Proposal 2009872522

FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS CHAPTER 1: INTRODUCTION
2011
1.0 CHAPTER DESCRIPTION The first chapter of this report provides an overview of the Islamic banking industry both globally and in Malaysia, the importance of Islamic banking and the factors that led the researcher to conduct research in this area. It highlights the background of the study, problem statement, objectives of the study, theoretical framework, research question and hypothesis of the study, significance of the study, definition of terms, limitation of the study and lastly scope of the study.
1.1 BACKGROUND OF THE STUDY Islamic banking refers to a system of banking that complies with Islamic law. The underlying principles that govern Islamic banking are mutual risk and profit sharing between parties, the assurance of fairness for all and that transactions are based on an underlying business activity or asset. These principles are supported by Islamic banking's core values whereby activities that cultivate entrepreneurship, trade and commerce and bring societal development or benefit is encouraged. Activities that involve interest (riba), gambling (maisir) and speculative trading (gharar) are prohibited (BNM, 2010). As stated in the Quran Allah forbids riba. Riba means an increase and under shariah the term refers to the premium that must be paid by the borrower to the lender along with the principle amount as a condition for the loan.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS
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Those who devour usury will not stand except as stand one whom the Evil one by his touch Hath driven to madness. That is because they say: "Trade is like usury," but Allah hath permitted trade and forbidden usury. Those who after receiving direction from their Lord, desist, shall be pardoned for the past their case is for Allah (to judge) but those who repeat (The offence) are companions of the Fire: They will abide therein (for ever).
(Al-Baqarah : 275)
Over the last three decades Islamic banking and finance has developed into a full- fledged system and discipline reportedly growing at the rate of 15 percent per annum. Today, Islamic financial institutions, in one form or the other, are working in about 75 countries of the world. Besides individual financial institutions operating in many countries, efforts have been underway to implement Islamic banking on a country wide and comprehensive basis in a number of countries. Islamic banking and finance has satisfy the Muslim community needs, to a multibillion dollar industry upholding Islamic principles since it undergone rapid transformation and growth from an industry striving. Islamic banking is now a well-known term and has emerged as one of the most important industries worldwide. Over recent decades, the Islamic banking industry has emerged as one of the fastest growing industries and has spread to all corners of the globe, receiving wide acceptance from Muslims and non-Muslims (Iqbal and Molynex, 2005; Asyraf and Nurdianawati, 2007).
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The emergence of strong Islamic movements has generated a renewed interest in Islamic economics, especially in Islamic interest-free banking. Iran and Sudan have instituted Islamic banking systems, while many other countries have established a mixed or dual banking system. Malaysia followed the latter course, with its first Islamic bank, beginning operations in July 1983, Bank Islam Malaysia Berhad (BIMB). The blueprint for the modern Islamic banking system came in 1983, with the introduction and enforcement of two new acts known as the Islamic Banking Act and the Government Investment Act (Remali Yusoff, Rodney Wilson, 2005).
Malaysia has emerged as the first country to implement a dual banking system where Islamic banking system operates side by side with the conventional banking system. The Malaysian model has been recognized by many Islamic counties as the model of the future and many countries have shown interest in adopting this system. In fact, delegates from various countries, mainly Muslim counties have come to Malaysia, particularly to the Central Bank and Bank Islam Malaysia Berhad (BIMB), to study how the dual banking system works (Hamim S. Ahmad Mokhtar, Naziruddin Abdullah, Syed M. Al Habshi, 2006).
The history of Islamic Banking in Malaysia can be traced in 1963 when Tabung Haji was established by the government. It is a specialized financial institution that provides a systematic mobilization of funds of Muslims to assist them to perform pilgrimage in Makkah as well as to encourage them to participate in investment opportunities and economic activities. In fact, due to its uniqueness, Tabung Haji is considered to be the first of its kind in the world and economic activities (Mohammed Siedu, 2002; Ahasanul Haque, 2009).
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The government of Malaysia had then introduced a coordinated and systematic process of implementing Islamic financial system which is based on the experience of Tabung Haji, This process can be divided into three phases. The first phase is considered as the period of familiarization (1983-1992).This was the period when BIBM was established and the Islamic banking operations were started in accordance with Sharia'h principles. Bank Islam has developed itself as one of the most respectable financial institutions in the country as it listed on the main board of the Kuala Lumpur Stock Exchange (KLSE) on January 17th 1992. The second phase (from 1993-2003) was aimed at creating a more conducive environment for competition among the banks. At the same time, it was to give banks ample time to try to capture a large market share. Lastly, while the intention was to create awareness among the public, especially Muslims, about the benefits of Islamic banking system, this was also the period when conventional banks were allowed to offer Islamic banking services by setting up "Islamic banking scheme (IBS)" in 1993. The third phase that commenced from 2004 was the period of further financial liberation. During this period, the Central Bank paved the way for new foreign Islamic banks to operate in Malaysia by means of issuing licenses to them (Hamim S. Ahmad Mokhtar, Naziruddin Abdullah, Syed M. Al Habshi, 2006).
The popularity of the Islamic banking system is not limited to the Islamic banks only. Increasingly large international conventional banks are showing interest in the Islamic banking system as well. The consequence of this is that Islamic banks operating in Islamic countries are faced with strong competition not only from Islamic banks but also from nonIslamic rivals. When competition intensifies and when banks start to offer more or less similar products and services, it is the customer's satisfaction that can influence the performance of an Islamic bank and determines its competitiveness and success (Ahasanul Haque, Jamil Osman and Ahmad Zaki Hj Ismail, 2009). 4|Page
FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 1.2 PROBLEM STATEMENT
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Islamic Banking has become a substantial and fastest growing industry during the last four decades. In Malaysia, Islamic banking products are available at two full pledged Islamic banks and at all commercial and merchant banks in Malaysia. The BNM has approved a system of parallel Islamic and conventional banking because of its mixed ethnic and religious backgrounds. The past two years saw many conventional banks rushing to obtain a full Islamic license in order to set up an Islamic bank in Malaysia. Malaysia is the first nation to successfully adopt a dual banking system, where a full-fledged Islamic system operates side by side with the conventional banking system within a single bank.
However, the products offered are still not fully accepted by customers. Here, the issues arise is the problems occur on customers confidence towards Islamic banking product. It becomes a major problem since some of the customers are not understand and lack of knowledge about Islamic banking system. Thus, its one of the reason why customers especially Muslim do not involve in Islamic banking. Hence, it is importance to assess the degree of customers confidence towards Islamic banking products.
Nowadays, customers positive perception towards Islamic banking is far more crucial due to the fact that it have to compete with the long established conventional banks in a dualbanking system. This study sought to examine customers understanding towards Islamic banking. So, this research done to measure whether the demographic factors, religious perspective and customers perception are influenced customers confidence towards Islamic banking products.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 1.3 OBJECTIVES OF THE STUDY
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The general purpose of this study is to identify the customers confidence towards Islamic banking products in Malaysia. In defining the limitations of this study, the researcher identified study areas to be addressed. A careful review of those questions areas led to the development of the following specific research objectives: To determine if the demographic factor influence customers confidence towards Islamic banking product To examine if the factor of religious perspective influence customers confidence towards Islamic banking product To know whether the factor of customers perception influence customers confidence towards Islamic banking product To study which is most influence factor that contributed to the customers confidence towards Islamic banking products
1.4 THEORETICAL FRAMEWORK
In the study, the theoretical framework is needed in order to know the relationship from one variable to the other variables. A variable is anything that can take on differing or varying value. In the theoretical framework there are two variables are used to identify for each other which is: Dependent variable (criterion variable) - is the primary interest to the researcher. Independent variable (predictor variable) - is one that influence the dependent variable in either a positive or negative way
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS The schematic diagram for the theoretical is as follow:
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Demographic Factors
Religious Perspective
Customers confidence towards the product
Customers Perception
