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FACTORS THAT INFLUENCE CUSTOMERS CONFIDENCE TOWARDS ISLAMICBANKING PRODUCTS 2011

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CHAPTER 1: INTRODUCTION

1.0 CHAPTER DESCRIPTION

The first chapter of this report provides an overview of the Islamic banking industry both

globally and in Malaysia, the importance of Islamic banking and the factors that led the

researcher to conduct research in this area. It highlights the background of the study,

problem statement, objectives of the study, theoretical framework, research question and

hypothesis of the study, significance of the study, definition of terms, limitation of the study

and lastly scope of the study.

1.1 BACKGROUND OF THE STUDY

Islamic banking refers to a system of banking that complies with Islamic law. The underlying

principles that govern Islamic banking are mutual risk and profit sharing between parties, the

assurance of fairness for all and that transactions are based on an underlying business

activity or asset. These principles are supported by Islamic banking's core values whereby

activities that cultivate entrepreneurship, trade and commerce and bring societal

development or benefit is encouraged. Activities that involve interest (riba), gambling

(maisir) and speculative trading (gharar) are prohibited (BNM, 2010). As stated in the Quran

Allah forbids riba. Riba means an increase and under shariah the term refers to the

premium that must be paid by the borrower to the lender along with the principle amount as

a condition for the loan.

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Those who devour usury will not stand except as stand one whom the Evil one by his touch

Hath driven to madness. That is because they say: "Trade is like usury," but Allah hath

permitted trade and forbidden usury. Those who after receiving direction from their Lord,

desist, shall be pardoned for the past their case is for Allah (to judge) but those who repeat

(The offence) are companions of the Fire: They will abide therein (for ever).

(Al-Baqarah : 275)

Over the last three decades Islamic banking and finance has developed into a full- fledged

system and discipline reportedly growing at the rate of 15 percent per annum. Today,

Islamic financial institutions, in one form or the other, are working in about 75 countries of

the world. Besides individual financial institutions operating in many countries, efforts have

been underway to implement Islamic banking on a country wide and comprehensive basis in

a number of countries. Islamic banking and finance has satisfy the Muslim community

needs, to a multibillion dollar industry upholding Islamic principles since it undergone rapid

transformation and growth from an industry striving. Islamic banking is now a well-known

term and has emerged as one of the most important industries worldwide. Over recent

decades, the Islamic banking industry has emerged as one of the fastest growing industries

and has spread to all corners of the globe, receiving wide acceptance from Muslims and

non-Muslims (Iqbal and Molynex, 2005; Asyraf and Nurdianawati, 2007).

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The emergence of strong Islamic movements has generated a renewed interest in Islamic

economics, especially in Islamic interest-free banking. Iran and Sudan have instituted

Islamic banking systems, while many other countries have established a mixed or dual

banking system. Malaysia followed the latter course, with its first Islamic bank, beginning

operations in July 1983, Bank Islam Malaysia Berhad (BIMB). The blueprint for the modern

Islamic banking system came in 1983, with the introduction and enforcement of two new

acts known as the Islamic Banking Act and the Government Investment Act (Remali Yusoff,

Rodney Wilson, 2005).

Malaysia has emerged as the first country to implement a dual banking system where

Islamic banking system operates side by side with the conventional banking system. The

Malaysian model has been recognized by many Islamic counties as the model of the future

and many countries have shown interest in adopting this system. In fact, delegates from

various countries, mainly Muslim counties have come to Malaysia, particularly to the Central

Bank and Bank Islam Malaysia Berhad (BIMB), to study how the dual banking system works

(Hamim S. Ahmad Mokhtar, Naziruddin Abdullah, Syed M. Al Habshi, 2006).

The history of Islamic Banking in Malaysia can be traced in 1963 when Tabung Haji was

established by the government. It is a specialized financial institution that provides a

systematic mobilization of funds of Muslims to assist them to perform pilgrimage in Makkah

as well as to encourage them to participate in investment opportunities and economic

activities. In fact, due to its uniqueness, Tabung Haji is considered to be the first of its kind in

the world and economic activities (Mohammed Siedu, 2002; Ahasanul Haque, 2009).

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The government of Malaysia had then introduced a coordinated and systematic process of

implementing Islamic financial system which is based on the experience of Tabung Haji,

This process can be divided into three phases. The first phase is considered as the period of

familiarization (1983-1992).This was the period when BIBM was established and the Islamic

banking operations were started in accordance with Sharia'h principles. Bank Islam has

developed itself as one of the most respectable financial institutions in the country as it listed

on the main board of the Kuala Lumpur Stock Exchange (KLSE) on January 17th 1992. The

second phase (from 1993-2003) was aimed at creating a more conducive environment for

competition among the banks. At the same time, it was to give banks ample time to try to

capture a large market share. Lastly, while the intention was to create awareness among the

public, especially Muslims, about the benefits of Islamic banking system, this was also the

period when conventional banks were allowed to offer Islamic banking services by setting up

"Islamic banking scheme (IBS)" in 1993. The third phase that commenced from 2004 was

the period of further financial liberation. During this period, the Central Bank paved the way

for new foreign Islamic banks to operate in Malaysia by means of issuing licenses to them

(Hamim S. Ahmad Mokhtar, Naziruddin Abdullah, Syed M. Al Habshi, 2006).

The popularity of the Islamic banking system is not limited to the Islamic banks only.

Increasingly large international conventional banks are showing interest in the Islamic

banking system as well. The consequence of this is that Islamic banks operating in Islamic

countries are faced with strong competition not only from Islamic banks but also from non-

Islamic rivals. When competition intensifies and when banks start to offer more or less

similar products and services, it is the customer's satisfaction that can influence the

performance of an Islamic bank and determines its competitiveness and success (Ahasanul

Haque, Jamil Osman and Ahmad Zaki Hj Ismail, 2009).

