factors influencing consumer intention towards …
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ASEAN Comparative Education Research Journal on Islam and Civilization (ACER-J) Volume 1(2) September 2017, 17-32. eISSN:2600-769X.
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FACTORS INFLUENCING CONSUMER INTENTION TOWARDS
INVESTMENT ACCOUNT: POST IFSA 2013
Azharul Adha Dzulkarnain
Universiti Teknologi MARA, Shah Alam, Malaysia
Mohammad Firdaus Mohammad Hatta
Universiti Teknologi MARA, Shah Alam, Malaysia
Abstract
This study aims to analyse the factors influencing consumer intention towards investment
account post Islamic Financial Services Act 2013 (IFSA). The establishment of IFSA
reclassify the deposit product to deposit and investment account. During Islamic Banking
Act 1983 (IBA), all monies accepted from depositors considered as deposit product. The
IFSA promote risk sharing instead of risk transfer. However, the investment account
shows the depletion since the introduction of IFSA in 2013. A consumer survey
comprises of 106 Muslim respondents from various ages, occupations, incomes, and
education levels. Religiosity, social influence, and knowledge have been selected as
factors that influence the consumer intention towards investment account. The theoretical
framework constructed based on past studies. This study applied multiple regression
analysis to test the hypothesis statement. The finding indicates the religiosity is the
primary factor influencing the consumer intention, followed by social influence.
However, the knowledge found no significant relationship with consumer intention.
Following these results, the researcher suggest the Islamic bank can look into religiosity
and social factor to strategize the development of products and in marketing activities.
Besides, the BNM and Islamic financial agencies need to endeavor to create positive
attitudes among consumer towards Islamic investment account post IFSA.
Keywords: Influencing; consumer intention; investment; IFSA 2013
Introduction
The Islamic Financial Services Act 2013 (IFSA) differentiates investment account
from Islamic deposit. Investment account is demarcated by the usage of Shariah contracts
(Hamza, 2013). The author further explains that the investment account has non-principal
guarantee feature for investment nature deposit. According to the author, the IFSA offers
adequate legal basis to upkeep the further solidification of investment account process
that provides proper protection to investment account holders (IAH) whilst safeguarding
financial stability of the Islamic banking system. Under the IFSA, the urgency of payment
for investment deposit account upon insolvency of the Islamic financial institution (IFI) is
treated separately from Islamic deposit, in accordance with the rights and obligations
accrued to the IAH (Hamza, 2013).
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As per BNM’s Investment Account Policy, the new classification of the existing
deposit products shall take effect commencing on 1 July 2015. As for profit, the
investment account commensurate with the risk taken. The Islamic bank did not offer the
product if they think the product did not meet the consumer demand. Furthermore, the
demand of consumer will affect the performance of Islamic bank. As consumer intention
represents one of the indicators that explain the performance in an organization, hence
monitoring consumer intention and its related situation become more crucial (Awan &
Azhar, 2014).
As these issues, problem, and information demonstrate, consumer intention towards
investment account post IFSA is the important thing to look in Islamic banking industry.
This study, hence, aims to gauge the consumer intention towards investment account post
IFSA, which should be considered as an important contribution in filling the observed gap
in the literature.
Overview – Investment Account Post IFSA 2013
Islamic Banking and Takaful Department, Bank Negara Malaysia issued the
policy on 14 March 2014 to define the investment account distinguishes from Islamic
deposit, where investment account is defined by the application of Shariah contracts with
non-principal guarantee feature for the purpose of investment. Notwithstanding this, the
IFSA provides adequate legal basis to support the further strengthening of investment
account operation that provides appropriate protection to investment account holders
(IAH) whilst ensuring financial stability of the Islamic financial system. Under the IFSA,
the priority of payment for investment account upon liquidation of the Islamic financial
institution (IFI) is treated separately from Islamic deposit, in accordance with the rights
and obligations accrued to the IAH. Previously during IB 1983, all monies accepted
considered as deposit.