Independent Variable (IV) Dependent Variable (DV)
1.5 RESEARCH QUESTIONS AND HYPOTHESIS OF THE STUDY
1.5.1
RESEARCH QUESTIONS
1.5.1.1 Does a demographic factors influence customers confidence towards Islamic banking products?
1.5.1.2 Does religious perspectives influence customers confidence towards Islamic banking products?
1.5.1.3 Does customers perception influence customers confidence towards Islamic banking products?
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 1.5.2 HYPOTHESIS OF THE STUDY
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Hypothesis can be defined as a logically conjectured relationship between two or more variables expressed in the form of a testable statement. By testing the hypotheses and conforming the conjectured relationship, it is expected that solutions can be found to correct the problem encountered. There are two differential hypotheses, the first one is null hypothesis (Ho) which is the proposition that the states a definitive, exact relationship between two variables. In general the null statement is expressed as no (significant) relationship between two variables or no (significant) difference between two groups. The second type is the alternate hypothesis (Ha), which is the opposite of the null that is expressing a relationship between two variables or indicating differences between groups. In this study, four hypotheses have built that are related with the objective of the study:
Hypothesis 1 Ho: There is no relationship between demographic factors and customers confidence towards Islamic banking products Ha: There is a relationship between demographic factors and customers confidence towards Islamic banking products
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS Hypothesis 2
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Ho: There is no relationship between religious perspectives and customers confidence towards Islamic banking products Ha: There is a relationship between religious perspectives and customers confidence towards Islamic banking products
Hypothesis 3 Ho: There is no relationship between customers perception and customers confidence towards Islamic banking products Ha: There is a relationship between customers perception and customers confidence towards Islamic banking products
1.6 SIGNIFICANT OF THE STUDY
1.6.1 To The Islamic Banking in Malaysia This study provides clear reason how to attract customers in selecting Islamic banking product rather than conventional product. It will give information to them the most factors that influence customers confidence towards Islamic banking products. So, they can know the problem arise and try to encourage the customers in choosing Islamic banking products. At the same time it can improve Islamic banking performance by increasing customer demanding on their products.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 1.6.2 To The Researcher
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It is the best way for the researcher to apply all those theories that have been learned in class. As a Finance student, this study will be positively beneficial for them to apply all those theories that have been learned in class. Through this study, they might gain knowledge and share their ideas and findings regarding to the area of study.
1.6.3 To The Customer This study will also give some knowledge and increase the awareness of customers that Islamic banking is on par with conventional banking in term of their products nowadays. By answering the questionnaire, the customer itself will be able to know their level of knowledge and understanding towards Islamic banking products.
1.7 DEFINITION OF TERMS
1.7.1 Demographics
Demographics are the characteristics of a human population. These types of data are used widely in sociology, public policy, and marketing. Commonly used demographics include gender, race, age, income, educational attainment, employment status, and even location. Demographic trends describe the changes in demographics in a population over time. Both distributions and trends of values within a demographic variable are of interest. (Wikipedia, 2011)
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 1.7.2 Religious
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Religion is often considered a cultural system that creates powerful and long-lasting meaning, by establishing symbols that relate humanity to deeper truths and values. Many religions have narratives, symbols, traditions and sacred histories that are intended to give meaning to life. They tend to derive morality, ethics, religious laws or preferred lifestyle from their ideas about the cosmos and human nature. (Wikipedia, 2011)
1.7.3 Perception In philosophy, psychology, and the cognitive sciences, perception is the process of attaining awareness or understanding of sensory information. It is a task far more complex than was imagined in the 1950s and 1960s, when it was predicted that building perceiving machines would take about a decade, a goal which is still very far from fruition. The word comes from the Latin words perceptio, percipio, and means "receiving, collecting, and action of taking possession, apprehension with the mind or senses." Perception is one of the oldest fields in psychology. (Wikipedia, 2011)
1.7.4 Confidence
Confidence is generally described as a state of being certain either that a hypothesis or prediction is correct or that a chosen course of action is the best or most effective. Confidence is about trust and a feeling of assurance and security. When someone is confident, they know they can achieve what they want to do. There is no fear of failure. (Wikipedia, 2011)
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 1.8 LIMITATIONS OF THE STUDY
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In completing this research, the researcher has to face a few limitations that could affect the result of the study. However these limitations differ from one researcher to another researcher where it depends on the subject matter of the study itself. Several limitations have been identified while completing this research such as:
1.8.1 Time constraint It is difficult to complete the research within a specified time frame. The studies conducted are accomplished within a short period. In this short time period, it will not be able to obtain more information for completing the research. Time period also becomes a constraint for the researcher to get more accurate and reliable data. At the same time, the researcher also needs to concentrate on the practical training during the working hours. So that it also restrains the researchers effort in completing this project paper.
1.8.2 Cost constraint This study was the liability of the researcher. Since the research was not sponsored, the researcher had to bear all the cost. A lot of money had to be spent in gathering data and information. As a student, the researcher has a financial constraint to carrying out the project paper. Limited budget and energy prevented the researcher to get further information.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 1.8.3 Computer expertise
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This research uses lots of data for analyzing. All data will be collected and analyzed. The researcher needs to know how to use the SPSS program to analyze data. So, researcher needs to be familiar with SPSS function and program. But, most students are not experts in using this program. In other words, it gave a lot of problems to the researcher in the process of interpreting data precisely. Therefore, the researcher must spend more time to understand and learn this program.
1.8.4 Lack of cooperation In gathering data, the questionnaires were distributed among the respondents within the sample chosen. It is not easy to gain cooperation from the respondents, as they did not answer the questionnaires fully especially when it involves their time spending. Some of the respondents unable to give good commitments and support during answering the questionnaires.
1.8.5 Lack of experience As this is the first time for the researcher to do this research, therefore it may be quite difficult to collect data and manage time. Besides, the researcher has limited knowledge about general information of Islamic banking system in Malaysia. The researcher have to do a lot of study about Islamic banking product and need to increase the communication skill in order to persuade customers answer the questions at the same time.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 1.9 SCOPE OF THE STUDY
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This study is conducted to focus on the factors that influenced customer s confidence towards Islamic banking products. The scope of the study involves the relationship between the demographic factors, religious perspective and customers perception as the independent variable and customers confidence towards the products as the dependent variable.
For the purpose of the study, questionnaires were distributed to 50 respondents who live in Kuala Lumpur. A total of 50 respondents participated in the study and data were collected using self-administered questionnaires.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS CHAPTER 2: LITERATURE REVIEW
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1.0 Chapter Description This chapter presents a detailed discussion on the subject matter. This describes the nature of Islamic banking, Islamic banking products and past literature that is related to this study. This section also highlights the findings of past researchers on issues in the Islamic banking industry and also secondary sources information on the prospects for the Islamic banking industry.
1.1 Overview of Islamic Banking
Islamic banking has emerged as one of the fastest growing industries over the past three decades. It has spread to all corners of the globe and received wide acceptance by both Muslims and non-Muslims alike (Iqbal and Molyneux, 2005; Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006). The functions of Islamic bank are similar as banks do in the conventional system. However, there is a different between them where Islamic bank carry out their transactions in accordance with the rules and principles of Islam (Henry and Wilson, 2004; Iqbal and Mirakhor, 2007; Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006). Islamic banking is no longer regarded as a business entity striving only to fulfill the religious obligations of the Muslim community since it is one of the most important players in service industry today. More significantly, they play as a business that is ineluctably in need for winning over customers whilst retaining the old ones (Wilson, 1995; Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006).