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1.2 PROBLEM STATEMENT

Islamic Banking has become a substantial and fastest growing industry during the last four

decades. In Malaysia, Islamic banking products are available at two full pledged Islamic

banks and at all commercial and merchant banks in Malaysia. The BNM has approved a

system of parallel Islamic and conventional banking because of its mixed ethnic and

religious backgrounds. The past two years saw many conventional banks rushing to obtain a

full Islamic license in order to set up an Islamic bank in Malaysia. Malaysia is the first nation

to successfully adopt a dual banking system, where a full-fledged Islamic system operates

side by side with the conventional banking system within a single bank.

However, the products offered are still not fully accepted by customers. Here, the issues

arise is the problems occur on customers confidence towards Islamic banking product. It

becomes a major problem since some of the customers are not understand and lack of

knowledge about Islamic banking system. Thus, its one of the reason why customers

especially Muslim do not involve in Islamic banking. Hence, it is importance to assess the

degree of customers confidence towards Islamic banking products.

Nowadays, customers positive perception towards Islamic banking is far more crucial due to

the fact that it have to compete with the long established conventional banks in a dual-

banking system. This study sought to examine customers understanding towards Islamic

banking. So, this research done to measure whether the demographic factors, religious

perspective and customers perception are influenced customers confidence towards

Islamic banking products.

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1.3 OBJECTIVES OF THE STUDY

The general purpose of this study is to identify the customers confidence towards Islamic

banking products in Malaysia. In defining the limitations of this study, the researcher

identified study areas to be addressed. A careful review of those questions areas led to the

development of the following specific research objectives:

To determine if the demographic factor influence customers confidence towards

Islamic banking product

To examine if the factor of religious perspective influence customers confidence

towards Islamic banking product

To know whether the factor of customers perception influence customers

confidence towards Islamic banking product

To study which is most influence factor that contributed to the customers confidence

towards Islamic banking products

1.4 THEORETICAL FRAMEWORK

In the study, the theoretical framework is needed in order to know the relationship from one

variable to the other variables. A variable is anything that can take on differing or varying

value. In the theoretical framework there are two variables are used to identify for each other

which is:

Dependent variable (criterion variable) - is the primary interest to the researcher.

Independent variable (predictor variable) - is one that influence the dependent variable in

either a positive or negative way

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The schematic diagram for the theoretical is as follow:

1.5 RESEARCH QUESTIONS AND HYPOTHESIS OF THE STUDY

1.5.1 RESEARCH QUESTIONS

1.5.1.1 Does a demographic factors influence customers confidence towards

Islamic banking products?

1.5.1.2 Does religious perspectives influence customers confidence towards


1.5.1.3 Does customers perception influence customers confidence towards


Independent Variable (IV)

Demographic Factors

Religious Perspective

Customers Perception

Customers confidence

towards the product

Dependent Variable (DV)

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1.5.2 HYPOTHESIS OF THE STUDY

Hypothesis can be defined as a logically conjectured relationship between two or

more variables expressed in the form of a testable statement. By testing the

hypotheses and conforming the conjectured relationship, it is expected that

solutions can be found to correct the problem encountered.

There are two differential hypotheses, the first one is null hypothesis (Ho) which

is the proposition that the states a definitive, exact relationship between two

variables. In general the null statement is expressed as no (significant)

relationship between two variables or no (significant) difference between two

groups. The second type is the alternate hypothesis (Ha), which is the opposite

of the null that is expressing a relationship between two variables or indicating

differences between groups. In this study, four hypotheses have built that are

related with the objective of the study:

Hypothesis 1

Ho: There is no relationship between demographic factors and customers

confidence towards Islamic banking products

Ha: There is a relationship between demographic factors and customers


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Hypothesis 2

Ho: There is no relationship between religious perspectives and customers


Ha: There is a relationship between religious perspectives and customers


Hypothesis 3

Ho: There is no relationship between customers perception and customers


Ha: There is a relationship between customers perception and customers


1.6 SIGNIFICANT OF THE STUDY

1.6.1 To The Islamic Banking in Malaysia

This study provides clear reason how to attract customers in selecting Islamic banking

product rather than conventional product. It will give information to them the most

factors that influence customers confidence towards Islamic banking products. So,

they can know the problem arise and try to encourage the customers in choosing

Islamic banking products. At the same time it can improve Islamic banking

performance by increasing customer demanding on their products.

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1.6.2 To The Researcher

It is the best way for the researcher to apply all those theories that have been learned

in class. As a Finance student, this study will be positively beneficial for them to apply

all those theories that have been learned in class. Through this study, they might gain

knowledge and share their ideas and findings regarding to the area of study.

1.6.3 To The Customer

This study will also give some knowledge and increase the awareness of customers

that Islamic banking is on par with conventional banking in term of their products

nowadays. By answering the questionnaire, the customer itself will be able to know

their level of knowledge and understanding towards Islamic banking products.

1.7 DEFINITION OF TERMS

1.7.1 Demographics

Demographics are the characteristics of a human population. These types of data are

used widely in sociology, public policy, and marketing. Commonly used demographics

include gender, race, age, income, educational attainment, employment status, and even

location. Demographic trends describe the changes in demographics in a population over

time. Both distributions and trends of values within a demographic variable are of interest.