Isa & Zabid (2015) explain further that the IFSA distinguish deposits made for
saving - where the principal is guarantee from those made for investments - where the
principal is not guarantee. It gives regulators greater oversight over Islamic scholars
whose duties and functions are for advising to assure that Islamic financial products are in
compliance with shariah. Bank Negara Malaysia on the website dated 17 May 2016
announces Investment Account is a new banking product offered by Islamic banking
institutions. It provides the opportunity for the customer to invest and share the profits
from Shariah-compliant investment account. Investment account caters for a wide range
of investor risk return preferences that reflect the underlying assets performance.
Investors have the option of placing the funds in investment account that match their risk
appetite.
Thajudeen (2013) stated that the main difference pre and post IFSA is the clear
definition of what constitutes a deposit and what goes into an investment account. The
deposit account is guaranteed, while money that is put into an investment account such as
wakalah or mudharabah is not guaranteed. With IFSA the Profit Equalization Ratio (PER)
and PIDM insurance backing is no longer available for Mudharabah investment accounts.
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Consumer Intention
Generally, the consumer is the king of the market, the one that dominates
the market and the market trends. The consumer plays a very important role in the
demand and supply of economic system for any industry. Md Husin & Abd Rahman
(2016) explained that marketers should identify and understand the potential consumers.
They suggested that the higher individual awareness, knowledge, or exposure will have
positive attitude and intention towards takaful participants. They also added that the
participation in takaful with ease will have a positive impact on intentions as well as
behaviour.
In discussing the consumer intention, it is important to understand the reason how
the intention can affect the performance of an organization. Ghosh (1990) stated that
purchase intention is an effective tool use in predicting purchasing process. Once the
consumers decide to purchase the product in certain store, they will be driven by their
intention. Thu Ha & Gizaw (2014) further explained that the interpretation and decision
making is different among individuals and also influenced by internal consumer intention
(perception, attitude, motivation) and external factors (family roles, peer influence, group
influence). Individuals have exposed to different window of information and varieties of
products; many great deal of choices and options available in the market place impulse
their purchase decision.
The consumer intention has always been discussed extensively and is being studied
by many researchers even today. Previous researchers like Reni & Ahmad (2016) study
the intention to use Islamic banking in Indonesia and found five factors significant
relations which were attitude, subjective norm, religion, knowledge, and pricing. Alam,
Janor, Zanariah, Che Wel, & Ahsan (2012) analyze the religiosity factor to undertake
Islamic Home Financing in Klang Valley by using Theory Planned Behaviour (TPB) as
underlying theory and discovered relationship between religion, subjective norm, attitude,
and perceived behavioral control towards intention. While study by Rani (2014) conclude
the identifying and understanding the factors that influence the customers, brands have
the opportunity to develop a strategy, a marketing message (Unique Value Proposition)
and advertising campaigns more efficient and more in line with the needs and ways of
thinking of the target consumers, a real asset to better meet the needs of its customers, and
increase sales.
Researchers like Ali, Raza, & Puah (2015) further discussed matters surrounding
the Islamic home financing facility which relates to intention using TPB model as
underlying theory. All these studies signify the importance of research on consumer
intention or intention subject.
Religiosity
Ahmed & Haroon (2002) found that religion is an important factor in Islamic
banking. Muslims take Islamic banking as an ethical banking theory because it is interest
free banking and interest is prohibited in Islam that’s why they like Islamic banking
system as compared to conventional banking. They also found that Islamic banking is not
only popular in Muslims even non-Muslims having much information about the Islamic
banking system.
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Research on the factor influence customer to patron Islamic bank by Idris, Naziman,
Januri, Asari, Muhammad, Sabri, & Jusoff (2011) found that the religious value is the
most important factor in selecting Islamic bank followed by other factor. This finding is
in line with the previous studies by Metawa & Almossawi (1998). Other studies with
conclusion that support the religious factor are Gait & Andrew (2008) with finding the
religion factor is the primary motivation for the potential use of Islamic methods of
finance. Akhtar & Mehmood (2016) indicates that the religion factor has strong impact on
perception of customers in Islamic banking by using regression analysis. Research by
Imtiaz, Murtaza, Abaas, & Hayat (2013) conducted in the case of Pakistan support the
religion is primary and main factor of motivation to choose an Islamic banking system.