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Malaysian commercial banks face even more challenges than most with other financial institutions because they have to compete with the new competitors which offer similar services but are based on Islamic principles. The first Malaysian commercial bank which fully operates based on Islamic principles is Bank Islam Malaysia Berhad (BIMB). The Islamic principles which govern the operations of Islamic banks are also known as Shariah principles. There are a lot of Islamic banking products, however in Malaysia there are some famous Islamic products that will be discussed briefly in this section. The applicable principles are called Mudharabah, Musyarakah, Murabahah, Al-Bai Bithaman Ajil, Al-Ijarah, Qard Hasan and Al-Wakalah: (Sudin Haron, Norafifah Ahmad and Sandra Planisek, 1994).
Mudharabah This is basically an agreement between a lender and an entrepreneur, whereby the lender agrees to finance the project on a profit-sharing basis according to a predetermined ratio agreed by both parties concerned. If there are any losses the lender will bear all the losses.
Musyarakah Musyarakah means a partnership between capital provider and customer. Islamic institution provides capital to the customer with the aim of making profit for a specific business. The lender not only provides the capital but also participate in the management. All parties agree, through negotiation, on the ratio of distribution of profits generated from the business activity. However, if there are any losses, all parties bear the loss in proportion to their shares in the financing.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS Murabahah
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This is basically the contract of sale. Financial institution sells the goods to the customer at a price covering the purchase price plus the profit margin agreed on by both parties concerned. The lender buys the goods wanted by the borrower for resale to the borrower at a higher price agreed on by both parties.
Al Bai Bithaman Ajil Known as deferred payment sale. Means, the borrower is allowed to defer settlement of the payment for the goods purchased within the period which agreed by both parties. Bai Bithaman Ajil is the most popular product used by Malaysian financial institutions in providing financing facilities to their customers.
Al Ijarah This is the Shariahs concept of leasing finance whereby the bank purchases the asset required by the customer and then leases back to the customer for a given period. The lease rental and other terms and conditions having been agreed on by both parties.
Qard Hassan This is a benevolent loan which obliges a borrower to repay the lender the principal sum borrowed on maturity of the loan. However, the borrower has the discretion to reward the lender for his/her loan by paying any sum over and above the amount of the principal.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS Al Wakalah
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This is an agreement between a customer and his or her bank in which the former appoints the latter as his or her agent in undertaking a certain transaction on his or her behalf.
Islamic banking products are increasing day by day and previous studies found that Islamic banking products are on a par with conventional banking products. The establishment of Islamic banking and finance in 1983 has contributed to the growth and sustainability of the Malaysian economy evidently. Since then, the strong growth of the Islamic banking in Malaysia is expected to continue due to new players who have joined the bandwagon in relation to the strong demand for Shariah-compliant financial products and services (Ismah Osman, Husniyati Ali and Anizah Zainuddin, 2009).
2.2 Customers confidence towards the products
As more conventional banks participating and offering banking products and services based on Islamic principles, the development of the Islamic banks in Malaysia is increasingly challenging after two decades of its establishment. Thus, in order to confront and respond vigorously to the robustness of the global financial environment, it is very important for the players in the Islamic banking industry to better position themselves (Ismah Osman, Husniyati Ali et al., 2009).
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Banks name and reputation are strongly effect on selecting a bank. The reputation and image factor are evidenced as one of the important criteria in the banking selection decision (Ahasanul Haque et. al, 2009). The most important criteria considered by the customers are provision of fast and efficient services, banks reputation and image, and confidentiality (Erol and El-Bdour, 1989; Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006).
The Islamic financial system prohibits the involvement in interest-based transactions and requires a trade-based arrangement where specific object of sale must be exchanged. It is further suggested that the Islamic financial market is better able to weather economic and financial crisis compared to the conventional financial market. The rapid demand for the Islamic financial products and services in both the Muslim and non-Muslim countries have also been contributing to the unprecedented growth of the Islamic financial industry (Salina H. Kassim and M. Shabri Abd. Majid).
Today, the Islamic banking and finance has emerged as an important component of the overall Malaysian financial system that contributes to the growth and development of the Malaysian economy. Since 2000, the domestic Islamic banking industry has been growing at an average rate of 18 percent per annum in terms of assets (Aziz, 2006; Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006). It is the aspiration of the Malaysian government to have a strong Islamic banking industry capturing 20 percent of market shares of financing and deposits in the Malaysian financial industry by 2010 (Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006).
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2.3 Demographic Factors
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The dimensions of value, cost, and prior satisfaction are the combination of product attributes that best meet customers needs. They make product or service choice based on these combinations (Kotler, 1997; Ahasanul Haque, 2010). Consumers attitude or behavior should be studied through demographics, beliefs, and attitudes. It has been widely recognized that demographic factors have a great impact on consumer attitudes and behavior (Jayawardhena and Foley, 2000; Mattila, 2001; Karjaluoto et al., 2002; Ahasanul Haque, 2010). It is important for the Islamic banking service providers to recognize them, understand them, and use them to design a gender specific strategy since gender is a key variable for marketing analysis (Nicovich et al., 2005; Ahasanul Haque, 2010).
In order to provide best service to the customers, it is better to understanding the motivation, expectations, and desires (Ahasanul Haque, 2010). It may even provide information on making improvements in the nature of business (Naylor and Greco, 2002; Ahasanul Haque, 2010). Indeed, what remains is to propose and test relevant hypotheses examining perception about Islamic banking in terms of gender beliefs, attitudes, and behavior pattern. Besides that, race and ethnicity is also important for the question of effects. Since, the democratic anthropological sense describes a whole way of life, which is ordinary in every society and in every mind (Haq and Smithson, 2002; Ahasanul Haque, 2010).
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2.4 Religious Perspectives
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Some customers do not have so much knowledge about the Islamic banking products such as Mudarabah, Musyarakah, Murabahah and etc, but they buy these products for the reason of religion (Ahasanul Haque et al, 2009). The key element to describe a cluster of beliefs is a religion. It is more than ecology of themes for social communication rather it is a specific way of communicating. Religion does not just lie in its capacity for differentiation but also lies in its ability to structure and lend meaning to the everyday, to the local world of interaction (Haq and Smithson, 2003; Ahasanul Haque, 2010).
Islamic banking came into existence to satisfy the financial needs of Muslims who have to observe the prohibition of interest-based transactions (Haq and Smithson, 2003; Ahasanul Haque, 2010). The Quran prohibits the taking and receipts of interest (riba) while making trade and commerce (al-bay) permissible (halal). The Quran argued that interest constitutes an unfair business transaction as profits realized from loans are risk-free with no evidence of value-addition by lenders (Saiful Azhar Rosly and Mohd Afandi Abu Bakar, 2003). In order to accommodate the additional changes in conventional banking, the sufficient flexibility are needed to support Islamic banking. This removes a long standing argument that Islamic banking is infeasible in a regulatory sense (Warde, 2000; Ahasanul Haque, 2010).
As it can be seen in the recent growth of ethical banking, all at once Western attitude are also changing, where non-Islamic customers refuse to invest in companies engaged in unethical and socially harmful activities (Warde, 2000; Ahasanul Haque, 2010). Currently we are witnessing a wide religious reinterpretation, spurred on by changes at national and global levels (Haynes, 1999; Haq and Smithson, 2003; Ahasanul Haque, 2010). 21 | P a g e
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The political, social and cultural values embedded within the development goals of projects shape the development and use of technology (Madon, 2000; Ahasanul Haque, 2010). Islamic banks should recognize that customers view them just like any other commercial bank since religion is no longer the main factor in attracting customers. Hence the quality of service, and products and services offered must be compatible with those offered by the commercial banks (Sudin Haron et. al, 1994).
2.5 Customers Perception
