Abstract:
The advent of an interest-free financial system has added a new dimension to Ethiopia's
current economic models and financial developments. Therefore, even though its
implementations depend on the consumers' intents, using such a financial system is highly
valued. Henceforth, the objective of this study is to identify the major factors affecting the
adoption of Interest free banking services in Ethiopia in case of Cooperative Bank of Oromia.
The research employs Decomposed theory of planned behaviour to investigate the influence
of customer’s intention towards adoption of interest-free banking services by using the
customer’ Attitude attribute, social influence and perceived behavioural control. Both
qualitative and quantitative research approach were applied in the study. A purposive
sampling technique was applied. A total of 216 respondents properly responds the
questionary. Primary and secondary data were used with five-point likert scales to collect
data from respondents. And the data analysed through descriptive and inferential statistics
using logit regression. The result of the study confirms that Awareness of customers, Valued
Person opinion, and Facilitating conditions have a positive and significant impact, whereas,
Media influence and self-efficiency have a negative effect but Relative Advantage,
Compatibility, Complexity, and Trust have an insignificant impact on customer intention to
adopt interest-free banking services. Accordingly, Attitude, Subjective norm and Perceived
behavioral control were found to have a significant positive impact on the customers
’intention toward adoption of interest-free banking services. Therefore, policy makers need to
apply better strategies and create an acceptable understanding of the services, whereas
government support is vital and should consider the perceived behavioral control by facility
condition while banks should use business intelligence and finally aggressive promotion and
marketing campaign to create awareness about the services is important to enhance
customer’s intention to adopt interest free banking services
