Bai` `inah refers to trading whereby the seller sells his assets to the buyer at an agreed selling price to be paid by the buyer at a later date. After that, the buyer immediately sells back the assets to the seller at a cash price, lower than the agreed selling price.
The majority of Islamic jurists state that there are three forms of trading categorised as bai` `inah, whereby it can be concluded that all the assets sold come from the financier. The financier will sell a product to the buyer at an agreed price to be paid later that is in instalment. The financier then immediately buys back the asset at a cash price lower than the deferred selling price.
They were different views of past Islamic jurist on the hukm towards bai inah. Majority of the jurist give their opinion that bai inah is not permissible because it is hilah towards riba or taking profit. Hanafi Mazhab gives their opinion that bai` `inah was permissible only if it involves a third party, which involved intermediary, the seller (creditor) and buyer (debtor). The Maliki and Hanbali Mazhab, on the other hand, rejected bai` `inah and considered it invalid. Their opinion was based on the principle of sadd zari'ah that aims to prevent practices that can lead to forbidden acts such as, in this case, riba. It is stated in the hadith, that is the dialogue between Aishah and the slave Zaid bin al-Arqam which showed the prohibition of bai` `inah and Prophet s.a.w also already warned that those who practised bai` `inah would suffer scorn. This evidence and fact make the majority of the Islamic jurist used as a basis for their opinion. It is different view from Syafi`i and Zahiri Mazhab, they viewed bai ` `inah as permissible. They criticised that the hadith used by majority Islamic jurist was weak and cannot be used as the basis for the hukm.
Bai inah financing mechanisms are as follows:
The seller sells a product to the buyer at a higher price on a deferred payment basis. After delivery to the buyer, the seller buys back the product in cash at a much lower price.
If a third party is Involved, The seller sells a product that is delivered later on for, say RM 200. After deliver it ti the buyer, the buyer then sells it to a third party for a lower price, say RM 100. The third party then resells it to the first party (original owner) for RM 100. This means the original owner obtained RM 100 from the trade. A man wants to borrow, say RM100. The creditor refuses to lend using the qardh principle. Instead he says: "I am not giving you qardh (loan) but i will sell you this shirt by deferred payment for RM 100 although the market price RM 70". This is to enable the buyer to sell it for RM70 at the market. When the buyer agrees, the trade is transacted. What happens is the shirt owner makes a profit of RM30 from the transaction because the buyer will pay him a deferred payment RM 100.
1.1 BACKGROUND OF THE STUDY
In this study, it is to study about customer perception towards bai inah financing in Sabah Credit Corporation. This study is important in line with the obvious cross-cultural and religious differences between these two key customer segments, Muslim and non-Muslims. It is to know the perception towards Islamic banking products among customer whether it's bring satisfaction to customer or just to gain profit based on hilah.
1.2 PROBLEM STATEMENT
This type of financing has different profit rates for the payment period made by the customer. For 1 to 15 years, Sabah Credit Corporation only charges 4.82% and 15 to 20 years is only 5.2%. The financing applied by the borrower will determine the profit gained by Sabah Credit Corporation. The service quality given by Sabah Credit is one of the factors towards positive feedback by customer, if the quality given is poor there will be no prospects customer coming in Sabah Credit. So in this study it wills studies about the customer perception towards bai inah financing in Sabah Credit in term of its beneficial to the borrowers and to improve the service quality of Sabah Credit as well.
1.4 OBJECTIVE OF THE STUDY
The main goal of the study is to identify the customer perception towards bai inah financing that rendered by Sabah Credit Corporation and to get any suggestion in improving the process and to add customer's knowledge about Islamic finance product. This is because Islamic finance is still new being introduced in the market and not all people know about Islamic product. So this is the opportunity to make a clear view for customer in Sabah Credit especially Muslim people towards Islamic Finance product.