(Wikipedia, 2011)
http://en.wikipedia.org/wiki/Humanhttp://en.wikipedia.org/wiki/Populationhttp://en.wikipedia.org/wiki/Sociologyhttp://en.wikipedia.org/wiki/Public_policyhttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Race_(classification_of_human_beings)http://en.wikipedia.org/wiki/Race_(classification_of_human_beings)http://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Public_policyhttp://en.wikipedia.org/wiki/Sociologyhttp://en.wikipedia.org/wiki/Populationhttp://en.wikipedia.org/wiki/Human

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1.7.2 Religious

Religion is often considered a cultural system that creates powerful and long-lasting

meaning, by establishing symbols that relate humanity to deeper truths and values. Many

religions have narratives, symbols, traditions and sacred histories that are intended to give

meaning to life. They tend to derive morality, ethics, religious laws or preferred lifestyle

from their ideas about the cosmos and human nature. (Wikipedia, 2011)

1.7.3 Perception

In philosophy, psychology, and the cognitive sciences, perception is the process of

attaining awareness orunderstanding ofsensory information. It is a task far more complex

than was imagined in the 1950s and 1960s, when it was predicted that building perceiving

machines would take about a decade, a goal which is still very far from fruition. The word

comes from the Latin words perceptio, percipio, and means "receiving, collecting, and

action of taking possession, apprehension with the mind or senses." Perception is one of

the oldest fields in psychology. (Wikipedia, 2011)

1.7.4 Confidence

Confidence is generally described as a state of being certain either that a hypothesis or

prediction is correct or that a chosen course of action is the best or most effective.

Confidence is about trust and a feeling of assurance and security. When someone is

confident, they know they can achieve what they want to do. There is no fear of failure.

(Wikipedia, 2011)
http://en.wikipedia.org/wiki/Culturehttp://en.wikipedia.org/wiki/Mythologyhttp://en.wikipedia.org/wiki/Symbolhttp://en.wikipedia.org/wiki/Traditionhttp://en.wikipedia.org/wiki/Meaning_of_lifehttp://en.wikipedia.org/wiki/Moral_codehttp://en.wikipedia.org/wiki/Ethicshttp://en.wikipedia.org/wiki/Religious_lawhttp://en.wikipedia.org/wiki/Philosophyhttp://en.wikipedia.org/wiki/Psychologyhttp://en.wikipedia.org/wiki/Cognitive_sciencehttp://en.wikipedia.org/wiki/Awarenesshttp://en.wikipedia.org/wiki/Understandinghttp://en.wikipedia.org/wiki/Sensehttp://en.wikipedia.org/wiki/Informationhttp://en.wikipedia.org/wiki/Informationhttp://en.wikipedia.org/wiki/Sensehttp://en.wikipedia.org/wiki/Understandinghttp://en.wikipedia.org/wiki/Awarenesshttp://en.wikipedia.org/wiki/Cognitive_sciencehttp://en.wikipedia.org/wiki/Psychologyhttp://en.wikipedia.org/wiki/Philosophyhttp://en.wikipedia.org/wiki/Religious_lawhttp://en.wikipedia.org/wiki/Ethicshttp://en.wikipedia.org/wiki/Moral_codehttp://en.wikipedia.org/wiki/Meaning_of_lifehttp://en.wikipedia.org/wiki/Traditionhttp://en.wikipedia.org/wiki/Symbolhttp://en.wikipedia.org/wiki/Mythologyhttp://en.wikipedia.org/wiki/Culture

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1.8 LIMITATIONS OF THE STUDY

In completing this research, the researcher has to face a few limitations that could affect the

result of the study. However these limitations differ from one researcher to another

researcher where it depends on the subject matter of the study itself. Several limitations

have been identified while completing this research such as:

1.8.1 Time constraint

It is difficult to complete the research within a specified time frame. The studies

conducted are accomplished within a short period. In this short time period, it will not

be able to obtain more information for completing the research. Time period also

becomes a constraint for the researcher to get more accurate and reliable data. At

the same time, the researcher also needs to concentrate on the practical training

during the working hours. So that it also restrains the researchers effort in

completing this project paper.

1.8.2 Cost constraint

This study was the liability of the researcher. Since the research was not sponsored,

the researcher had to bear all the cost. A lot of money had to be spent in gathering

data and information. As a student, the researcher has a financial constraint to

carrying out the project paper. Limited budget and energy prevented the researcher

to get further information.

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1.8.3 Computer expertise

This research uses lots of data for analyzing. All data will be collected and analyzed.

The researcher needs to know how to use the SPSS program to analyze data. So,

researcher needs to be familiar with SPSS function and program. But, most students

are not experts in using this program. In other words, it gave a lot of problems to the

researcher in the process of interpreting data precisely. Therefore, the researcher

must spend more time to understand and learn this program.

1.8.4 Lack of cooperation

In gathering data, the questionnaires were distributed among the respondents within

the sample chosen. It is not easy to gain cooperation from the respondents, as they

did not answer the questionnaires fully especially when it involves their time

spending. Some of the respondents unable to give good commitments and support

during answering the questionnaires.

1.8.5 Lack of experience

As this is the first time for the researcher to do this research, therefore it may be quite

difficult to collect data and manage time. Besides, the researcher has limited

knowledge about general information of Islamic banking system in Malaysia. The

researcher have to do a lot of study about Islamic banking product and need to

increase the communication skill in order to persuade customers answer the

questions at the same time.

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1.9SCOPE OF THE STUDY

This study is conducted to focus on the factors that influenced customers confidence

towards Islamic banking products. The scope of the study involves the relationship between

the demographic factors, religious perspective and customers perception as the

independent variable and customers confidence towards the products as the dependent

variable.

For the purpose of the study, questionnaires were distributed to 50 respondents who live in

Kuala Lumpur. A total of 50 respondents participated in the study and data were collected

using self-administered questionnaires.

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CHAPTER 2: LITERATURE REVIEW

1.0 Chapter Description

This chapter presents a detailed discussion on the subject matter. This describes the

nature of Islamic banking, Islamic banking products and past literature that is related to this

study. This section also highlights the findings of past researchers on issues in the Islamic

banking industry and also secondary sources information on the prospects for the Islamic

banking industry.