In Malaysia, customers positive perception towards Islamic banking is far more crucial mainly due to the fact that Islamic banks have to compete with the long established conventional banks in a dual-banking system. Since 1983, Malaysia to date has a dual banking system, whereby the Islamic banking system operates in parallel with the conventional system (Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006). Although Islamic banks perform mostly similar functions to that of conventional banks, their approach is distinctly different. First, Islamic banking strives for a just, fair and balanced society as envisioned by the Islamic economics (Mirakhor, 2000; Warde, 2000, Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006). Accordingly, the many prohibitions like interest, gambling, excessive risks and etc are to protect the interests and benefits of all parties involved in market transactions and to promote social harmony (Ahmad, 2000; Chapra, 2000; Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006).
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Second, Islamic banking constructed upon the principle of brotherhood and cooperation, which stands for a system of equity sharing, risk sharing and stake taking. It promotes such sharing and cooperation between the provider of funds (investor) and the user of funds (entrepreneur) (Ahmad, 2000; Iqbal and Molyneux, 2005; Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006).
Lastly, Islamic banking is also characterized by ethical norms and social commitments. There is a moral filter based on the definitions of halal (permissible) and haram (prohibited and undesirable) operating at different levels, carving the conscience of entrepreneur and firm, promoting a positive social climate for society, and providing an expedient legal framework (Chapra,1992; Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006). Accordingly, Islamic banks cannot finance any project which conflict with the moral value system of Islam such as financing a brewery factory, a casino, a night club or any other activity clearly prohibited by Islam or known to be detrimental to society (Ahmad, 2000; Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006).
The performance of an Islamic bank are based on customers satisfaction when competition intensifies and when banks start to offer more or less similar products and services, thus, it will determines its competitiveness and success (Ahasanul Haque, Jamil Osman, and Ahmad Zaki Hj Ismail, 2009). The main objective of Islam is to guide human development along the correct lines and in the right direction. Islam deals with all aspects of economic development, but always in the framework of total human development and never in a form divorced from this perspective (Al-Harran, 1993; M. Shahid Ebrahim, 2001).
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS CHAPTER 3: RESEARCH METHODOLOGY
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3.0 Chapter Description
This chapter consists of the research methodology used in order to complete the study. This chapter will explain in detail the sources of data and the formula used in order to gain the results. On this chapter, it will be covered research design, types of data, data collection method, measurement, questionnaire development, sampling and data analysis.
3.1 Research Design Research design is a master plan specifying the methods and procedures for collecting and analyzing the needed information. The importance of research design includes a plan selecting sources and types of information used to answer the problem statement. It is also include a framework for specifying the relationships among variables (Rozieana, 2009). In this research, Causal Research Design was used. It is conducted to identify cause and affect relationship among variables, where the research problem has already been narrowly defined. The researcher wants to identify whether the factors such as demographic factors, religious perspective and customers perception are influenced customers confidence towards Islamic banking products.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 3.2 Types of Data Collection
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3.2.1 Primary Data The primary data with specific purpose of address the research problem will be obtained through distribution of questionnaire to customers who are interest in answering the question.
3.2.1.1 Questionnaires Questionnaires were designed and distributed to the respondents who are aware about Islamic banking system. The questionnaires were designed to collect and gather the data collection for the study. For this study, questionnaires were administrated personally and being typed in 2 versions, English and Malay version. These questionnaires have been divided into four sections, which are Section A, Section B, Section C and Section D.
3.2.1.1.1 Section A: Demographic Questions are constructed by the researcher for collecting all the information regarding the background of respondents in order to get a brief background. Nominal Scale is one that allows the researcher to assign subject to certain categories or groups. In this section, nominal scale question is used for the question such as gender, age, and education level.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 3.2.1.1.2 Section B: Religious Perspectives
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The questions are designed by the researcher in order to determine whether the religious factor is the main reason customers buy the Islamic banking products. Researcher found that customers do not have so much knowledge about the Islamic banking products such as Musyarakah, Mudharabah and Bai Bithaman Ajil. So, this section sought to examine religious factor an enough to drive Muslim to use Islamic banking product.
3.2.1.1.3 Section C: Customers Perception Question are constructed by the researcher in order to reveal actual perception of customers towards Islamic banking product. For this section, Likert scale questionnaire is used to measure the level of perception among the respondents.
3.2.1.1.4 Section D: Customers confidence towards the product The question designed are focused to gather information of customers confidence towards Islamic banking system. For this section, Likert scale questionnaire is used to measure the level of confidence among the respondents.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 3.2.2 Secondary Sources
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In doing this research, the researcher will also refer to secondary sources to collect more information in order to complete this study. Secondary sources are very useful for the researcher to better define the problem of the study and can interpret primary data more meaningful. Most of the secondary sources were collected from journals and articles. All the journals can help the researcher to conduct this research and gather more additional information that relates to the case study.
3.3 Sampling Technique
3.3.1
Population Population refers to the entire group of people, event and things of interest that the researcher wants to investigate. For this study, the population refers to all respondents that interest in answering the questionnaire.
3.3.2
Sample A survey of approximately 50 respondents who have answered the questionnaire will provide the database for this study. The sample will be selected on a nonprobability basis from all respondents. Eligible customers are between the age of 21 and above 50 years.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS . 3.3.3 Collection Technique
2011
This study has used self-administrative questionnaire for the collection technique. That is the respondents have to answer and fill in the questions given. The questionnaire that has been collected by the time the respondents had completed the questionnaire.
3.4 Data Analysis
3.4.1
Statistical Procedure of Social System (SPSS) The analysis will be done to get the finding to the study after all the data is collected. All the data is treated and interpreted by using relevant information from analysis method. An analysis of the data can be made by using the Statistical Procedure of Social System (SPSS), then interpret the result findings.
3.4.1.1 Frequency Distribution The frequency provides statistics and graphical display that is used to describe many types of variables. A frequency of distribution simply reports the number of respondents that each questionnaire received and determined the empirical distribution of the variables.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 3.4.1.2 Reliability Analysis
2011
Reliability of a measure is established by testing both consistency and stability. Cronbachs alpha is computed in terms of the average intercorrelations among the items measuring the concept. Cronbachs alpha is a reliability coefficient that indicates how well the items in a set are positively correlated to one another. The closer Cronbachs alpha is to 1, the higher the internal consistency reliability.
3.4.1.3 Hypotheses Testing By analyzing the result from the questionnaires, the researcher tried to obtain the observed value with critical value in determining whether to reject or fail to reject the null hypothesis. The test of chi square will be use in this research to test the hypothesis. The calculated value from Pearson Chi Square has been compared with the level of significance. Null hypothesis will be rejected where calculated value is greater than level of significance value. The questions that have been tested are the combination of questions for each independent variable after all of them have been cross-tabulated with the dependent variable.
3.4.1.4 Correlation Coefficient Researchers used the correlation to know the relationship between the dependent and independent variables. The correlation were used to determine whether the relationship weak or strong with the negative or positive association. 29 | P a g e
FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 3.4.1.5 F-Statistics
2011
F-test is used to test the overall model. It provides an overall appraisal of the regression equation appeased in evaluating the significant of each component in the model. Moreover, f-statistics tests whether a significant proportion of the total variation independent is explained by the estimated regression equation.
3.4.1.6 T-Statistics T-statistics will use to test the hypothesis either hull hypothesis and alternate hypothesis. It is also to test whether there is statistically significant relationship between the dependent variables and independent variables.