However, Tara, Irshad, Khan, Yamin, & Rizwan (2014) research in Pakistan focus on
adoption of Islamic banking found that the religion is not the most influential factor to
switch from conventional to Islamic banking. The study found religion as the third
influence factor behind financial teaching of Islam and reputation to adopt Islamic
banking in Pakistan.
There are various past studies that also look at the relationship between religion and
consumer intention towards Islamic banking product or services. Research by Mansor,
Masduki, Zulkarnain, & Aziz (2015) on Muslim’s preferences towards takaful product in
Malaysia investigates the causal relationship between consumer awareness, perception,
and religiosity towards Muslim’s preferences towards takaful product . The results
showed a positive significant between religion and perception towards Muslim’s
preferences. According to research by Abduh, Kassim, & Dahari (2013), the variable of
religion found to be statistically significant in influencing consumer switching intention
due to non-sharia compliance issues.
Social Influence
Sethi & Chawla (2014) reveals the social factors that influence the consumer
buying behavior includes reference groups, immediate family members, relatives, role in
the society, and social status. According to the authors, the family has the very important
role and influence in the buying behavior of the consumers that includes parents,
husband, wife, and children.
With the spirit of helping the economy of the ummah, Muslim consumers tend to
give their support to Muslim products. According to research by Fauzi, Mokhtar, &
Yusoff (2015), the result shown that Muslim products has a significant impact on the
patronage-intention of Muslim consumers. Muslim consumers have shown their social
responsibility in supporting the economics of the ummah and the responsibility to buy
local products (Al-Ajmi, Hussain, & Al-Salleh, 2009).
Social influence also said to have the positive relationship with consumer intention.
The intention can be changes depend on the world around us and how it works. Study by
Echchabi & Azouzi (2015) found that normative belief have a significant influence on
subjective norm, by particular reference to the parents, siblings, peers, and colleagues as
the main reference groups. The finding explains all the TPB have a significant impact on
the intention to adopt Islamic banking services in Tunisia. The study supports the TPB as
an underlying theory towards consumer intention.
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According to Iuliana, Munthiu, & Radulescu (2012), social factors that influence
consumer intention are family, social roles, and statuses. Another study by Echchabi &
Olaniyi (2012) on the patronisation intention of Islamic banks’ customer in Malaysia
market indicated that there is a positive relationship between subjective norm and attitude
on the intention to adopt Islamic banking services. The result showed the normative belief
and motivation to comply have a significant positive influence on the subjective norm.
Based on Haque, Osman, & Ismail (2009) findings, social and religious factor
expected to have great role for influencing customer mind. The impact on customer
preferences can affect the bank performance. Social and religious factor could make
Islamic banking easier and comfortable. Another study by Ali & Hong (2015), have
worked on factor affecting intention to use Islamic personal financing using modified
Theory Reasoned Action (TRA) model. Social influence and attitude found no
relationship with the intention. The significant factors are pricing, religiosity, and
government support.
Knowledge
Past studies like Loo (2010) found that Muslim respondent understanding towards
Islamic banking services influence their perception and attitudes. According to Abbas &
Kadir (2013), the product knowledge among academician and non-academician
specifically in Higher Education Institutions in Pahang are still low. They suggest Islamic
bank to put more effort in promoting the product and services. Harun, Abd Rashid, &
Hamed (2015) research for the products’ knowledge among Islamic banking employees
showed a significance influence relationship between understanding underlying principles
and product knowledge. According to their study, the employees itself should have
product knowledge to attract customer. Moreover, Islamic banking products do not just
focus among the Muslim customer but non-Muslim as well. Another research done by
Obeid & Kaabachi (2016) found that the amount of information as a second important
factor after religiosity to adopt the Islamic banking services. The clear understanding of
Islamic financial concept needed to enhance the motivation to use it.