1.5 SIGNIFICANT OF STUDY
The purpose of this research, it is to identify and study about customer perception towards bai inah financing in Sabah Credit. This is because Sabah Credit Corporation just introduce their Islamic Product in December 2010 and seek any changes to improve the financing better than before as well as expanding the knowledge about Islamic banking .
The borrower especially will learn the process of the Islamic executive financing that is bai inah financing more details will be able to and identify the benefits that they are going to get by applying this type of financing.
1.6 SCOPE OF STUDY
The study will focus on customer perception towards bai inah financing offered by Sabah Credit Corporation. The sample will be come from the borrower that works for Federal, State and also from the government link companies (GLC) and it will be situated in Donggongon Penampang, the Headquarters of Sabah Credit Corporation.
1.7 LIMITATIONS
In doing this research there are many limitations involved such as:
Time constraint
In this research the time is limited because the respondent or borrower is tight with his or her schedule.
Data constraint
The availability of data on Islamic Finance is very limited due to the new introduction of Islamic banking and Finance in the market.
Financial constraint.
This is because from Penampang to Sepanggar is too far, Petrol is expensive.
1.8 DEFINITION OF TERMS
Hilah: Trick or other solution. (stated in oxford dictionary of Islam)
Perception: the ability to see or awareness, to understand clearly. (oxford English dictionary)
CHAPTER 2
LITERATURE REVIEW
2.1 PREVIOUS STUDY
Various empirical research using different methodologies and approaches has been applied in various parts of the world to examine the perceptions of customer towards Islamic banking. Similarly, there are only a few published works that related to the Islamic financing that is in conventional perception.
Perception of customer towards the product that offered is linked with customer satisfaction towards the product and services given. When customers satisfy, there will be positive perception about the services and make customer become loyal. It is stated in Anderson and Mittal (2000) put forward the chain reaction of customer satisfaction in which customer satisfaction can be boosted by improving the attributes of offered products and services. Increased customer satisfaction is presumed to lead to greater customer retention and loyalty, eventually maximizing profitability.
This factor being supported by Rosenblatt, et al. (1988) sampled 423 Canadian corporate treasury personnel in their study to determine the responsible person(s) in selecting bank(s) for their organization, factors attributed to the selection of the bank(s), and perceptions of these personnel on the bank's service quality. They found that almost half of these corporate treasurers were solely responsible in the selection of the bank(s). The two factors that influenced their decision-making were banks with better branching networks and which offer quality services. Half of the respondents in this survey also preferred the bank to assign special officer who had the most knowledge about the customers' business operations. The corporate treasurers were also more concerned about quality products and services than innovative products.
Turnbull and Gibbs also make a study towards the factor. The objectives of their study were to find factors that were considered important among corporate customers in selecting their banks and to find information whether companies have single or split banking relationship. The finding generally showed that the corporate customers perceived that quality of service was the most important factor in establishing a relationship. Other influential factors were quality of staff, bank manager's attitude, and price of service. Although very large companies considered quality of service as the most important factor, both price and quality of staff were equally important. Split banking relationship practice was common among the corporate customers.
According to Muslim religion, it is to focus for afterlife rather only live in the world. It's being support by Metawa and Almossawi (1998) focused their study to customers of Bahrain Islamic Bank and Faisal Islamic Bank of Bahrain. They found that customers of these two Islamic banks perceived Islamic principle as the most important factor while selecting Islamic banks. The second important factor was reward extended by the banks, followed by influence of family and friends, and convenient location. Other than that, socio-demographic factors such as age, income and education were important criteria in bank selection. This finding indicating religion as the most important reason for customers patronizing Islamic banks contradict those findings by Haron et al. (1994), and Gerrard and Cunningham (1997).
In Chan and Ma's (1990) study in Hong Kong aimed at understanding corporate customer's behaviour on split-banking, bank-switching, the factors that attribute to patronage, level of awareness, and the usage of banking product and services. They found that corporate customers preferred to use big and reputable banks, and split banking. Corporate customers would only switch their banks if the new bank were able to show that the quality of its products and services were more superior to others'. In their study it is based on strength marketing style, company that have better marketing will get many customers.
