In the repercussions of the recent years‟ financial crisis, a question mark regarding trust for the conventional banking system has arisen. During this period several financial markets have experienced a large downturn in customer trust, and this still constitutes a huge threat to the industry. Banking customers worldwide have realised the value that they offer the banks and have therefore begun to demand a more loyal relationship from the companies. Although the customers are still relatively reluctant to switching banks, they are believed to have come to a point where the effort of a change can be worthwhile in the search for a more loyal and safe alternative (Ernst & Young 2011). In addition, an increasing interest for sustainable and ethical financial products has been noticed recently. In general, it is becoming more important for consumers to find financial products that offer both revenues and the opportunity to make a good deed, and the meaning of the investment is becoming more valuable than the actual profit (Svenska Dagbladet 2010). Furthermore, with the ongoing globalization there is an increase in the spread and exchange of information, cultures and values around the globe. This leads to people having a more open minded attitude towards new business methods and alternative ways of doing business. In this changing environment, companies that provide options that go beyond the traditional easily become rooted onto new markets (Dicken 2007). As in our general knowledge, Islamic banks have become one of the most popular banking systems nowadays. It was claimed that today the global Islamic banking industry is worth more than USD 1 trillion in asset terms and experiencing a growth rate of 10 to 15% per annum (Fenton, 2009; Sole, 2007). It has emerged as one of the fastest growing industries. The role and functions of the banking system in a contemporary economy is of great significance to the development process and thus, it is often considered as the heart of every prosperous economy (Fakhrul-Ahsan, 1998; & Usman, 2003). Islamic banking also has spread all over the world with wide acceptance received by both Muslims and non-Muslims (Dusuki & Abdullah, 2007). Until September 2012, Malaysia has sixteen Islamic banks which comprises of nine local Islamic banks and seven foreign Islamic banks, six international Islamic banks and fifteen participating banks in Islamic banking scheme includes Development Financial Institutions (DFIs), Investment banks and commercial banks that offering Islamic banking services (Bank Negara Malaysia, 2012). All of the above can be seen as some of the reasons to why Islamic banking, an almost unknown financial system 30 years ago, has developed and become a unique and growing segment in the international banking market (Elgar 2007). Since that, the emergence of Islamic banks must have something special to relate with perception and perspective among Malaysian and the specialty of Islamic banks itself. Throughout the development of Islamic banking, the system has been adapted differently between countries. Malaysia, a special case in terms of being a pioneer within Islamic finance, has been able to develop a dual system, whereby Islamic and conventional banking can co-exist. Many of us may be quite new to the system of Islamic banks therefore we need to know why people choose Islamic bank as their number one bank. The thoughts and perceptions of consumers need to be known to improve the quality of our current Islamic banks.
Problem statement
Changes in the Malaysian financial landscape and the introduction of Islamic banking has generated new dimension and phenomenal in banking sector. Such scenario had also led to the changes in the customer's taste and demand for better and high quality banking services. This research was conducted to find out what is the perception of consumers toward Islamic banks.
Research question
1) What is the perception of consumers toward Islamic banks?
2) What do you understand about Islamic banking products?
3) Do you accept Islamic banking? And if you do, what influence your acceptance?
Research objective
To investigate the perception of consumers toward Islamic bank.
To find out the knowledge and understanding of Malaysians towards Islamic banking.
To recognize the factors influencing the decision to choose Islamic banking.
Theoretical framework
Knowledge and understanding
Perception of consumers towards Islamic banking
Factors influencing the decision to choose Islamic banking
Scope of study
This study focuses on the perception of consumers towards Islamic banking. We will be conducting our studies on both muslim and non-muslim in Malaysia with different ethnic background. Unfortunately it will be impossible for us to do the study on the entire Malaysia so we have limited our study only in Shah Alam.
Significant of study
This study will be a significant endeavor in promoting Islamic banking and give information about the level of awareness that Malaysian have in relation to the culture of Islamic banking, the attitude of Malaysian towards Islamic banking and factors for bank selection criteria by Malaysian. This study is important because these findings will be beneficial to a variety of parties including Islamic banking provider, regulators, employees of the Islamic banks, and customer and encourage them to look into the current problems and challenges.
To staff of Islamic banking; there is a need of an experienced and Shariah knowledgeable staff at an early stage, especially in the development stage. Moreover, Islamic banking staff lack training and there is a need for Islamic banks and BNM to explore the setup of an Islamic Training Centre for bank related staff.