1.1 Overview of Islamic Banking

Islamic banking has emerged as one of the fastest growing industries over the past three

decades. It has spread to all corners of the globe and received wide acceptance by both

Muslims and non-Muslims alike (Iqbal and Molyneux, 2005; Asyraf Wajdi Dusuki and

Nurdianawati Irwani Abdullah, 2006). The functions of Islamic bank are similar as banks

do in the conventional system. However, there is a different between them where Islamic

bank carry out their transactions in accordance with the rules and principles of Islam

(Henry and Wilson, 2004; Iqbal and Mirakhor, 2007; Asyraf Wajdi Dusuki and

Nurdianawati Irwani Abdullah, 2006). Islamic banking is no longer regarded as a

business entity striving only to fulfill the religious obligations of the Muslim community since

it is one of the most important players in service industry today. More significantly, they play

as a business that is ineluctably in need for winning over customers whilst retaining the old

ones (Wilson, 1995; Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006).

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Malaysian commercial banks face even more challenges than most with other financial

institutions because they have to compete with the new competitors which offer similar

services but are based on Islamic principles. The first Malaysian commercial bank which

fully operates based on Islamic principles is Bank Islam Malaysia Berhad (BIMB). The

Islamic principles which govern the operations of Islamic banks are also known as Shariah

principles. There are a lot of Islamic banking products, however in Malaysia there are some

famous Islamic products that will be discussed briefly in this section. The applicable

principles are called Mudharabah, Musyarakah, Murabahah,Al-Bai Bithaman Ajil,Al-Ijarah,

Qard Hasan and Al-Wakalah: (Sudin Haron, Norafifah Ahmad and Sandra Planisek,

1994).

Mudharabah

This is basically an agreement between a lender and an entrepreneur, whereby the

lender agrees to finance the project on a profit-sharing basis according to a

predetermined ratio agreed by both parties concerned. If there are any losses the

lender will bear all the losses.

Musyarakah

Musyarakah means a partnership between capital provider and customer. Islamic

institution provides capital to the customer with the aim of making profit for a

specific business. The lender not only provides the capital but also participate in the

management. All parties agree, through negotiation, on the ratio of distribution of

profits generated from the business activity. However, if there are any losses, all

parties bear the loss in proportion to their shares in the financing.

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Murabahah

This is basically the contract of sale. Financial institution sells the goods to the

customer at a price covering the purchase price plus the profit margin agreed on by

both parties concerned. The lender buys the goods wanted by the borrower for

resale to the borrower at a higher price agreed on by both parties.

Al Bai Bithaman Ajil

Known as deferred payment sale. Means, the borrower is allowed to defer

settlement of the payment for the goods purchased within the period which agreed

by both parties. Bai Bithaman Ajil is the most popular product used by Malaysian

financial institutions in providing financing facilities to their customers.

Al Ijarah

This is the Shariahs concept of leasing finance whereby the bank purchases the

asset required by the customer and then leases back to the customer for a given

period. The lease rental and other terms and conditions having been agreed on by

both parties.

Qard Hassan

This is a benevolent loan which obliges a borrower to repay the lender the

principal sum borrowed on maturity of the loan. However, the borrower has the

discretion to reward the lender for his/her loan by paying any sum over and above

the amount of the principal.

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Al Wakalah

This is an agreement between a customer and his or her bank in which the former

appoints the latter as his or her agent in undertaking a certain transaction on his or

her behalf.

Islamic banking products are increasing day by day and previous studies found that Islamic

banking products are on a par with conventional banking products. The establishment of

Islamic banking and finance in 1983 has contributed to the growth and sustainability of the

Malaysian economy evidently. Since then, the strong growth of the Islamic banking in

Malaysia is expected to continue due to new players who have joined the bandwagon in

relation to the strong demand for Shariah-compliant financial products and services (Ismah

Osman, Husniyati Ali and Anizah Zainuddin, 2009).

2.2 Customers confidence towards the products

As more conventional banks participating and offering banking products and services based

on Islamic principles, the development of the Islamic banks in Malaysia is increasingly

challenging after two decades of its establishment. Thus, in order to confront and respond

vigorously to the robustness of the global financial environment, it is very important for the

players in the Islamic banking industry to better position themselves (Ismah Osman,

Husniyati Ali et al., 2009).

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Banks name and reputation are strongly effect on selecting a bank. The reputation and

image factor are evidenced as one of the important criteria in the banking selection decision

(Ahasanul Haque et. al, 2009). The most important criteria considered by the customers

are provision of fast and efficient services, banks reputation and image, and confidentiality

(Erol and El-Bdour, 1989; Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah,

2006).

The Islamic financial system prohibits the involvement in interest-based transactions and

requires a trade-based arrangement where specific object of sale must be exchanged. It is

further suggested that the Islamic financial market is better able to weather economic and

financial crisis compared to the conventional financial market. The rapid demand for the

Islamic financial products and services in both the Muslim and non-Muslim countries have

also been contributing to the unprecedented growth of the Islamic financial industry (Salina

H. Kassim and M. Shabri Abd. Majid).

Today, the Islamic banking and finance has emerged as an important component of the

overall Malaysian financial system that contributes to the growth and development of the

Malaysian economy. Since 2000, the domestic Islamic banking industry has been growing at

an average rate of 18 percent per annum in terms of assets (Aziz, 2006; Asyraf Wajdi

Dusuki and Nurdianawati Irwani Abdullah, 2006). It is the aspiration of the Malaysian

government to have a strong Islamic banking industry capturing 20 percent of market shares

of financing and deposits in the Malaysian financial industry by 2010 (Asyraf Wajdi Dusuki

and Nurdianawati Irwani Abdullah, 2006).

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2.3 Demographic Factors

The dimensions of value, cost, and prior satisfaction are the combination of product

attributes that best meet customers needs. They make product or service choice based on

these combinations (Kotler, 1997; Ahasanul Haque, 2010). Consumers attitude or

behavior should be studied through demographics, beliefs, and attitudes. It has been widely

recognized that demographic factors have a great impact on consumer attitudes and

behavior (Jayawardhena and Foley, 2000; Mattila, 2001; Karjaluoto et al., 2002;

Ahasanul Haque, 2010). It is important for the Islamic banking service providers to

recognize them, understand them, and use them to design a gender specific strategy since

gender is a key variable for marketing analysis (Nicovich et al., 2005; Ahasanul Haque,

2010).