The earliest patronage studies on Islamic banking that using both Islamic and conventional bank customers is by the studies of Erol and El Bdour (1989) and Erol et al. (1990) they found that customers who patronized Islamic banks perceived that the three most important criteria in bank selection were the provision of a fast and efficient service, bank's reputation and image, and confidentiality.
A study conduct by Haron et al. (1994) sought to establish the selection criteria used by Muslim customers in Malaysia when selecting their banks. The three most important criteria perceived by Muslims in Malaysia were the provision of a fast and efficient service, the speed of transaction, and friendly bank personnel. Another important contribution from this study was the potentiality of individual customers in patronizing an Islamic bank when they had knowledge of this new system. 80 per cent of Muslim and 53 percent of non-Muslim respondents indicated that they would consider establishing a relationship with an Islamic bank if they had substantial understanding of its operations.
Public acceptance has played an important component in power plant development. Thus, public opinion, perception and satisfaction are the often key motivating factor for successful acceptance (Choi and Lee, 1995; Bureekul, 2000; Huang et al, 2009).
2.2 THEORETICAL FRAMEWORK
INDEPENDENT VARIABLE
APPLICATION
DEPENDENT VARIABLE
CUSTOMER PERCEIVED TOWARDS BAI INAH FINANCING IN SABAH CREDIT CORPORATION
PROCESS
PROFIT RATE
2.2.1 INDEPENDENT VARIABLE
Application
It is regarding the quality of services that given to the customer and all applicant information is confidential. The management or flow of the financing is structured from receiving the applicant form till the application is approved.
Process
In this second variable, process is regarding the tenor and service given by Sabah Credit towards their borrower. Usually, one applicant will need to wait for 24 hours that is 3 days working hours for processing its application and now Sabah Credit is trying to make the process for only in 1 day for only a few hours of processing. Friendly unit of customer service makes people interested and make a positive perception towards Sabah Credit.
Profit rate
Sabah Credit Corporation only charges profit 4.85% for bai inah Financing. The minimum charges profit interest towards customer makes people attraction and perceived a positive comment towards Sabah Credit.
CHAPTER 3
METHODOLOGY AND DATA
3.0 INTRODUCTION
After gathering the information from introduction and literature review, next is the methodology and data that need to discover deeply to get the right flow. So, the objective of this study is to get the accurate information from the real sources. To achieve this, it needs to know the study very well and explore the appropriate method for the research.
3.1 DATA COLLECTION
There are two types of data collection which are primary and secondary data. Primary data is data that collected on firsthand for subsequent analysis meanwhile secondary data is data that being gathered from the past researchers. In this study the sources that gain is from the primary and secondary data. In primary data, questionnaire will be design in order to guide into the study. Interview will be conduct because it is more efficient to gather information. This is because it is a face to face interaction between respondent and researcher.
Secondary data originally grabbed from journal, annual report, magazine and internal sources. All this sources gathered in order to expand knowledge regarding topic that will be studied. These secondary data also helps and can be used as literature review to support this study.
3.2 VARIABLES AND MEASUREMENT
There are four types of variables which are dependent, independent, moderating and intervening. For this study, it is only used dependent and independent variable which are the main using like others research.
3.2.1 Dependent Variable
The dependent variable for this study is the customer perception towards bai inah financing in Sabah Credit Corporation.
3.2.2 Independent Variable
The independent variable for this research is application, process, profit interest, Islamic principle.
TARGET POPULATION AND SAMPLE SIZE
Target populations
The target population are based on the borrowers who apply for the loan especially working in state or in the federal sector and also people who are working with the government link company (GLC).