3.4.1.7 Regression Analysis Regression analysis is used when independents variables are correlated with one another and with the dependent variable (Sheridan J Coakes, 2005). From the correlation analysis obtained on this research, all hypothesis are accepted but to make sure there are actual relationship between two variable, the researcher must run regression analysis to make sure the hypothesis support or not. The interpretation of the regression analysis is based on the standardized coefficient beta () and R square (R2) which provide evidence whether the independent variable and dependent variables have a relationship or not.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 3.5 Measurement
2011
Types of Measurement
3.5.1
Nominal scaled data Nominal scale data described the variable in term of its category and the measure differs in term of quality rather than quantity. It assigned to represent the categories of which the characteristic of data belongs. In this research, I used nominal scale mainly for the purpose of identifying the respondents variables in term of their gender, age, education level, perception and so on.
3.5.2 Likert scale data The likert scale is one of the famous attitudes rating scale used by the researchers in their questionnaire. The likert scale is designed to examine how strongly subjects agree or disagree with statement on a 7-points scale. There are seven different scale used to differentiate the degree of agreement and disagreement. The scales are ranging 1 to 7 from strongly agree to strongly disagree, respectively.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS CHAPTER 4: FINDING AND ANALYSIS
2011
4.0
CHAPTER DESCRIPTION This chapter represents the finding and analysis on the factors that influence customers confidence towards Islamic banking products. The study is involved with customers who live in Kuala Lumpur. It covers different sectors of occupations such as government sectors, private sectors and other sectors. Because of limitation of time, only fifty (50) sets of questionnaires were distributed in that area. Researcher had used the Statistical Package for Social Sciences (SPSS) system, version 16.0 in order to analyze and measure the dependent and the independent variables. The major advantage using
this software is that its ability to perform various advanced statistical analysis, variable transformation, as well as producing statistic charts and table.
This chapter presents the detailed findings of the primary data. The first section 4.1 describes the findings on issues related to the demographic characteristic of respondents. The second section 4.2 presents the reliability analysis of the research followed by section 4.3 the hypotheses testing and discussion to test the relationship between independent variable and dependent variable. Lastly, section 4.4 gathers results of regression analysis.
4.1
DATA INTERPRETATION ON FREQUENCY Frequency distribution indicates how many participants are in each category. Here the interpretation data is use only for nominal scale which refers to the correspondent profile.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.1.1 GENDER
2011
Cumulative Frequency Valid Male Female Total 21 29 50 Percent 42.0 58.0 100.0 Valid Percent 42.0 58.0 100.0 Percent 42.0 100.0
TABLE 4.1
GENDER
30 25 20 15 10 5 0 Male Female Male Female
FIGURE 4.1 GENDER From the Figure 4.1 and Table 4.1, it shows the number of respondents. It shows that female respondents are higher with 58% than the male respondents with 42%. The gap between female respondents and male respondents are 16%.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.1.2 AGE
2011
Cumulative Frequency Valid 21-30 31-40 41-50 50 years above Total 33 11 4 2 50 Percent 66.0 22.0 8.0 4.0 100.0 Valid Percent 66.0 22.0 8.0 4.0 100.0 Percent 66.0 88.0 96.0 100.0
TABLE 4.2
AGE
35 30 25 20 15 10 5 0 21-30 31-40 41-50 50 years above 21-30 31-40 41-50 50 years above
FIGURE 4.2
AGE
From the Figure 4.2 and Table 4.2, respondents age has been diversified into four groups. These are 21 to 30 years old, 31 to 40 years old, 41 to 50 years old and 50 years old and above. It shows that the majority of the respondents are between 21 to 30 years old with 66%. It is followed by the respondents age between 31 to 40 years old which is 23%. 8% of the respondents are in the range of 41 to 50 years old and only 4% are 50 years and above.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.1.3 RACE
2011
Cumulative Frequency Valid Malay Chinese Indian Total 27 19 4 50 Percent 54.0 38.0 8.0 100.0 Valid Percent 54.0 38.0 8.0 100.0 Percent 54.0 92.0 100.0
TABLE 4.3 RACE
30 25 20 15 10 5 0 Malay Chinese Indian Malay Chinese Indian
FIGURE 4.3 RACE
Table 4.3 and Figure 4.3 above show the race of the respondents. The table revealed that almost 27 respondents (54%) are Malay, 19 from Chinese (38%) and the rest are only 4 respondents (8%) which are Indian.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.1.4 MARITAL STATUS
2011
Cumulative Frequency Valid Single Married Total 32 18 50 Percent 64.0 36.0 100.0 Valid Percent 64.0 36.0 100.0 Percent 64.0 100.0
TABLE 4.4
35 30 25 20 15 10 5 0 Single Married Single Married
FIGURE 4.4 From the Figure 4.4 and Table 4.4, the results show that majority of the respondents are single with 32%. It is followed by 18% of the respondents are married.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.1.5 EDUCATION LEVEL
2011
Cumulative Frequency Valid SPM STPM Diploma Degree Master Total 7 2 6 30 5 50 Percent 14.0 4.0 12.0 60.0 10.0 100.0 Valid Percent 14.0 4.0 12.0 60.0 10.0 100.0 Percent 14.0 18.0 30.0 90.0 100.0
TABLE 4.5
SPM STPM Diploma Degree Master
FIGURE 4.5 From the Figure 4.5 and Table 4.5, the results show that 60% of the respondents have degree, 14% of the respondents have SPM and followed by 12% of the respondents have diploma. The rest of the respondents which represents only 10% and 4% which are Master and STPM respectively.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.1.6 OCCUPATION LEVEL
2011
Cumulative Frequency Valid Student Businessman Government Employee Private Sector Employee Total 8 1 10 31 50 Percent 16.0 2.0 20.0 62.0 100.0 Valid Percent 16.0 2.0 20.0 62.0 100.0 Percent 16.0 18.0 38.0 100.0
TABLE 4.6
Student Businessman Government Employee Private Sector Employee
FIGURE 4.6
From the Figure 4.6 and Table 4.6 show that the highest percentage of respondents occupation is 62% which is the private sector employee, followed by government employee with 20%. For student stated 16% and the rest of the respondents with 2% are businessman.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.1.7 MONTHLY INCOME
2011
Cumulative Frequency Valid less than RM1000 RM1000-RM2000 RM2001-RM3000 RM3001-RM4000 Above RM4000 Total 7 13 15 11 4 50 Percent 14.0 26.0 30.0 22.0 8.0 100.0 Valid Percent 14.0 26.0 30.0 22.0 8.0 100.0 Percent 14.0 40.0 70.0 92.0 100.0
TABLE 4.7
16 14 12 10 8 6 4 2 0 less than RM1000 RM1000-RM2000 RM2001-RM3000 RM3001-RM4000 Above RM4000
FIGURE 4.7 Figure 4.6 and Table 4.6 represent the result of respondents income level. It shows that there are 30% of the respondents who earned an income for ranging from RM2001 to RM3000. This is followed by 26% of the respondents who earned an income ranging from RM1000 to RM2000 per month, and 22% of the respondent who earn RM3001 to RM4000. The rest of the respondents have income less than RM1000 and above RM4000 are 14% and 8% respectively. 39 | P a g e
FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.1.8 HAVE EVER USE ISLAMIC BANKING PRODUCT BEFORE
2011
Cumulative Frequency Valid yes No Total 23 27 50 Percent 46.0 54.0 100.0 Valid Percent 46.0 54.0 100.0 Percent 46.0 100.0
TABLE 4.8
28 27 26 25 yes 24 23 22 21 yes No No
FIGURE 4.8
Figure 4.8 and table 4.8 shows the result whether the respondents have ever use Islamic banking products before. It represent 27 respondents (54%) are not using Islamic banking products before and the rest 23 respondents (46%) are have used Islamic banking products.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.2 RELIABILITY ANALYSIS
2011
Here the researcher measures the reliability of the research. It is to know whether this research reliable or not. According to Uma Sekaran (2003), the reliability of a measure indicates the extent to which it is without bias (error free) and hence ensures consistent measurement across time and across the various items in the instrument. In other words, reliability of a measure is an indication of the stability. A Coefficient Alpha is often used to measure reliability. Consistency reliability or Cronbachs Alpha reliability gets to 1.0 is the better. In general reliability less than 0.6 are consider to be poor. Those in the 0.7 range are acceptable and those in the 0.8 range are good. The findings of reliability test shows as follow:
Alpha Coefficient Range < .6 .6 to < .7 .7 to < .8 .8 to < .9 .9>
Strength of Association Poor Moderate Good Very Good Excellent
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.2.1 Reliability Test: Independent Variable (Demographic Factors)
2011
Reliability Statistics
Cronbach's Alpha Cronbach's Alpha .459 Based on Standardized Items .405 N of Items 8
TABLE 4.9
RELIABILITY ANALYSIS FOR DEMOGRAPHIC FACTORS
For the first independent variable which is Demographic Factors, the result indicates that the Cronbachs Alpha for six (8) items in Demographic Factors (independent variables) measure is .459. The result shows that this independent variable is range and poor. It can be conclude that the questionnaire about Demographic Factors is having low reliability and acceptable.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.2.2 Reliability Test: Independent Variable [Religious Perspectives]
2011
Cronbach's Alpha Based on Cronbach's Alpha Standardized Items .915 .920 N of Items 6
TABLE 4.10 RELIABILITY ANALYSIS FOR RELIGIOUS PERSPECTIVES
For the second independent variable which is Religious Perspectives, the result indicates that the Cronbachs Alpha for six (6) items in Religious Perspectives (independent variables) measure is .915. The result shows that this independent variable is range and excellent. It can be conclude that the questionnaire about Religious Perspectives is having high reliability and acceptable.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.2.3 Reliability Test: Independent Variable [Customers Perception]
2011
Cronbach's Alpha Based on Cronbach's Alpha .696 Standardized Items .694 N of Items 5