Mehtab, Zaheer, & Ali (2015) have worked on knowledge, attitudes, and practice
on Islamic banking at Pesahawar, Pakistan by using attitude as mediating variable
between knowledge and practice. The study revealed that there is significant relationship
existed between the knowledge and practice of Islamic banking. However, the individual
must have positive attitude because if they have knowledge but with negative attitude, it
would impact the intention to practice Islamic banking. Other study by Bley & Kuehn
(2004), investigates the relationship between university students’ knowledge of relevant
financial concepts and terms in conventional and Islamic banking, the impact of religion
and language, and other individual variables on preferences for financial services. The
study found that the knowledge is not the strongest factor on preference for Islamic
banking services. The strongest factor is the religiosity.
According to Noonari, Memon, Mangi, Pathan, Khajjak, & Jamali (2015),
consumer need to be facilitating with the understanding of Islamic products and making
the comparability with similar conventional products easier will help consumers make
better choices. This is to ensure the long term growth and prosperity of the Islamic
finance sector. Study by Wahyuni (2012) found that with better knowledge has greater
intention to use the Islamic banks. These results also indicate that the knowledge variable
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must be considered in building a model of the behavior of a selection or use of products,
including Islamic banks.
Theoretical Framework
This study looks at the relationship between consumer intention and the
independent variables towards investment account post IFSA 2013. The three
independent variables selected to measure the dependent variables.
Figure 1: Theoretical framework of relationship between consumer intention and the
independent variables towards investment account post IFSA 2013
Methodology
In this study, the method of data collection is via survey distribution. The objective
of this study is to examine and analyse the factors influencing consumer intention towards
investment account post IFSA. The collection of data is based on primary data. The
participant from IBFIM in house training selected as a target population in order to
complete this research. The quality of the respondent is the reason why there are selected
as a respondent. In order to participate in the survey, respondent should have at least
some financial and banking knowledge. A total of 106 feedbacks were collected during
IBFIM in house training using judgemental sampling.
In term of analysis, this study has conducted a Pearson correlation coefficient
analysis to describe on the strength of association among variables. Subsequently,
Multiple regression analysis were performed to test the hypothesized links among
constructs and to validate the research model. The last question in the survey asks for
respondent opinion. The researcher uses this platform to get the information from
respondent. The answer given constructed to the meaningful group.
Results
The descriptive statistics analysis (see Table 1) on demographic of the
respondents reveal that majority of the respondents in this study consists of 61.3 percent
females and 38.7 percent males. The majority of the respondents are 30 and below with
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41.5%, followed by range group between 31-40 with 37.7%, 41-55 with 17%, and 56 and
above with 3.8%. In addition, occupation status consists of both worker and student,
student, and worker. The highest frequencies are worker with 67%, followed by both
worker and student with 19.8%, and student with 13.2% of the respondents.
Besides that, the highest frequency for occupation industry is banking or financial
services with 47.2%. The second highest is non-banking and financial services with
39.6% of the respondents, followed by not applicable with 13.2%. As for monthly
income, the highest frequency is the respondent who has income around RM 2,000 – RM
3,999 with 32.1%, followed by the respondent who has income RM 6,000 and above with
28.3%, RM 4,000 – RM 5,999 with 24.5%, and below 1,999 with 15.1%. Besides, the
majorities of respondents have academic qualification in pre graduate with 49%, followed
by post graduate with 38.7%, and secondary with 12.3%.
