Why do Malaysian customers patronise Islamic banks?

Abstract

Purpose -The purpose of this paper is to examine the main factors that motivate customers to deal with Islamic banks particularly in a dual banking environment, like in the case of Malaysia. A discussion on factors relating to corporate social responsibility initiatives as part of potential customers' banking selection criteria is also included. Design/methodology/approach -The paper presents primary data collected by self-administered questionnaires involving a sample of 750 respondents from four different regions in Malaysia. The Islamic banking criteria ranking as perceived by the respondents are analysed using Friedman Test. To further explore the customers' understanding of the banking criteria, an exploratory factor analysis is employed. Findings -This study reveals that the selection of Islamic banks appears to be predominantly a combination of Islamic and financial reputation and quality service offered by the bank. Other factors perceived to be important include good social responsibility practices, convenience and product price. Practical implications -The empirical evidence of this paper affects two aspects; first, Islamic banks must offer quality services while maintaining its Islamic credential and reputation; second, Islamic banks should also embrace good customers services policies to reap its potential as a strategic tool to achieve competitive advantage, enhance reputation and secure customers allegiance. This research will be of interest to both incumbent and potential entrants into this niche market. Originality/value -The paper reports findings from the first nationwide study carried out in the area of Islamic banking selection criteria.

Attitudes of Customers towards Islamic Banks in Kuwait

“…It confirms that religion is an integrated process of values relative to the holly topics, while religiosity is perceived as the level to which beliefs are practiced by individual Islamic principles. The finding is consistent with the results reached by Dusuki and Abdullah (2007) who stated that Islamic bankers should no longer rely upon marketing strategy of attracting religious customers who might only concern about Islamicity of financial product. Erol and El-Bdour (1989) observed that religious causes are not the only item for inviting customers.…”

“…Ahmad and Haron (2002) found that the major factors behind selecting IBs are religious motives, service charges, bank reputation and location. Dusuki and Abdullah (2007) confirmed that financial reputation and quality service offered by the bank are the main items of selecting IBs. observed that the majority of dealings with Islamic bank are satisfied with the overall service qualities.…”

Comparative Analysis of Customer Satisfaction on Islamic and Conventional Banks in Malaysia

“…The results in Tables 5-6 indicate that customers of both Islamic and conventional banks are highly satisfied with the banks' competent personnel, friendliness and efficiency of service. The findings of this study concur well with those of Dusuki and Abdullah (2007) who found that personnel factor is one of the major factors influencing customers in making decision to patronize a particular bank. Abbas et al (2003) who conducted a study on customers' choice in selecting Islamic financing products reported that incompetence and lack of courtesy of Islamic bank's personnel was the main reason why customers averted Islamic finance.…”

“…Among the common factors used to measure customer satisfaction are service delivery (fast and efficient), convenience (location and parking facilities). A study conducted by Dusuki and Abdullah (2007) on 52 different branches of Islamic banks in Malaysia found that customer satisfaction normally depends on the quality of services provided by Islamic banks. According to Dusuki and Abdullah (2007), the quality of services include factors such as treating customers politely and with respect; staff ability to uphold trust and confidence; effective and efficient in handling transactions; and competency of staff in handling customers banking needs.…”

A Conceptual Model of Literature Review for Family Takaful (Islamic Life Insurance) Demand in Malaysia

“…Various studies (for example, Naser et al, 1999;Almossawi, 2001;Dusuki & Abdullah, 2007;Gait & Worthington, 2008;Mansour et al, 2010) have affirmed that the reputation as of the important contributors in the selection of Islamic banking among customers. It is in line with a takaful study, which found that majority of respondents chose reputation as their reason for choosing takaful operator (Bashir et al, 2011).…”