In order to provide best service to the customers, it is better to understanding the motivation,

expectations, and desires (Ahasanul Haque, 2010). It may even provide information on

making improvements in the nature of business (Naylor and Greco, 2002; Ahasanul

Haque, 2010). Indeed, what remains is to propose and test relevant hypotheses examining

perception about Islamic banking in terms of gender beliefs, attitudes, and behavior pattern.

Besides that, race and ethnicity is also important for the question of effects. Since, the

democratic anthropological sense describes a whole way of life, which is ordinary in every

society and in every mind (Haq and Smithson, 2002; Ahasanul Haque, 2010).

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2.4 Religious Perspectives

Some customers do not have so much knowledge about the Islamic banking products such

as Mudarabah, Musyarakah, Murabahah and etc, but they buy these products for the reason

of religion (Ahasanul Haque et al, 2009). The key element to describe a cluster of beliefs is

a religion. It is more than ecology of themes for social communication rather it is a specific

way of communicating. Religion does not just lie in its capacity for differentiation but also lies

in its ability to structure and lend meaning to the everyday, to the local world of interaction

(Haq and Smithson, 2003; Ahasanul Haque, 2010).

Islamic banking came into existence to satisfy the financial needs of Muslims who have to

observe the prohibition of interest-based transactions (Haq and Smithson, 2003; Ahasanul

Haque, 2010). The Quran prohibits the taking and receipts of interest (riba) while making

trade and commerce (al-bay) permissible (halal). The Quran argued that interest constitutes

an unfair business transaction as profits realized from loans are risk-free with no evidence of

value-addition by lenders (Saiful Azhar Rosly and Mohd Afandi Abu Bakar, 2003). In

order to accommodate the additional changes in conventional banking, the sufficient flexibility

are needed to support Islamic banking. This removes a long standing argument that Islamic

banking is infeasible in a regulatory sense (Warde, 2000; Ahasanul Haque, 2010).

As it can be seen in the recent growth of ethical banking, all at once Western attitude are

also changing, where non-Islamic customers refuse to invest in companies engaged in

unethical and socially harmful activities (Warde, 2000; Ahasanul Haque, 2010). Currently

we are witnessing a wide religious reinterpretation, spurred on by changes at national and

global levels (Haynes, 1999; Haq and Smithson, 2003; Ahasanul Haque, 2010).

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The political, social and cultural values embedded within the development goals of projects

shape the development and use of technology (Madon, 2000; Ahasanul Haque, 2010).

Islamic banks should recognize that customers view them just like any other commercial

bank since religion is no longer the main factor in attracting customers. Hence the quality of

service, and products and services offered must be compatible with those offered by the

commercial banks (Sudin Haron et. al, 1994).

2.5 Customers Perception

In Malaysia, customers positive perception towards Islamic banking is far more crucial

mainly due to the fact that Islamic banks have to compete with the long established

conventional banks in a dual-banking system. Since 1983, Malaysia to date has a dual

banking system, whereby the Islamic banking system operates in parallel with the

conventional system (Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006).

Although Islamic banks perform mostly similar functions to that of conventional banks, their

approach is distinctly different. First, Islamic banking strives for a just, fair and balanced

society as envisioned by the Islamic economics (Mirakhor, 2000; Warde, 2000, Asyraf

Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006). Accordingly, the many

prohibitions like interest, gambling, excessive risks and etc are to protect the interests and

benefits of all parties involved in market transactions and to promote social harmony

(Ahmad, 2000; Chapra, 2000;Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah,

2006).

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Second, Islamic banking 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) (Ahmad, 2000; Iqbal and Molyneux, 2005; Asyraf Wajdi Dusuki and

Nurdianawati Irwani Abdullah, 2006).

Lastly, Islamic banking is also characterized by ethical norms and social commitments. There

is a moral filter based on the definitions of halal (permissible) and haram (prohibited and

undesirable) operating at different levels, carving the conscience of entrepreneur and firm,

promoting a positive social climate for society, and providing an expedient legal framework

(Chapra,1992; Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006).

Accordingly, Islamic banks cannot finance any project which conflict with the moral value

system of Islam such as financing a brewery factory, a casino, a night club or any other

activity clearly prohibited by Islam or known to be detrimental to society (Ahmad, 2000;

Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006).

The performance of an Islamic bank are based on customers satisfaction when competition

intensifies and when banks start to offer more or less similar products and services, thus, it

will determines its competitiveness and success (Ahasanul Haque, Jamil Osman, and

Ahmad Zaki Hj Ismail, 2009). The main objective of Islam is to guide human development

along the correct lines and in the right direction. Islam deals with all aspects of economic

development, but always in the framework of total human development and never in a form

divorced from this perspective (Al-Harran, 1993; M. Shahid Ebrahim, 2001).

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CHAPTER 3: RESEARCH METHODOLOGY

3.0 Chapter Description

This chapter consists of the research methodology used in order to complete the study. This

chapter will explain in detail the sources of data and the formula used in order to gain the

results. On this chapter, it will be covered research design, types of data, data collection

method, measurement, questionnaire development, sampling and data analysis.

3.1 Research Design

Research design is a master plan specifying the methods and procedures for collecting and

analyzing the needed information. The importance of research design includes a plan

selecting sources and types of information used to answer the problem statement. It is also

include a framework for specifying the relationships among variables (Rozieana, 2009).

In this research, Causal Research Design was used. It is conducted to identify cause and

affect relationship among variables, where the research problem has already been narrowly

defined. The researcher wants to identify whether the factors such as demographic factors,

religious perspective and customers perception are influenced customers confidence

towards Islamic banking products.