TABLE 4.11 RELIABILITY ANALYSIS FOR RELIGIOUS PERSPECTIVES
For the third independent variable which is Customers Perception, the result indicates that the Cronbachs Alpha for seven (5) items in Customers Perception (independent variables) measure is .696. The result shows that this independent variable is range and fair. It can be conclude that the questionnaire about Customers Perception is having high reliability and acceptable.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.3 HYPOTHESIS TESTING AND DISCUSSION
2011
4.3.1 INTRODUCTION Hypothesis is a statement, opinions or beliefs that the researcher wishes to accept or to rejected base on the data collected. Alternatives hypothesis (Ha) exist for the purposes of the comparing the null hypothesis (H0). Since Ha is a statement in which no difference or effect is expected, there will be some changes taken in action if the Ha is accepted. The main objective of hypothesis testing is to make a judgment about the different between two samples statistic and a hypothesized population parameter. These are three hypotheses to be tested: Hypothesis 1 Ho: There is no relationship between demographic factors and customers confidence towards Islamic banking products Ha: There is a relationship between demographic factors and customers confidence towards Islamic banking products
Hypothesis 2 Ho: There is no relationship between religious perspectives and customers confidence towards Islamic banking products Ha: There is a relationship between religious perspectives and customers confidence towards Islamic banking products 45 | P a g e
FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS Hypothesis 3
2011
Ho: There is no relationship between customers perception and customers confidence towards Islamic banking products Ha: There is a relationship between customers perception and customers confidence towards Islamic banking products
4.3.2 Hypothesis Testing Using Correlation In this section, Pearson Correlation Coefficient is used for test the hypothesis. The hypothesis tested is that linear relationship exists between two variables, dependent and independent variable, as seen in the correlation coefficient (r). The null hypothesis, however, states that no linear relationship exists between the two variables. As in all hypothesis tests, the goal is to reject the null hypothesis and accept the alternative hypothesis. In other words, it is to decide that an effect, in this case a relationship exists. r value Less than .20 .20 - .40 .40 - .70 .70 - .90 .90 1.00 Interpretation Slight, almost negligible relationship Low correlation, definite but small relationship Moderate correlation, substantial relationship High correlation, marked relationship Very high correlation, very dependable relationship
Table 4.12 Interpretation for value r that being propose by Guilford (1956) 46 | P a g e
2011
Correlations Customers' Confidence Towards The Demographic Products Customers' Confidence Pearson Towards The Products Correlation Sig. (1-tailed) N Demographic Factors Pearson Correlation Sig. (1-tailed) N Religious Perspectives Pearson Correlation Sig. (1-tailed) N Customers' Perception Pearson Correlation Sig. (1-tailed) N **. Correlation is significant at the 0.01 level (1-tailed). 50 .344** .007 50 .570** .000 50 .783** .000 50 50 .455** .000 50 .522** .000 50 50 .521** .000 50 50 1 Factors .344** .007 50 1 Religious Perspectives .570** .000 50 .455** .000 50 1 Customers' Perception .783** .000 50 .522** .000 50 .521** .000 50 1
Table 4.13 Correlation Coefficient Tests on Hypothesis
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.3.2.1 Hypothesis Testing for Demographic Factors using Correlation
2011
Based on the correlation coefficient test in the table 4.13, it shows that demographic factors have small relationship with the customers confidence towards the products. The result from the table shows correlation between demographic factors and customers confidence towards the products is r = .344. It means that it has low correlation and proves to have small relationship between demographic factors and customers confidence towards the products. From the correlation, it shows that the null hypothesis is accepted indication that the association is statistically not significant at the 0.05 levels. It is clearly stated that:
Degree of significant > 0.05 = Null hypothesis (H0) is accepted)
In this study, the result is:
0.007 > 0.05 = Ha is rejected
From the result, the hypothesis 1 is rejected because it has low correlation and proves to have small relationship as statistically the association is not significant at the level is significant value. The conclusion for this finding is demographic factors is the factor that did not contributed to the customers confidence towards the products.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.3.2.2 Hypothesis Testing for Religious Perspectives using Correlation
2011
Table 4.13 shows the hypothesis testing for the second independent variable, religious perspectives. From this finding, it shows that there is a positive
relationship between religious perspectives and customers confidence towards the products. Moreover, from the table, it shows the result of correlation between religious perspectives and customers confidence towards the products is r = .570. Looking at the theory from Guilford , this result is moderate correlation and proves to have substantial relationship between religious perspectives and customers confidence towards the products From the correlation, it shows that the null hypothesis is rejected indication that the association is statistically significant at the 0.05 levels.
It is clearly stated that:
Degree of significant < 0.05 = Null hypothesis (H0) is rejected)
0.000 < 0.05 = Ha is accepted
From the result, the hypothesis 2 is acceptable although it is moderate correlations and has substantial relationship as statistically the association is significant at the level is significant value. The conclusion for this finding is religious perspectives is one of the relevance factors of customers confidence towards the products. 49 | P a g e
FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.3.2.3 Hypotheses Testing for Customers Perception using Correlation
2011
Table 4.13 shows the hypothesis testing for the third independent variable, customers perception. From this finding, it shows that there is a positive
relationship between customers perception and customers confidence towards the products. Moreover, from the table, it shows the result of relationship between customers perception with customers confidence towards the products is r = .783. This means that, between customers perception and customers confidence towards the products has high correlation and proves to have marked relationship. From the correlation, it shows that the null hypothesis is rejected indication that the association is statistically significant at the 0.05 levels. It is clearly stated that:
Degree of significant < 0.05 = Null hypothesis (H0) is rejected)
0.00 < 0.05 = Ha is accepted
From the result, the hypothesis 3 is acceptable because it has high correlation and proves to have marked relationship as statistically the association is significant at the level is significant value. The conclusion for this finding is customers perception are the factors that influence customers confidence towards the products.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.3.2 Hypotheses Testing Using F-Test
2011
In order to test the statistics, calculated f-statistics will be compared with its critical value. If the calculated value greater than critical value, the regression equation is significant to explain the changes in dependent variables. Calculated F-statistics > critical value (> 5%), there is significant relationship between independent variables and dependent variables. Calculated F-statistics < critical value (< 5%), there is no significant relationship between independent variables and dependent variables. The model is not valid for forecasting.
ANOVAb Sum of Squares Regression Residual Total 62.839 31.600 94.439
Model 1
df 3 46 49
Mean Square 20.946 .687
F 30.492
Sig. .000a
a. Predictors: (Constant), Customers' Perception, Religious Perspectives, Demographic Factors b. Dependent Variable: Customers' Confidence Towards The Products
TABLE 4.14
Regression Analysis Summary of the Research Model
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS Whereby; K = number of independent variables + dependent variable N = number of observation
2011
F = R2 / (k 1) (1 R2) / (n k) = 0.665 / (4 1) (1 0.665) / (50 4) = 30.442
Df numerator = K 1 =41 =3 Df denumerator = N K = 50 3 = 47
F - Statistics Vs F Table 30.442 > 2.8387
So, there is significant relationship between independent variables and dependent variables since F - statistics greater than F - table.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.3.3 Hypotheses Testing Using T-Test
2011
To test the hypothesis, we make comparisons between the absolute value of the tstatistics to the tabulated value of t-table with the degree of freedom. Normally, we take a significant value at level 95% confident interval. The symbols we use to test the hypothesis are: H0 = null hypothesis HA = alternate hypothesis, also known as H1 Thus, the decision rule is; At 95% confidence interval: t-statistics > t-table ; reject H0, accept HA t-statistics < t-table ; reject HA, accept H0
Coefficients
Unstandardized Coefficients Model 1 (Constant) Demographic Factors Religious Perspectives Customers' Perception B .522 -.550 .264 .822 Std. Error .664 .368 .105 .122
Standardized Coefficients Beta t .787 -.154 .261 .728 -1.493 2.524 6.752 Sig. .435 .142 .015 .000
a. Dependent Variable: Customers' Confidence Towards The Products
Table 4.15 Standardized Coefficients of the Research Model 53 | P a g e
FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS Whereby; K = number of independent variables N = number of observation
2011
i.
Test the significant of each independent variable (T-Test) a. State the hypothesis : H0 : H1 : b. Degree of freedom : df = n k 1 df = 50 - 3 - 1 df = 46 Thus, T-table = 2.013
c. Calculate t-statistics : t =
SE ( 2)
1) Demographic Factors : t = -0.550 0 0.368 = -1.494 < 2.013 There is no significant relationship between demographic factors and customers confidence towards the product. Thus, we accept H0, and reject HA.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2) Religious Perspectives : t = 0.264 0
2011
0.105 = 2.514 > 2.013

