PROPOSAL PAPER

ISLAMIC HIRE PURCHASE (AITAB) VEHICLE FINANCING : THE STUDY OF CUSTOMERS PERCEPTION AMONG GOVERNMENT STAFF

Prepared by

SAFIZAL BIN AZMI ZP00572

PROPOSAL PROJECT PAPER

Table of Contents
NO . 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. PURPOSE INTRODUCTION OBJECTIVES CONCEPTUAL FRAME WORK/RESEARCH MODEL SCOPE RESEARCH QUESTIONS HYPOTHESES METHODOLOGY ADMINISTRATION FUNDING APPENDIX 1 GANTT CHART ITEMS PAGE

2 2 3 4 4 5 5 5 7 8 9

1. PURPOSE

The purpose of this document is to propose the implementation of research and study the study of customers perception towards the Islamic hire purchase product focusingly in al ijarah thumma al bay. This study will cope on the specific group of study that stress on gathering information the level of customers perception among individual who are working in government sector in Seremban, Negeri Sembilan. As record, there are several previous study about the customers perception of AITAB but there are not focuse in government staff as the sample of study. The study also done in certain localities such as Pulau Pinang, Kelantan, Kuala Lumpur and Johor but not very rarely pursued in Negeri Sembilan. Why this this paper focus on staff in government sector? This sample of population can be considered as the personal who are computer literate, educated and being the consumers target by most of the bank to promote the product of auto loan. For example, the Bank Rakyat is now intensively leading in launching promotion for car loan through Shariah compliance financing. The city of Seremban can be deemed as the pace growth of city that growing faster. Most of banking and financial institution is well established in Seremban that aggresively promotes Islamic financing based on Shariah. The city of Seremban is going being proclaimed from town to city since there are uniting of two municipal council Nilai and Seremban. Thus, it simulating that there are uplift on the technology, knowledge, lifestyle, education, income & expenses and consumers perception towards the Islamic product that provided by banking sector. Overall, the results provide a strong signal to the bankers that efforts need to be intensified in educating the public about the distinctive characteristics of AITAB and how it may suit the interest of customers in financing their assets. There is a huge potential for AITAB to be marketed to various segments of customers comprising those who are concerned with the legitimacy of the facility, and those who seek convenience and less complicated transactions.

2. INTRODUCTION

One of the latest innovative products of Islamic banks is the Islamic hire purchase facility or Al Ijarah Thumma Al Bay (AITAB) which is designed to meet the current demand and avoid certain risks in the financing of consumer durables and motor vehicles. AITAB can be utilized to finance a wide range of assets, either for individual or corporate customers. This paper presents empirical evidence on the customers perception of AITAB. In recent years, there has been an increasing interest in patronage studies of Islamic banks, particularly to survey the customers and other stakeholders opinions and views towards the operation of Islamic banks. Notwithstanding the progress made to date in the study of customers perceptions towards Islamic banks, more focused research studying specific products offered by Islamic banks remains embryonic. Moreover, more specific research to study customers views on AITAB is almost non-existent. Therefore, it is imperative to survey the perception of customers of Islamic banks towards AITAB facilities offered. Hence, this paper is deemed to be of significance in filling this gap. The paper has been organized in the following way. The next section begins by discussing the concept and mechanism of AITAB. The third section gives a brief overview of AITAB operations in Malaysia. The fourth section reviews past literature on customers perceptions towards Islamic banking. Research methodology adopted in this study is further elaborated in section five. While the findings and analysis are discussed in section six, the conclusion is presented in the final section. Currently, AITAB is limited to the financing of certain items such as motor vehicles. Some banks also offer this facility to finance industrial goods like equipment, machinery, building, transport and other durable article. The facility has been actively promoted by the banks in view of the low risk involved, high return on the investment and tax benefits derived. Figure 1 below further illustrates the mechanism of AITAB as practiced in Malaysia.

3.

OBJECTIVES

This study has the following objectives:3.1 To enable the study to gather the respondents

perceptions towards AITAB; 3.2 To examines the perceptions of respondent towards the potential of AITAB as an alternative to other financing methods.

4.

CONCEPTUAL FRAMEWORK/RESEARCH MODEL INDEPENDENT VARIABLE (IV) DEPENDENT VARIABLE (V)

SATISFACTION PATRONAGE SOURCE OF INFORMATION CONFIDENCE

CUSTOMER PERCEPTION ON AITAB

5.