Table 1: Frequencies Distribution (Demographic Profile)
Demographic
Profile Characteristic Frequency
Percentage
(%) Gender Female 65 61.3
Male 41 38.7
Total 106 100.0
Age 30 and below 44 41.5
31-40 40 37.7
41-55 18 17.0
56 and above 4 3.8
Total 106 100.0
Occupation Status Both worker and student 21 19.8
Student 14 13.2
Worker 71 67.0
Total 106 100.0
Occupation Industry Banking or Financial Services 50 47.2
Non-Banking or Financial Services 42 39.6
Not Applicable 14 13.2
Total 106 100.0
Monthly Income Below 1,999 16 15.1
2,000 - 3,999 34 32.1
4,000 - 5,999 26 24.5
Above 6,000 30 28.3
Total 106 100.0
Education Level Post Graduate 41 38.7
Pre Graduate 52 49.0
Secondary 13 12.3
Total 106 100.0
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The association among variables in this study as tabulated in the table 2 within
range 0.5 – 0.7. Thus, the variables have the moderate relationship among them
(Guildford’s). As for direction, all variables have positive relationship, means if one
variable increase, another variable also increase. For example, if religiosity increases by
0.663, the consumer intention also increases by 0.663.
Table 2: Pearson Correlation Analysis among Variables
Variables Religiosity Social
Influence
Knowledge Consumer
Intention
Religiosity 1 0.591 0.586 0.663
Social Influence 0.591 1 0.532 0.654
Knowledge 0.586 0.532 1 0.537
Consumer
Intention
0.663 0.654 0.537 1
The next step is to assess the relationships among constructs incorporated in the
hypothesis conceptual model. Multiple regression analysis is utilised to test the
hypothesis relationships among the constructs as postulated in the research model. The
goal of this analysis is to determine whether the hypothesis model is supported or not
supported.
The result shows (Table 3) the R Square value is 0.555. The R Square is the
proportion of variance in the dependent variable that can be explained by the independent
variables. This indicates that 55.5% changes of dependent variable can be explained by
these three independents variables. Meanwhile, the remaining 44.5% of changes in
dependent variable come from other independent variables that are not included in this
research.
As for ANOVA (Table 4), the analysis conducted to test whether the overall
regression model is a good fit for the data. The table shows that the independent variables
statistically significantly predict the dependent variable, F (3, 102) = 42.328, p < 0.005.
Thus, the regression model is a good fit of the data and the overall model acceptable.
Next, coefficients (Table 5) indicate how much the dependent variable varies with
an independent variable when all other independent variables are held constant. Besides,
the coefficients used to determine the relationship between dependent and independent
variables. From the table above, only two independent variables (religiosity and social
influence) have significance level less than 0.05 which is 0.000, whereas the other
independent variables (knowledge) have significance level more than 0.05 which is 0.151.
The results prove religiosity and social influence have relationship with consumer
intention; however the knowledge did not have relationship with consumer intention. The
beta show religiosity = 0.374 and social influence = 0.367, this means that 1 percent
increase in religiosity and social influence; there is increase 0.374 and 0.367 in consumer
intention.
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Table 3: Model Summary
Model R R Square Adjusted R Square Std. Error of the
Estimate
1 .745a .555 .541 .50564
a. Predictors: (Constant), Knowledge, Social, Religiosity
b. Dependent Variable: Consumer Intention
Table 4 : ANOVAa
Model Sum of
Squares df Mean Square F Sig.
1
Regression 32.466 3 10.822 42.328 .000b
Residual 26.078 102 .256
Total 58.544 105
a. Predictors: (Constant), Knowledge, Social, Religiosity
b. Dependent Variable: Consumer Intention
Table 5 : Coefficientsa
Model Standardized
Coefficients
t Sig.
Beta
1
(Constant) 2.243 .027
Religiosity .374 4.193 .000
Social .367 4.301 .000
Knowledge .123 1.446 .151
a. Dependent Variable: Consumer Intention
The researcher manages to compile the suggestions from respondents to enhance the
understanding towards Islamic deposit and investment account among public. The
feedback compile to the meaningful group as table 6 below:
Table 6: Suggestion from respondent
Strategies to enhance the understanding towards
Islamic deposit and investment account among
public
1. Awareness Campaign
2. Advertisement
3. Seminar and Training
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Table 7: Hypothesis Result
Hypothesis Result Significant
Level
Beta
Hypothesis 1: H1: There is a significant relationship between
religiosity and consumer intention
Supported 0.000 0.374
Hypothesis 2:
H2: There is a significant relationship between
social influence and consumer intention
Supported. 0.000 0.367
Hypothesis 3:
H3: There is a significant relationship between
knowledge and consumer intention
Not Supported. 0.151 0.123
Conclusion and Recommendation
Religiosity and social influence are directly impacted the consumer intention and
the Islamic bank tend to be more strategize since studies have proven that the two factors
can affect the consumer intention. Since the objective of IFSA is to promote risk sharing
instead of risk transfer, the Islamic bank should be more open to develop the new product
based on wakalah or mudharabah contract.
