Examining the relationship between Islamic financial literacy and investment mediated by financial risk tolerance: Gaziantep case

Unlike other types of banks, participation banks, which are designed by taking into account the phenomenon of interest prohibited by Islam, offer interest-free investment product alternatives to their customers. The diversity in these interest-free products, which are basically based on profit sharing, reveals the need to identify the factors that shape investment preferences of participation banking customers. At this point, it is thought that the level of Islamic financial literacy of customers will be effective both in understanding participation banking products and in shaping their investment preferences accordingly. In addition, as in all other investment types, it is known that the risk tolerance of participation banking customers is one of the most important factors shaping their investment preferences. Based on this point, this study aims to determine the mediating role of financial risk tolerance in the effect of Islamic financial literacy on investment preferences of participation banking customers. The study included 452 customers living in Gaziantep who use participation banking products and make regular investments. In order to test the hypotheses, structural equation modeling was performed using partial least squares method with Smart PLS 4. According to the findings of the study, the level of Islamic financial literacy increases financial risk tolerance, asset track record, social responsibility and return-based investment preference. In addition, while financial risk tolerance increases investment preference based on asset track record and social responsibility, it plays a mediating role in the effect of Islamic financial literacy on asset track record and social responsibility-based investment preference.