Sample size
Sample size refers to the number of respondents in this study and is considered as representatives of the total population of the respondents which will be analyze and be measure in this study. The sampling size that will be used by researcher is 150 respondents. Why I choose only 150 respondents, this is because following the rule of thumb, sample size between 30 and 500 could be effective, but it depends on the type of sampling design used and the research question investigated. ( Uma Sekaran, Fourth Edition)
DATA ANALYSIS PROCEDURE
The coded answer data from the questionnaire that been completed by the respondents will be collected, analyzed and measure by using SPSS (Statistical Package Social Science). In analyzing the data, preliminary analysis and detail analysis will be used.
Preliminary analysis
The preliminary analysis is based on the distribution of demographic factors of the respondents, which includes gender, age, marital status, race, occupation and etc. This will be used in the method in order to organize the data into relevant types of classes.
Detail analysis
Detail analysis will be based on the development of the program will be done and to develop the knowledge on what the perception of the customer.
Cross tabulation
Cross tabulation is a statically technique that describes two or more variables simultaneously and results in tables that reflect the joint distributional of two or more variables that have a limited number of categories or distinct values (Malhotra 1999). It will help us to understand how one variable such as respondent's demographic information relates to the one of the question section customer perception towards bai-inah financing.
Hypotheses statement
Hypothesis can be defined as a logically conjectured relationship between variables (either one or more variables) that convey in the form of a testable statement. So, to see either each variable have a significant, it is hypothesis that:
Hypothesis 1
Ho : There is no relationship between application and customer perception towards Bai-Inah Financing.
H1 : There is a relationship between application and customer perception towards Bai-Inah Financing.
Hypothesis 2
Ho : There is no relationship between process and customer perception towards Bai-Inah Financing.
H2 : There is a relationship between process and customer perception towards Bai-Inah Financing.
Hypothesis 3
Ho : There is no relationship between profit interest and customer perception towards Bai-Inah Financing.
H3 : There is a relationship between profit interest and customer perception towards Bai-Inah Financing.
Hypothesis 4
Ho : There is no relationship between Islamic principle and customer perception towards Bai-Inah Financing.
H4 : There is a relationship between Islamic principle and customer perception towards Bai-Inah Financing.
There are null and alternative hypothesis given. Only one hypothesis will be accepted. After the research has done, the final hypothesis will be determined.
PRE TEST/ PILOT STUDY
Before the actual data collection period, a pilot study was conducted to assess the validity of the research instrument. A total of 10 customer involved in the pilot study whose are chosen randomly to those visiting Sabah Credit Corporation.
INSTRUMENTATION
This study used questionnaire as a medium to obtain the data needed. There are three sections in this questionnaire, consisting of:
Backgrounds of Respondent, there are four questions covering from the subjects of gender, age, race, and religion.
Section B: Measurement of services quality using CARTER model (Compliance, Assurance, Reliability, Tangibility, Empathy, and Responsiveness). In this section, customer were asked to indicate their level of satisfaction with quality services on a five point Likert - type scale from '1' to '5' (with '1' meaning "highly dissatisfaction" and '5' meaning "highly satisfied")
Section C: In section C including measurement Level of customer satisfaction
In this section, customer were asked to indicate their level of satisfaction and this section also used five point Likert - type scale from '1' to '5' (with '1' meaning "highly dissatisfaction" and '5' meaning "highly satisfied")
Section D: Recommendation including two question covering recommendation to sustain customer satisfaction.
MEASUREMENT
3.7.1 Nominal Scale
Nominal scale is always used for obtaining personal data such as gender or department in which one work, where grouping of individual or object is useful (Sekaran, 2003). In this research, personal data such as gender, age, race, and religion is obtained.
3.7.2 Likert Scale
Likert-type scale is using ranging from '1' to '5' ('1' meaning "highly dissatisfaction' and '5' meaning "highly satisfied). In this study, researcher use Likert scale to identify the level customer satisfactions towards quality services.
3.7.3 Dichotomous Scale
The dichotomous scale is used to obtain a Yes or No answer (Sekaran, 2003). In this research, researcher used this scale in section C for recommendation question.
