The adoption of e-banking in developing countries: A theoretical model for SMEs Al Nahian Riyadh, Md. Shahriar Akter , Nayeema Islam
Electronic banking offers numerous benefits to SMEs. SMEs can check account balances, transfer money, pay bills, collect receivables and ultimately reduce transaction costs and establish greater control over bank accounts. Despite the benefits of e-banking to SMEs, there has been little research done on the factors affecting its adoption. Thus, this paper aims to investigate the factors that affect SMEs’ adoption of e-banking in Bangladesh. The study has come up with an integrated model including seven variables (Organizational capabilities, Perceived benefits, Perceived credibility, Perceived regulatory support, ICT industries readiness, Lack of financial institutions readiness and Institutional Influence) which influence the adoption of e-banking by SMEs in developing countries.
Field of Research: Bangladesh, Developing Countries, Electronic Banking, Electronic Commerce, Electronic Finance, Information Systems (IS), Information and Communication Technologies (ICTs), Small and Medium Scale Enterprises (SMEs).
Electronic banking (e-banking) reduces the transaction costs of banking for both SMEs and banks. SMEs need not visit banks for banking transactions, providing round the clock services (Karjaluoto et al., 2002; Cheng et al., 2006). SMEs can apply for loans and do other banking services online (Smith and Rupp, 2003). Despite these benefits, little research has been conducted on factors affecting e-banking adoption by SMEs in developing countries. E-banking has been discussed from a retail point of view (B2C) (Wan and Chow, 2005; Celik, 2008), however financial services to SMEs have so far received limited attention. (Gehling et al., 2007). Nonetheless, online financial services represent a critical issue for the survival of SMEs (Wright and Ralston, 2002). Al Nahian Riyadh, Department of Finance and Banking, University of Chittagong, firstname.lastname@example.org Md. Shahriar Akter, Department of Business Administration, East West University, email@example.com Nayeema Islam, Information & Communication Engineering, Rajshahi University,firstname.lastname@example.org
E-banking grows faster than other e-commerce sectors, as financial services are data intensive and require no physical delivery (Kim, 2004; Zekos, 2004).The Literature on SMEs in developed countries has mostly focused on e-commerce issues (Bunker and MacGregor, 2000; Kartiwi and MacGregor, 2007; Eriksson et al., 2008), as unlike in developing countries, financing seems not to be a critical issue (Guglani, 2001). Khalifa and Davison (2006) mentioned that existing literature on the adoption of information technologies can be grouped into two approaches. One focuses on the rationalistic goal oriented behaviour of firms and the other focuses on external forces of institutions. These theories, however, are not mutually exclusive as both firms’ related and institutional forces together determine adoption. Hence, there is a clear demand for an e-banking adoption model for SMEs in developing countries that incorporate both the goal oriented behaviour of firms as well as institutional pressure on technology adoption. E-banking services have been available in Bangladesh since 2001. As of 2007, 29 out of 48 banks have offered online financial services (Rahman, 2007). However, the adoption of online banking channels by Bangladeshi SMEs has been rather slow when compared with the large companies in Bangladesh or SMEs in other developed countries. Dewan and Nazmin (2008) have reported that SMEs in Bangladesh lag behind in the use of ICTs. In Bangladesh, research has been done on electronic commerce issues (Azam, 2007), computer usage (Azam, 2005), Internet usage (Awal, 2004), telephone (Khan, 2001) and electronic banking (Alam et al., 2007; Bakta et al., 2007). But, no research has been done on e-banking issues in SMEs, although SMEs in...
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