market share. More specifically, the agricultural sector of northwestern Nigeria could be given focus in such a marketing strategy. In terms of social impact, providing necessary finances to the agricultural sector will further enhance employment creation and reduce poverty in the northwestern region. Originality/value Despite several extensions of TRA and TPB in various settings, this could the first study which examined both direct and indirect effects of customer financial condition not only in relation to the acceptance of Islamic microfinance but also all other Islamic financial products and services.