SCOPE 5.1 The study will cover all targeted personal who are working in

government sector around the city of Seremban, Negeri Sembilan. The various methods will ensure an adequate coverage of the selected area of study. The scope of the study will gain an insight on the customers perception among the user and related information for the respective key stakeholders about the Islamic hire purchase facility. The research is conducted to identify the customers perception factors in Malaysia using only online self administered survey. The online survey is used since it is cost
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saving, faster, efficient and the response rate is better than the mail survey. In this research, the satisfaction factors would be identified using the factoring analysis and the card holders satisfaction would be measured using logistic regression. It is expected that the result from this research could be used by bankers as guidance on the factors that might influence the behaviors of the targeted consumers and specifically the factors that contribute to the satisfaction of the AITABs consumer. 5.2 The study focuses on the following key stakeholders as the targeted groups and areas:5.2.1 Government Officer
(i)

Group of Professional & Management

b. Group of Supporting Staff

6.

RESEARCH QUESTIONS

6.1

Based on the objectives and the above scope, the study

will seek answers to the questions below: a) What are the differences between Conventional and Islamic Hire Purchase facility? b) What are the customers perceptions in term of behavior, customer patronized, customers source of information and customer satisfaction towards AITABs facility? c) Is it the personal in government staff aware and having knowledge about Islamic products that is AITAB?

7.

HYPOTHESES

The research hypotheses are developed as follows: H1- Government staff is satisfy with the AITAB facility
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H2- Government staff has positive perception towards AITAB

8.

METHODOLOGY

Collection of Data In all research strategies, there is a need to develop procedures which produce results that are both reliable and valid. In this study, efforts have been taken to make sure the instrument to be used is valid and reliable for collecting the most accurate data. As a result the instrument was modified to make it more attractive and friendly to the respondents and avoid from complexities and technicalities. The instrument included 5 items to extract the respondents overall view of AITAB facility. The respondents had to express their level of agreement to; (a) AITAB is in accordance with Sharah guidelines, (b) AITAB is a good alternative to acquire asset, (c) AITAB is not much different from conventional hire-purchase, (d) AITAB is too costly, and (e) AITAB is a financing method of last resort. A total of 200 questionnaires will be distributed to individuals having experience of AITAB facility who are working in various departments in government sector at Seremban, Negeri Sembilan. Certain groups of people are targeted due to their high probability of using AITAB. Then respondents in the groups are selected based on convenient sampling. In the course of administering questionnaires, the respondents were asked whether they have ever signed up for Islamic car financing scheme. Brief explanation will also be given in respect of objectives of the survey and contribution they would give by participating in the survey. The demographic profiles of the respondents are illustrated in the table in the next section. 8.1 Literature Review/Documentary Evidence

8.1.1 The

literature

review

or

document

analysis

explains the history and the previous study. 8.2 Survey 8.2.1 Questionnaires information or will be developed from to derive various

experiences

the

backgrounds of respondent such as demographical aspect, behavior, constraints, users knowledge and skill, implications, and suggestions. 8.2.2 The questionnaire also made by soft copy and will be sending to respondent via email randomly 8.3 Interviews 8.3.1 The questionnaires will be piloted to test pre reliability and validity of the questions. The pilot will also suggest if the sampling needs refinement. Selected respondents will be selected from the stratified random sampling. 8.3.2 The interviews will gather information that may not have been the obtained interview from the survey will forms. Additionally, findings strengthen

findings gathered from the survey forms. Questions of the interviews will be open-ended and unstructured. 8.8 Data Analysis 8.8.1 Questionnaires and testing outcomes will be analyzed. Based on the analysis, a proper approach and alternative methods will be suggested. 8.8.2 Final analysis of findings following the pilot and from the different methods will be cross referenced.

9.

ADMINISTRATION

9.1

Set up the preparation for study. Forward the proposal

paper of study to advisor for verification. 9.2 Identify the source and elements that will provide input,

feedback, and details during the study period. 9.3 The meetings will be held on the agreed time with

advisor at the UKM KL or UKM Bangi sites for discussion and compilation the report on the progress status. 9.4 Implementation Period 9.4.1 The study will be completed within two months and completed by the first week of September in year 2011 with the following activities and as reflected in the Gantt Chart (Appendix 1): a. Preliminary discussions; b. Preparation and approval of the proposal paper; c. Information gathering site visits, briefings, dialogue sessions; d. Refining the scope consultation with advisor; preparation of questionnaires/case study; f. Pilot testing of the questionnaires; g. Improvement of testing instruments and questionnaires; h. Field work i. Preliminary report; e. Implementation of study; f. Data analysis; g. Report writting; h. Reports presentation.

10.

FUNDING
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The funding to bear the cost of completing for this study will be underwritten by self funding.

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Appendix 1

SCHEDULE FOR THE IMPLEMENTATION OF STUDY : ISLAMIC HIRE PURCHASE (AITAB) VEHICLE FINANCING : THE STUDY OF CUSTOMERS PERCEPTION AMONG GOVERNMENT STAFF

Month Days Project Kick-Off Preparation of instrument and pilot testing Field Work Report Writing and Analysis Submission of Full Report

July 2011 1-31 3

August - 2011 10 17 24

September 1 2011 7 14

PROPOSAL PROJECT PAPER