Customer awareness: To help the Islamic banking providers to understand customer behavior and the criteria in the bank selection process. The customers choose Islamic banking not only because of religious based decisions but more because of service quality and convenience. Islamic bankers need to increase their service quality and image.
Limitation of study
There are several limitations in doing this study. Firstly, the research is to investigate the perception of Malaysians towards Islamic banking. So the result that we get may not be the most accurate result because it is impossible to do the study sample of all Malaysian. It is because the perspective of these respondents does not mean that it is the same with the remaining population. Secondly, the different backgrounds of Malaysian in different research will show a different result. This will make it hard to be analyzed. The other limitation along the research is time constraints. Each student in our group has different time and life schedule and these constraints make it hard for us to hold discussions in order to complete this proposal.
Literature Review
Knowledge and understanding towards Islamic banking
Perception is the act of discerning, realizing, and becoming aware of through the senses (Albrecht, 2003). Mokhlis, Hazimah., & Salleh (2008) has also found that pricing and convenience were the main reasons for selecting a new bank or switching banks. Maryland. Gerrad and Cunningham (1997) also found that profit or interest rate served as a reason for people maintaining their relationship with Islamic banks. Rashid et al. (2008) said "higher demand of Islamic banking products and services requires existence of superior quality in service, efficiency in system, strict compliance to Islamic Shari`ah and satisfactory community service through job creation and ensuring consistency in service provisions." Other than that majority of consumer perceived religion and economics as the patronage factors in Islamic Bank selection by customers. Ahmad, 2000; Iqbal and Molyneux,2005) said "Islamic banking is 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)". Research by Ahmad and Haron (2002) for instance, shows that the majority emphasize religious as well as other factors like cost/benefit, service delivery, reputation and location in patronizing Islamic banks.
influencing decision towards accepting Islamic banks
The customer perception is often identified by their level of satisfaction towards particular products or services. Erol and El-Bdour (1989) said ''the most important criteria by customers while selecting Islamic Banks were the provision of fast and efficient services, banks reputation and image, and confidentiality.'' Haron et al. (1994) have found out three important criteria perceived by Muslims in selecting Islamic banks which is provision of fast and efficient service, the speed of transaction, and the friendly bank personnel. There are also other factors influencing consumer's perception towards choosing banks. Gerrerd and Cunningham (1997) considered "parking space" and "interior facilities" as important issues related to customer satisfaction. Naser et al. (1999) said "among the most important service features used to measure customer satisfaction are convenience, competitiveness and location of service provider.'' Investigating services used and factors considered important in bank selection on 140 Canadian households, Laroche et al. (1986) found that "friendliness of staff" was the primary choice determinant followed by "hours of operations", "size of waiting lines", "convenience of location", "efficiency of personnel", "speed of processing items", "parking facilities and accessibility", "availability of credit", "bilingualism of staff", and "interest on savings". In addition, it was found that convenience of location to college and parental advice and influence were the predominant factors having a bearing on students' choice of bank said by Lewis (1982).
Research methodology
Data collection(sabri)
Sampling frame(botak)
Variables and measurement(evra)
Research instrument
For the purpose of depth and familiarity with the subject matter, this study utilized secondary data for the literature review. Thereafter, primary data were collected through questionnaire survey among consumers of Islamic banking in Shah Alam. Basically, the questionnaire comprised of four sections. The first section elicited information about the demographic characteristics of the respondents while section two elicited responses about the knowledge and awareness of Islamic Banks. The third section covered issues on the likely perceived problems and challenges to confront Islamic Banks in Malaysia. The fourth section elicited information on the perceived role expected of the Bank Negara Malaysia in the establishment and operation of Islamic Banks. The questionnaire utilized Likert-scale with a seven-point options and the rating scale adopted i.e. 1-7 allowed respondents to choose within the range of Strongly Disagree to Strongly Agree. Hence, Strongly Disagree is represented by 1, Disagree (2), Slightly Disagree (3), Indifferent (4), Slightly Agree (5), Agree (6) and Strongly Agree (7). The questionnaire contents were adapted from many similar perceptions studies on IBs and other related studies like Ahmad (2006), Ahmad et al. (2010) and Bley and Kuehn (2004).
Data analysis (descriptive study) (hypothesis study)(lado)
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