An analysis of the religious, social factors and income’s influence on the decision making in Islamic microfinance schemes

Abstract

Purpose Islamic microfinance schemes are designed and developed with the primary intention of poverty alleviation and fulfillment of the Islamic law requirements. The purpose of this study is to investigate the effects of religiosity, religious leader’s endorsement, social influence and income on the intention to apply for Islamic microfinance among Muslims in Malaysia. Design/methodology/approach This study is based on a public survey to collect primary data from various states in Malaysia. Then, structural equation modelling (SEM) was used to analyse the data set. Findings The results of SEM indicate significant roles for religiosity and religious leader’s endorsement as religion-based factors on intention to apply for microfinance products. Moreover, social influence (peer-pressure) is influential on the financial decision-making process. The authors also examined the moderation effect of gender on these relations and found that females, in comparison to males, tend to be more influenced by religious leader’s endorsement and social influence. On the other hand, male with higher religiosity tend to favour Islamic microfinance products more than females. Originality/value Findings of this study are new in many aspects, most importantly as it sheds light into the role of religiosity and religious leader’s endorsement on the decision-making process in microfinancing services.

A review on literature of Islamic microfinance from 2010-2020: lesson for practitioners and future directions

“… Mansori et al. (2020) prove that religiosity, ulama fatwas , and social environment significantly affect the intention of Muslims in Malaysia in proposing microfinance products.…”

“…Third, in several studies, it is stated that the problem of Shariah and product knowledge does not have a significant effect on customer decisions to use Islamic financial products ( Effendi et al., 2020 ; Rokhman and Abduh, 2019 ). It must be a common concern of both experts and practitioners to always provide education to the public, especially Muslims , about the importance of using Islamic financial services ( Mansori et al., 2020 ; Wijaya et al., 2019 ). Socialization and education can prioritize men as the head of the family because of the above research.…”

“…(2018) Potential for financing under the musharaka contract among microcredit customers in Egypt, particularly in the manufacturing and trade sectors. Mansori et al. (2020) Religiosity, ulama fatwas, and social environment have a significant effect on the intention of Muslims in Malaysia in proposing microfinance products.…”

The Impact Of Individual Cultural Values And Religiosity On Financial Preferences

“…Religion and culture are two basic characteristics of individuals. Religion is a belief system that shows both the right and wrong (Mansori et al, 2020). Culture is also a value that indicates what is right and what is wrong (Akremi & Smaoui, 2015;Ashraf et al, 2016;Ashraf & Arshad, 2017;Donohue, 2020).…”

“…Both affect decisions and behavior. Various studies have investigated the effect of religiosity on financial decisions (Al Balushi et al, 2018;Bhuian et al, 2018;Mansori et al, 2020;Usman et al, 2017).…”