There is significant relationship between religious perspectives and customers confidence towards the product. Thus, we reject H0, and accept HA.
3) Customers Perception : t = 0.822 0
0.122 = 6.738 > 2.013

There is significant relationship between customers perception and customers confidence towards the product. Thus, we reject H0, and accept HA.
4.4 REGRESSION ANALYSIS
Researcher uses the regression method in order to test the hypotheses and whether to accept or reject. According to Burns and Bush (2000), multiple regression analysis is an expansion of bivariate regression analysis in that more than one independent variable is used in the regression equation. The researcher chooses multiple regressions because there are three independent variables need to be predicting in this research. The interpretation of the regression analysis is based on the standardized coefficient beta () and R square (R) which provide evidence whether to support or not to support the hypotheses stated earlier in the early chapter. 55 | P a g e
2011
Regression analysis was chosen for it fits well for the hypotheses testing and analyzing how independent variables can be used to predict a dependent variable. According to Maholtra (2006) Regression analysis is a powerful and flexible procedure for analyzing associative relationship between dependent variable and one or more independent variables. Fitness of the model built for this study is examined by this kind of standard regression analysis. The analysis shows how much of the total variance in the dependent variable (customers confidence towards the products) is possible to explain by the independent variables: demographic factors, religious perspectives and customers perception.
Model Summaryb
Adjusted R Model 1 R .816a R Square .665 Square .644
Std. Error of the Estimate .82883
DurbinWatson 1.820
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS ANOVAb Sum of Squares Regression Residual Total 62.839 31.600 94.439
2011
Model 1
df 3 46 49
Mean Square 20.946 .687
F 30.492
Sig. .000a
TABLE 4.14
Regression Analysis Summary of the Research Model
4.4.1
Coefficient of Determination (R2) = 0.665 Coefficient of determination shows the explanatory power of the equation. It determines how much change in the dependent variable in relation to the independent variables. The linear regression analysis been presented in Table 4.14. The linear regression test of the model reveals that the R-square of the model is .665. This means the model explains 65.5% of the variance in the dependent variable, customers confidence towards the products. Meanwhile, the remaining 35.5% cannot be explained. This
means there were other factors that can be used to determine the factors on customers confidence towards the products. The coefficient of correlation (R square) that obtained from Table 4.14 which is .665 is close to 1 and its indicates a strong positive linear correlation.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.4.2 Durbin Watson = 1.820
2011
Durbin Watson is used to test whether serial correlation is present in the term of regression or not. It measured through the range from 1.5 to 2.5, which measures the correct model used for this study. Furthermore, the linear regression test of model reveals that the Durbin-Watson of the model is 1.820. The Durbin-Watson statistics lies in the range is 1 to 4. A value of 2 or nearly 2 indicates that, there is no first order autocorrelation and an acceptable range is 1.50 to 2.50. So that, for Durbin-Watson of the model which is 1.820 is acceptable and no first order autocorrelation. For conclusion, this is significance, meaning the fitness of the model in explaining the customers confidence towards the products is good. According to the ANOVA F test, the result of f-statistic is 30.492 and the p value = 0.000, which means the null hypotheses is rejected and this model is statistically significant. Coefficientsa
Unstandardized Coefficients
Model 1 (Constant) Demographic Factors Religious Perspectives Customers' Perception
Standardized Coefficients Beta t .787 -.154 .261 .728 -1.493 2.524 6.752 Sig. .435 .142 .015 .000
B .522 -.550 .264 .822
Std. Error .664 .368 .105 .122
a.
Dependent Variable: Customers' Confidence Towards The Products
Table 4.15 Standardized Coefficients of the Research Model 58 | P a g e
2011
Therefore, this regression equation is significant. Through this finding and analysis, the researcher fails to reject the null hypotheses (H0) for hypothesis one. It is because there are no relationship between demographic factors and customers confidence towards the products. While for hypotheses two and three, the researcher fails to accept the null hypotheses since there are have relationship between religious perspectives and customers perception with customers confidence towards the products.
Multiple regressions: Y= B + B2X2 + B3X3 + B4X4 Y= 0.522-0.550+0.264+0.822 Where, Y = Customers Confidence Towards The Products X2 = Demographic Factors X3 = Religious Perspectives X4 = Customers Perception
59 | P a g e
2011
From Table 4.16, R2 = 0.665 means that 65.5% have been covered by demographic factors ( = -0.550), religious perspectives ( = 0.264), and customers perception ( = 0.822). By analyzing this result, Table 4.15 showed that the variables making the
biggest contribution to the model are customers perception and religious perspectives then it is followed by demographic factors. Here I can interpret that two independent variables have significant relationship with the dependent variable which is customers confidence towards the products. But for the first independent variable which is demographic factors, there is negative relationship with the customers confidence towards the products. It means that when the demographic factors decrease, so the customers confidence towards the products is increase.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS CHAPTER 5: CONCLUSION AND RECOMMENDATIONS
2011
5.0 CHAPTER DESCRIPTION Following the research result, the last chapter summarizes and concludes the findings of the research. Subsequently, this chapter highlights the problem arise in Islamic banking system. This chapter also presents the implications of the study as well as some recommendations for future research. Lastly, this chapter discusses the whole of the research findings and recommendations in the conclusion section.
5.1 CONCLUSION The operations of Islamic banks are based on Islamic Law which is different in terms of spirit, cultural background and practice from conventional banks. However, both conventional and Islamic banks operate in a globally integrated banking industry which is characterized by strong competition and rapid changes in technology. Since the products provided by both banks are generally undifferentiated, Islamic banks will have to compete on the basis of high quality of products offered to its customers if they want to gain a competitive edge against their rivals. Thus, it can gain customers confidence to attract them in using Islamic banking products. The researcher has concluded from the whole study on the findings and the analysis of the data from the study undertaken. Through the interpretation and finding analysis from the questionnaires, researcher is able to prove the problem statement thus reaching the research objectives thoroughly. Basically, the problem statement was extracted from literature review and being applied to specific problems on customers confidence towards Islamic banking products. 61 | P a g e
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In analyzing customers confidence towards Islamic banking products, this research focuses on demographic factors, religious perspectives and customers perception as the independent variables while customers confidence towards the products as dependent variable. Through this analysis, we will know whether the independent variables have relationship with dependent variable or not. From literature review, researcher discovered that there are lots of variables in determining the selection of Islamic banking products among the customers. These variables were choose to be fitted with customers confidence among the individuals who have use Islamic banking products or not.
5.1.1
Demographic Factors For the first independent variable, the result indicates that the Cronbachs Alpha measure is 0.459. The result shows that this independent variable is range and poor. It can be concluding that this variable is having low reliability and acceptable. The correlation between demographic factors and customers confidence towards the products r = 0.344. It means that it has low correlation and proves to have small relationship between demographic factors and customers confidence towards the products.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 5.1.2 Religious Perspectives
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For the second independent variable, the result indicates that the Cronbachs Alpha measure is 0.915. The result shows that this independent variable is
range and excellent. It can be conclude that this variable is having high reliability and acceptable. From the hypothesis testing, it shows that there is a positive relationship between religious perspectives and customers confidence towards the products. Moreover, from the table, it shows the result of correlation between religious perspectives and customers confidence towards the products is r = 0.570. Looking at the theory from Guilfords, this result is moderate correlation and proves to have substantial relationship between religious perspectives and customers confidence towards the products.
5.1.3
Customers Perception For the third independent variable, the result indicates that the Cronbachs Alpha measure is 0.696. The result shows that this independent variable is range and moderate. It can be concluding that this variable is having high reliability and acceptable. Moreover, from the table, it shows the result of relationship between customers perception and customers confidence towards the products is r = 0.783. This means that, between customers perception and customers confidence towards the products has high correlation and proves to have marked relationship.
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From the hypothesis testing, there are two independent variable which religious perspectives and customers perception are accepted as the factors of customers confidence towards the products. These independent variables have a positive relationship with the dependent variable where customers perception has strong relationship with the dependent variable (customers confidence towards the products) at significant level below 0.05 followed by religious perspectives. T The other independent variable which demographic factors are rejected as the factors of customers confidence towards the products since the significant level above 0.05. From these findings there are several recommendations that appropriate to Islamic banking in order to gain customers confidence in using Islamic banking products.
5.2 RECOMMENDATIONS
5.2.1 Islamic Banking in Malaysia Currently, Malaysia is one of the leading countries in Islamic banking. Intelligent solutions for the challenges in the industry are essential to entail its prestigious position in the Islamic banking world. Product innovation is much needed to fulfill the customers confidence to deal with Islamic banking products. Skilled and knowledgeable staffs are also necessary to assist customers in making the right choice of products as well as for the operation of the Islamic banking system. Due to the lack of public awareness of Islamic bank products, bankers should promote these products intensively via advertising and effective marketing strategies to increase the market share.
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Besides that, Islamic banking need is to have a good system as it is the main criterion for efficiency. At the early stages, there were a lot of problems, especially on the technical side where the current conventional system did not suit Islamic banking transactions. This in turn contributed to delays in coming up with certain products. The bank needs to have the system before the products are offered to customers for the efficiency of the business. Information Technology (IT) plays an important role in the advancement of Islamic banking. There is a need to provide more innovative products IT.
The good prospects for Islamic banking in Malaysia are due to the dual system where Islamic banks use the conventional base to market all their products. These Islamic banks do not have to grow from the roots by building up more branches. The image of conventional banking is already an advantage for local Islamic banks. There is a need to be more innovative and develop new products, not just duplicate conventional based products. Islamic banks need to develop appropriate products to meet the changing needs of customers.
Islamic banking can grow like conventional banking because all the local banks and foreign based banks market conventional and Islamic banking together. Islamic banks do not stand alone but they are using the conventional base to market all the products. Thus, these Islamic banks do not have to grow from the foundation by building up branches.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 5.2.2 Government and BNM
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In terms of regulation and policy, BNM and the government need to supports Islamic banking industry. The central bank or BNM was very helpful in setting up Islamic banking. Therefore, Islamic banking managed to overcome the obstacles with the moral support and help from BNM and government. When government involved indirectly in giving support, Islamic banking will gain customers confidence to use their products offered. 5.2.3 Customers The individual customers must have knowledge and good perception towards Islamic banking system. Although they are not familiar with Islamic banking products, but the awareness from them are important in order to develop Islamic banking industry. Customers also must give support to encourage Islamic banking provide better products that can compete with the conventional bank. Without support from customers itself, Islamic banking industry are not growing rapidly in this country. 5.2.4 Future Researcher For future research, researcher would like to suggest to other researchers who have interest to explore and go deeper into this domain to carefully design the questionnaire and add more questions so that it can be more reliable. Besides, for researchers who want to continue this research or have interest to do the same research, researcher suggests that they should study more on the demographic factors as in this it is found that there is no significant relationship and they should come out with others several independent variables, which may lead to the customers confidence towards the products. Besides that, it is also suggested that future researchers take a long period of study in order to get more reliable result. 66 | P a g e
FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS REFERENCES
2011
JOURNALS
H. Sudin, A. Norafifah. (1994), International Journal of Bank Marketing, Journal of Bank Patronage Factors of Muslim and Non-Muslim Customers, 12 (1), 32-40.
A. Naziruddin. (2008), AlHosn University, Abu Dhabi, United Arab Emirates, Journal of Efficiency and competition of Islamic banking in Malaysia, 24 (1), 28-48.
O. Ismah. (2009), Faculty of Business Management, Universiti Teknologi MARA, Journal of Customer Satisfaction in Malaysian Islamic Banking, 1 (1), 197-202.
H. Ahasanul, O. Jamil, Z.Ahmad. (2009), Department of Business Administration, Faculty of Economics and Management Sciences, Journal of Factors Influence Selection of Islamic Banking: A Study on Malaysian Customer Preferences, 6 (5), 922-928.
H. Ahasanul. (2010), Faculty of Economics and Management Sciences International Islamic University Malaysia, Journal of Islamic Banking in Malaysia: A Study of Attitudinal Differences of Malaysian Customers, 7-18.
A. Saiful, A. Mohd. (2003), Department of Economics, International Islamic University Malaysia, Kuala Lumpur, Malaysia, Journal of Performance of Islamic and Mainstream Banks in Malaysia, 30 (12), 1249-1265.
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W. Asyraf, I. Nurdianawati (2007), International Islamic University Malaysia, Kuala Lumpur, Malaysia, Journal of Why Do Malaysian Customers Patronise Islamic Banks, 25 (3), 142-160.
S. Hamim, A. Naziruddin, M. Syed. (2006), Journal of Efficiency of Islamic Banking in Malaysia: A Stochastic Frontier Approach, 27 (2), 37-70.
Y. Remali, W. Rodney. (2005), International Association for Islamic Economics, Journal of An Econometric Analysis of Conventional and Islamic Bank Deposits in Malaysia, 9 (1), 31-52.
E. M. Shahid. (2001), University of Brunei Darussalam/National University of Singapore, Journal of Islamic Banking in Brunei Darussalam, 28 (4), 314-337.
H.Kassim Salina. (2010), Department of Economics, Kulliyyah of Economics and Management Sciences, Journal of Impact of Financial Shocks on Islamic Banks, 3 (4), 291-305.
INTERNET RESOURCES Confidence. (2011, January 25). Retrieved February 1, 2011, from Wikipedia: http://en.wikipedia.org/wiki/Confidence
Demographics. (2011, January 25). Retrieved February 1, 2011, from Wikipedia: http://en.wikipedia.org/wiki/Demographics
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS Islamic Banking & Takaful. (2010). Retrieved from Bank Negara Malaysia: http://www.bnm.gov.my/microsites/financial/0204_ib_takaful.htm
2011
Perception. (2011, January 27). Retrieved February 1, 2011, from Wikipedia: http://en.wikipedia.org/wiki/Perception
Religion. (2011, January 26). Retrieved February 1, 2011, from Wikipedia: http://en.wikipedia.org/wiki/Religion
BOOKS
Rozieana. (2009). Manual Research Methodology. Malaysia: UiTM.
Sekaran, U. (2006). Research Methodology.
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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS CHAPTER 1: INTRODUCTION

FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS

FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS

FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS

1.4 THEORETICAL FRAMEWORK

Customers confidence towards the product

Independent Variable (IV) Dependent Variable (DV)

1.5 RESEARCH QUESTIONS AND HYPOTHESIS OF THE STUDY

1.6 SIGNIFICANT OF THE STUDY

1.7 DEFINITION OF TERMS

1.1 Overview of Islamic Banking

FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS

2.2 Customers confidence towards the products

FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS

FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS

2.5 Customers Perception

FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS

3.0 Chapter Description

3.3 Sampling Technique

3.4 Data Analysis

30 25 20 15 10 5 0 Male Female Male Female

TABLE 4.3 RACE

30 25 20 15 10 5 0 Malay Chinese Indian Malay Chinese Indian

FIGURE 4.3 RACE

35 30 25 20 15 10 5 0 Single Married Single Married

SPM STPM Diploma Degree Master

Student Businessman Government Employee Private Sector Employee

Alpha Coefficient Range < .6 .6 to < .7 .7 to < .8 .8 to < .9 .9>

Strength of Association Poor Moderate Good Very Good Excellent

RELIABILITY ANALYSIS FOR DEMOGRAPHIC FACTORS

TABLE 4.10 RELIABILITY ANALYSIS FOR RELIGIOUS PERSPECTIVES

TABLE 4.11 RELIABILITY ANALYSIS FOR RELIGIOUS PERSPECTIVES

FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS

Table 4.13 Correlation Coefficient Tests on Hypothesis

Degree of significant > 0.05 = Null hypothesis (H0) is accepted)

In this study, the result is:

0.007 > 0.05 = Ha is rejected

It is clearly stated that:

Degree of significant < 0.05 = Null hypothesis (H0) is rejected)

In this study, the result is:

0.000 < 0.05 = Ha is accepted

Degree of significant < 0.05 = Null hypothesis (H0) is rejected)

In this study, the result is:

0.00 < 0.05 = Ha is accepted

ANOVAb Sum of Squares Regression Residual Total 62.839 31.600 94.439

Mean Square 20.946 .687

Regression Analysis Summary of the Research Model

F = R2 / (k 1) (1 R2) / (n k) = 0.665 / (4 1) (1 0.665) / (50 4) = 30.442

Df numerator = K 1 =41 =3 Df denumerator = N K = 50 3 = 47

F - Statistics Vs F Table 30.442 > 2.8387

a. Dependent Variable: Customers' Confidence Towards The Products

Table 4.15 Standardized Coefficients of the Research Model 53 | P a g e

0.105 = 2.514 > 2.013

3) Customers Perception : t = 0.822 0

0.122 = 6.738 > 2.013

4.4 REGRESSION ANALYSIS

FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS

Adjusted R Model 1 R .816a R Square .665 Square .644

Std. Error of the Estimate .82883

Mean Square 20.946 .687

Regression Analysis Summary of the Research Model

B .522 -.550 .264 .822

Std. Error .664 .368 .105 .122