The Impact of Digital Transformation on the Development of Islamic Banking Services: Evidence from Libyan Islamic Banks

Abstract

The study aims to examine the impact of digital transformation on improving the quality and facilitation of banking services in the Libyan Islamic banks which must necessarily keep pace with technological advancements in order to improve performance, strengthen competitiveness, and maintain customer trust, while adhering to Shariah principles. The study addresses many aspects such as reducing procedural costs, facilitating access to services, and developing digital infrastructure and human skills to ensure the provision of innovative banking solutions. A mixed-method approach was used, combining quantitative and qualitative techniques through theoretical review, descriptive analysis, and a field questionnaire to assess the reality of digital transformation and its influence on banking services. The findings indicate that the level of digital transformation in Libyan Islamic banks remains limited. Most efforts focus on digital marketing and promoting services rather than improving the functionality, quality, and user experience of digital applications. A clear gap appears between promotional messages and the actual performance of digital services. The study identified several challenges facing Islamic banks in their digital transformation journey, including weak digital infrastructure, limited skills and training, low managerial awareness of the importance of digital transformation, information security risks, and insufficient regulatory frameworks that ensure both Shariah compliance and customer protection. Cultural and organizational barriers, such as resistance to change, also hinder progress. Despite these challenges, the study concludes that digital transformation has strong potential to improve both service quality and ease of access if supported by appropriate strategies. This includes updating legislation, establishing clear digital transformation plans, training employees, strengthening technological infrastructure, and enhancing cybersecurity to ensure an effective, secure, and sustainable digital transformation process.
Keywords: Digital transformation; Banking Service Development; Libyan Islamic bank