The adoption of Islamic banking services in Malaysia

Abstract

Purpose-The purpose of this paper is to examine the level of understanding of Islamic banking concepts and the factors that influence Islamic banking adoption in Malaysia, based on Rogers' (1983; 2003) Diffusion of Innovation. Specifically, the impact of perceived attributes and other variables (understanding, consumer innovativeness and bank personnel's professionalism) on Islamic banking adoption is examined. Design/methodology/approach-A quantitative approach using a sample of 200 working MBA students in a leading public university in Malaysia was used. The instrument used was a self-administered questionnaire survey. Findings-The level of understanding of various Islamic banking concepts is below average. A logistic regression reveals that the understanding of Islamic banking concepts and perceived advantage significantly influences the adoption of Islamic banking services. Research limitations/implications-The small sample size of 200 individuals may render the findings ungeneralizable. Future studies may use a larger sample from across Malaysia and incorporate other independent variables, such as religiosity and Islamic financial literacy. Practical implications-The Malaysian government can provide tax incentives and conduct educational roadshows on Islamic banking. Educating prospective consumers on the advantages of Islamic banking as opposed to conventional banking would provide more objective benefits that would boost the adoption of Islamic banking. Originality/value-The results of this paper will be useful for Islamic financial institutions to increase their marketing and promotional efforts to keep pace with stiff competition within the industry.

Determinants of islamic banking adoption across different religious groups in Ghana: A panoptic perspective

“…The study found that KNW had significant positive effects on African Traditional (β= 0.50) followed by the Muslim (β= 0.25) and the least Christians (β= 0.19) sub-groups attitude towards IB. these results corroborate prior studies that Knowledge has influence on attitude towards IB (Mariadas et al, 2017;Mbawuni & Nimako, 2017;Nurdin, 2017;Mahdzan et al (2015;Abuazom et al, 2013;Abuazom et al, 2013) revealed in their study that the Islamic Bank embarks on knowledge sharing among employees and other motivations like promotion and reward system. Islamic Banks encourage their employees to share knowledge and information in order to reduce risk (risk-weighted assets) of the capital adequacy ratio (CAR).…”

“…Knowledge on IB is regarded as one of the key determinants of IB adoption (Mariadas et al, 2017;Nurdin, 2017;Mahdzan et al (2015;Abuazom et al, 2013;Abuazom et al, 2013) revealed in their study that the Islamic Bank embarks on knowledge sharing among employees and other motivations like promotion and reward system. Islamic Banks encourage their employees to share knowledge and information in order to reduce risk (risk-weighted assets) of the capital adequacy ratio (CAR).…”

“…Two main factors namely consumers knowledge and consumer satisfaction are revealed in the study. Study conducted in Malaysia, by Mahdzan et al (2015), revealed the level of understanding of Islamic banking concept as the influential factor in the use of Islamic banks in the country. The study indicated low level of understanding of Islamic banking.…”

Service Quality from Customer Perception: Evidence from Carter Model on Bank Islam Brunei Darussalam (BIBD)

“…The study further discovered the age ranges from 19 to 50 for most of the bank customers. It is also consistent with literature as studies have shown that the age of various bank customers range from 21 to 50 representing most of bank customers are Generation X (Mahdzan et al, 2017;Khattak & Rehman, 2010).…”

“…The model was modified by introducing two unique dimensions of social responsibility and innovation each dimension contain one item. Social responsibility and innovation were included in the model due to significant role of these dimensions in the formation of exceptional service quality (Mahdzan, Zainudin, & Au, 2017). Each item was provided with five scale likert options ranging from 1 (strongly disagree), 2 (disagree), 3 (neutral), 4 (agree) to 5 (strongly agree).…”