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3.2 Types of Data Collection

3.2.1 Primary Data

The primary data with specific purpose of address the research problem will be

obtained through distribution of questionnaire to customers who are interest in

answering the question.

3.2.1.1 Questionnaires

Questionnaires were designed and distributed to the respondents who are

aware about Islamic banking system. The questionnaires were designed to

collect and gather the data collection for the study. For this study,

questionnaires were administrated personally and being typed in 2 versions,

English and Malay version. These questionnaires have been divided into four

sections, which are Section A, Section B, Section C and Section D.

3.2.1.1.1 Section A: Demographic

Questions are constructed by the researcher for collecting all the

information regarding the background of respondents in order to get a

brief background. Nominal Scale is one that allows the researcher to

assign subject to certain categories or groups. In this section, nominal

scale question is used for the question such as gender, age, and

education level.

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3.2.1.1.2 Section B: Religious Perspectives

The questions are designed by the researcher in order to determine

whether the religious factor is the main reason customers buy the

Islamic banking products. Researcher found that customers do not

have so much knowledge about the Islamic banking products such

as Musyarakah, Mudharabah and Bai Bithaman Ajil. So, this section

sought to examine religious factor an enough to drive Muslim to use

Islamic banking product.

3.2.1.1.3 Section C: Customers Perception

Question are constructed by the researcher in order to reveal actual

perception ofcustomers towards Islamic banking product. For this

section, Likert scale questionnaire is used to measure the level of

perception among the respondents.

3.2.1.1.4 Section D: Customers confidence towards the product

The question designed are focused to gather information of

customers confidence towards Islamic banking system. For this

section, Likert scale questionnaire is used to measure the level of

confidence among the respondents.

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3.2.2 Secondary Sources

In doing this research, the researcher will also refer to secondary sources to collect

more information in order to complete this study. Secondary sources are very useful

for the researcher to better define the problem of the study and can interpret primary

data more meaningful. Most of the secondary sources were collected from journals

and articles. All the journals can help the researcher to conduct this research and

gather more additional information that relates to the case study.

3.3 Sampling Technique

3.3.1 Population

Population refers to the entire group of people, event and things of interest that

the researcher wants to investigate. For this study, the population refers to all

respondents that interest in answering the questionnaire.

3.3.2 Sample

A survey of approximately 50 respondents who have answered the questionnaire

will provide the database for this study. The sample will be selected on a non-

probability basis from all respondents. Eligible customers are between the age of

21 and above 50 years.

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. 3.3.3 Collection Technique

This study has used self-administrative questionnaire for the collection technique.

That is the respondents have to answer and fill in the questions given. The

questionnaire that has been collected by the time the respondents had

completed the questionnaire.

3.4 Data Analysis

3.4.1 Statistical Procedure of Social System (SPSS)

The analysis will be done to get the finding to the study after all the data is

collected. All the data is treated and interpreted by using relevant information

from analysis method. An analysis of the data can be made by using the

Statistical Procedure of Social System (SPSS), then interpret the result findings.

3.4.1.1 Frequency Distribution

The frequency provides statistics and graphical display that is used to

describe many types of variables. A frequency of distribution simply reports

the number of respondents that each questionnaire received and determined

the empirical distribution of the variables.

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3.4.1.2 Reliability Analysis

Reliability of a measure is established by testing both consistency and

stability. Cronbachs alpha is computed in terms of the average inter-

correlations among the items measuring the concept. Cronbachs alpha is a

reliability coefficient that indicates how well the items in a set are positively

correlated to one another. The closer Cronbachs alpha is to 1, the higher the

internal consistency reliability.

3.4.1.3 Hypotheses Testing

By analyzing the result from the questionnaires, the researcher tried to obtain

the observed value with critical value in determining whether to reject or fail to

reject the null hypothesis. The test of chi square will be use in this research

to test the hypothesis. The calculated value from Pearson Chi Square has

been compared with the level of significance. Null hypothesis will be rejected

where calculated value is greater than level of significance value. The

questions that have been tested are the combination of questions for each

independent variable after all of them have been cross-tabulated with the

dependent variable.

3.4.1.4 Correlation Coefficient

Researchers used the correlation to know the relationship between the

dependent and independent variables. The correlation were used to

determine whether the relationship weak or strong with the negative or

positive association.

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3.4.1.5 F-Statistics

F-test is used to test the overall model. It provides an overall appraisal of the

regression equation appeased in evaluating the significant of each

component in the model. Moreover, f-statistics tests whether a significant

proportion of the total variation independent is explained by the estimated

regression equation.

3.4.1.6 T-Statistics

T-statistics will use to test the hypothesis either hull hypothesis and alternate

hypothesis. It is also to test whether there is statistically significant

relationship between the dependent variables and independent variables.

3.4.1.7 Regression Analysis

Regression analysis is used when independents variables are correlated with

one another and with the dependent variable (Sheridan J Coakes, 2005).

From the correlation analysis obtained on this research, all hypothesis are

accepted but to make sure there are actual relationship between two variable,

the researcher must run regression analysis to make sure the hypothesis

support or not.

The interpretation of the regression analysis is based on the standardized

coefficient beta () and R square (R2) which provide evidence whether the

independent variable and dependent variables have a relationship or not.

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3.5 Measurement

Types of Measurement

3.5.1 Nominal scaled data

Nominal scale data described the variable in term of its category and the

measure differs in term of quality rather than quantity. It assigned to represent

the categories of which the characteristic of data belongs. In this research, I

used nominal scale mainly for the purpose of identifying the respondents

variables in term of their gender, age, education level, perception and so on.

3.5.2 Likert scale data

The likert scale is one of the famous attitudes rating scale used by the

researchers in their questionnaire. The likert scale is designed to examine how

strongly subjects agree or disagree with statement on a 7-points scale. There are

seven different scale used to differentiate the degree of agreement and

disagreement. The scales are ranging 1 to 7 from strongly agree to strongly

disagree, respectively.