The Islamic bank prefers to develop new product based on commodity murabahah
contract because it can give upfront profit to depositor and PIDM guarantee. The reason
may be to ensure the market share did not loss to conventional market. The researcher
manages to observe the financial statement of Hong Leong Islamic Bank and Alliance
Islamic Bank from 2013 to 2016, found the increase in commodity murabahah account
and the decrease in mudharabah account.
It looks like the strict deposit reclassification by IFSA has made the industry jittery
to Islamic banking concept and marginalized the investment account. Hence, with the
finding from this study, Islamic bank can look into religiosity and social factor to
strategize the development of products and in marketing activities.
The deposit reclassification has impacted the product development of investment
account. This study perhaps will help to give an idea to the BNM and Islamic financial
agencies such as AIBIM and IBFIM to enhance consumer awareness and therefore, some
strategies or policies can be further improved.
Besides, the BNM and Islamic financial agencies need to endeavor to create
positive attitudes among consumer towards Islamic investment account post IFSA. They
can do this by concentrating on the motivational factors that lead to positive or negative
attitudes towards Islamic banking among both Islamic and conventional bank consumers.
This is important as negative attitudes can prevent individuals from opening an account
with an Islamic bank even if they have knowledge of certain Islamic banking principles
(Mehtab, Zaheer, and Ali, 2015). The positive attitudes can influence individuals to select
Islamic products in case of some factor such as religiosity.
Besides, the researcher manages to get some information from respondent regarding
their suggestion to enhance understanding towards Islamic deposit and investment
account post IFSA. The researcher manages to convert suggestions to the meaningful
group which are awareness campaign, advertisement, seminar, and training. The
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respondents want Islamic banking industry to do the awareness campaign related with
Islamic banking product and how they differ with conventional banking. For example,
every year Association of Islamic Banking Institution in Malaysia (AIBIM) with
cooperation from Islamic bank can organize the ‘Islamic Banking Week’ and during the
week, they can conduct many activities such as quiz, information counter booth, and other
activities as long it can create awareness to the public regarding Islamic banking product
and activity.
Other suggestion is to create more advertisement in the media channel to introduce
and familiarize the public with the Islamic banking product and activity. As regulator,
Bank Negara Malaysia (BNM) can take an initiative to produce the short advertisement
regarding Islamic banking industry. The advertisement must be simple and easy to
understand but is full with message and information.
The third suggestion is to conduct seminar or training to enhance consumer
understanding. IBFIM as one of the industry player in Islamic banking can conduct
seminar or training to the government or private sector. During seminar, IBFIM can use
the opportunity to share the information in Islamic banking industry and at least it will
create two way communications about any dispute or less understanding in regards of
Islamic banking.
This study contributes further to the literature of IFSA, Islamic investment account,
consumer intention, religiosity, social influence, and knowledge factor. Furthermore,
researchers may use the findings of this study as reference to continue with further
research in similar area. The researcher suggests future researchers to add attitude as
moderating variable between knowledge and intention as suggested by Mehtab et.al
(2015) and to use the wide area of population.
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Appendices
*Alliance Islamic Bank deposit and investment account 2013-2016
*Hong Leong Islamic Bank deposit and investment account 2013-2016
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
2013 2014 2015 2016
Wadiah
Commodity Murabahah
Wakalah
Mudharabah
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
2013 2014 2015 2016
Wadiah
Commodity Murabahah
Wakalah
Mudharabah