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CHAPTER 4: FINDING AND ANALYSIS


This chapter represents the finding and analysis on the factors that influence customers

confidence towards Islamic banking products. The study is involved with customers who

live in Kuala Lumpur. It covers different sectors of occupations such as government

sectors, private sectors and other sectors. Because of limitation of time, only fifty (50)

sets of questionnaires were distributed in that area. Researcher had used the Statistical

Package for Social Sciences (SPSS) system, version 16.0 in order to analyze and

measure the dependent and the independent variables. The major advantage using

this software is that its ability to perform various advanced statistical analysis,

variable transformation, as well as producing statistic charts and table.

This chapter presents the detailed findings of the primary data. The first section 4.1

describes the findings on issues related to the demographic characteristic of

respondents. The second section 4.2 presents the reliability analysis of the research

followed by section 4.3 the hypotheses testing and discussion to test the relationship

between independent variable and dependent variable. Lastly, section 4.4 gathers

results of regression analysis.

4.1 DATA INTERPRETATION ON FREQUENCY

Frequency distribution indicates how many participants are in each category. Here the

interpretation data is use only for nominal scale which refers to the correspondent profile.

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4.1.1 GENDER

Frequency Percent Valid Percent

Cumulative

Percent

Valid Male 21 42.0 42.0 42.0

Female 29 58.0 58.0 100.0

Total 50 100.0 100.0

TABLE 4.1 GENDER

FIGURE 4.1 GENDER

From the Figure 4.1 and Table 4.1, it shows the number of respondents. It shows that

female respondents are higher with 58% than the male respondents with 42%. The gap

between female respondents and male respondents are 16%.

0

5

10

15

20

25

30

Male Female

Male

Female

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4.1.2 AGE

TABLE 4.2 AGE

FIGURE 4.2 AGE

From the Figure 4.2 and Table 4.2, respondents age has been diversified into four groups.

These are 21 to 30 years old, 31 to 40 years old, 41 to 50 years old and 50 years old and

above. It shows that the majority of the respondents are between 21 to 30 years old with 66%.

It is followed by the respondents age between 31 to 40 years old which is 23%. 8% of the

respondents are in the range of 41 to 50 years old and only 4% are 50 years and above.

0

5

10

15

20

25

30

35

21-30 31-40 41-50 50 years

above

21-30

31-40

41-50

50 years above

Frequency Percent Valid PercentCumulative

Percent

Valid 21-30 33 66.0 66.0 66.0

31-40 11 22.0 22.0 88.0

41-50 4 8.0 8.0 96.0

50 years above 2 4.0 4.0 100.0

Total 50 100.0 100.0

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4.1.3 RACE


Cumulative

Percent

Valid Malay 27 54.0 54.0 54.0

Chinese 19 38.0 38.0 92.0

Indian 4 8.0 8.0 100.0

Total 50 100.0 100.0

TABLE 4.3 RACE

FIGURE 4.3 RACE

Table 4.3 and Figure 4.3 above show the race of the respondents. The table revealed that

almost 27 respondents (54%) are Malay, 19 from Chinese (38%) and the rest are only 4

respondents (8%) which are Indian.

0

5

10

15

20

25

30

Malay Chinese Indian

Malay

Chinese

Indian

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4.1.4 MARITAL STATUS


Cumulative

Percent

Valid Single 32 64.0 64.0 64.0

Married 18 36.0 36.0 100.0

Total 50 100.0 100.0

TABLE 4.4

FIGURE 4.4

From the Figure 4.4 and Table 4.4, the results show that majority of the respondents are

single with 32%. It is followed by 18% of the respondents are married.

0

5

10

15

20

25

30

35

Single Married

Single

Married

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4.1.5 EDUCATION LEVEL

TABLE 4.5

FIGURE 4.5

From the Figure 4.5 and Table 4.5, the results show that 60% of the respondents have

degree, 14% of the respondents have SPM and followed by 12% of the respondents

have diploma. The rest of the respondents which represents only 10% and 4% which are

Master and STPM respectively.

SPM

STPM

Diploma

Degree

Master


Cumulative

Percent

Valid SPM 7 14.0 14.0 14.0

STPM 2 4.0 4.0 18.0

Diploma 6 12.0 12.0 30.0

Degree 30 60.0 60.0 90.0

Master 5 10.0 10.0 100.0

Total 50 100.0 100.0

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4.1.6 OCCUPATION LEVEL

TABLE 4.6

FIGURE 4.6

From the Figure 4.6 and Table 4.6 show that the highest percentage of respondents

occupation is 62% which is the private sector employee, followed by government

employee with 20%. For student stated 16% and the rest of the respondents with 2% are

businessman.

Student

Businessman

Government Employee

Private Sector Employee


Cumulative

Percent

Valid Student 8 16.0 16.0 16.0

Businessman 1 2.0 2.0 18.0

Government Employee 10 20.0 20.0 38.0

Private Sector Employee 31 62.0 62.0 100.0

Total 50 100.0 100.0

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4.1.7 MONTHLY INCOME


Cumulative

Percent

Valid less than RM1000 7 14.0 14.0 14.0

RM1000-RM2000 13 26.0 26.0 40.0

RM2001-RM3000 15 30.0 30.0 70.0

RM3001-RM4000 11 22.0 22.0 92.0

Above RM4000 4 8.0 8.0 100.0

Total 50 100.0 100.0

TABLE 4.7

FIGURE 4.7

Figure 4.6 and Table 4.6 represent the result ofrespondents income level. It shows that there are

30% of the respondents who earned an income for ranging from RM2001 to RM3000. This is

followed by 26% of the respondents who earned an income ranging from RM1000 to RM2000 per

month, and 22% of the respondent who earn RM3001 to RM4000. The rest of the respondents

have income less than RM1000 and above RM4000 are 14% and 8% respectively.

0

2

4

6

8

10

12

14

16

less than RM1000

RM1000-RM2000

RM2001-RM3000

RM3001-RM4000

Above RM4000

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4.1.8 HAVE EVER USE ISLAMIC BANKING PRODUCT BEFORE


Cumulative

Percent

Valid yes 23 46.0 46.0 46.0

No 27 54.0 54.0 100.0

Total 50 100.0 100.0

TABLE 4.8

FIGURE 4.8

Figure 4.8 and table 4.8 shows the result whether the respondents have ever use Islamic

banking products before. It represent 27 respondents (54%) are not using Islamic banking

products before and the rest 23 respondents (46%) are have used Islamic banking products.

21

22

23

24

25

26

27

28

yes No

yes

No

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4.2 RELIABILITY ANALYSIS

Here the researcher measures the reliability of the research. It is to know whether this

research reliable or not. According to Uma Sekaran (2003), the reliability of a measure

indicates the extent to which it is without bias (error free) and hence ensures consistent

measurement across time and across the various items in the instrument. In other

words, reliability of a measure is an indication of the stability. A Coefficient Alpha is often

used to measure reliability. Consistency reliability or Cronbachs Alpha reliability gets to

1.0 is the better. In general reliability less than 0.6 are consider to be poor. Those in the

0.7 range are acceptable and those in the 0.8 range are good. The findings of reliability

test shows as follow:

Alpha Coefficient Range Strength of Association

< .6 Poor

.6 to < .7 Moderate

.7 to < .8 Good

.8 to < .9 Very Good

.9> Excellent

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4.2.1 Reliability Test: Independent Variable (Demographic Factors)

Reliability Statistics

TABLE 4.9 RELIABILITY ANALYSIS FOR DEMOGRAPHIC FACTORS

For the first independent variable which is Demographic Factors, the result indicates that

the Cronbachs Alpha for six (8) items in Demographic Factors (independent variables)

measure is .459. The result shows that this independent variable is range and poor. It

can be conclude that the questionnaire about Demographic Factors is having low

reliability and acceptable.

Cronbach's

Alpha

Cronbach's Alpha

Based on

Standardized Items N of Items

.459 .405 8

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4.2.2 Reliability Test: Independent Variable [Religious Perspectives]


Cronbach's Alpha

Cronbach's Alpha

Based on


.915 .920 6

TABLE 4.10 RELIABILITY ANALYSIS FOR RELIGIOUS PERSPECTIVES

For the second independent variable which is Religious Perspectives, the result

indicates that the Cronbachs Alpha for six (6) items in Religious Perspectives

(independent variables) measure is .915. The result shows that this independent variable

is range and excellent. It can be conclude that the questionnaire about Religious

Perspectives is having high reliability and acceptable.

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4.2.3 Reliability Test: Independent Variable [Customers Perception]


TABLE 4.11 RELIABILITY ANALYSIS FOR RELIGIOUS PERSPECTIVES

For the third independent variable which is Customers Perception, the result indicates

that the Cronbachs Alpha for seven (5) items in Customers Perception (independent

variables) measure is .696. The result shows that this independent variable is range and

fair. It can be conclude that the questionnaire about Customers Perception is having

high reliability and acceptable.

Cronbach's Alpha

Cronbach's Alpha

Based on


.696 .694 5

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4.3 HYPOTHESIS TESTING AND DISCUSSION

4.3.1 INTRODUCTION

Hypothesis is a statement, opinions or beliefs that the researcher wishes to

accept or to rejected base on the data collected. Alternatives hypothesis (Ha)

exist for the purposes of the comparing the null hypothesis (H0). Since Ha is a

statement in which no difference or effect is expected, there will be some

changes taken in action if the Ha is accepted. The main objective of hypothesis

testing is to make a judgment about the different between two samples statistic

and a hypothesized population parameter.

These are three hypotheses to be tested:

Hypothesis 1

Ho: There is no relationship between demographic factors and customers


Ha: There is a relationship between demographic factors and customers


Hypothesis 2

Ho: There is no relationship between religious perspectives and customers


Ha: There is a relationship between religious perspectives and customers


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Hypothesis 3

Ho: There is no relationship between customers perception and customers


Ha: There is a relationship between customers perception and customers


4.3.2 Hypothesis Testing Using Correlation

In this section, Pearson Correlation Coefficient is used for test the hypothesis. The

hypothesis tested is that linear relationship exists between two variables,

dependent and independent variable, as seen in the correlation coefficient (r). The

null hypothesis, however, states that no linear relationship exists between the two

variables. As in all hypothesis tests, the goal is to reject the null hypothesis and

accept the alternative hypothesis. In other words, it is to decide that an effect, in

this case a relationship exists.

rvalue Interpretation

Less than .20 Slight, almost negligible relationship

.20 - .40 Low correlation, definite but small relationship

.40 - .70 Moderate correlation, substantial relationship

.70 - .90 High correlation, marked relationship

.90 1.00 Very high correlation, very dependable relationship

Table 4.12Interpretation for value rthat being propose by Guilford (1956)

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Correlations

Customers'

Confidence

Towards The

Products

Demographic

Factors

Religious

Perspectives

Customers'

Perception

Customers' Confidence

Towards The Products

Pearson

Correlation1 .344** .570** .783**

Sig. (1-tailed) .007 .000 .000

N 50 50 50 50

Demographic Factors Pearson

Correlation.344** 1 .455** .522**

Sig. (1-tailed) .007 .000 .000

N 50 50 50 50

Religious Perspectives Pearson

Correlation.570** .455** 1 .521**

Sig. (1-tailed) .000 .000 .000

N 50 50 50 50

Customers' Perception Pearson

Correlation.783** .522** .521** 1

Sig. (1-tailed) .000 .000 .000

N 50 50 50 50

**. Correlation is significant at the 0.01 level (1-tailed).

Table 4.13Correlation Coefficient Tests on Hypothesis

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4.3.2.1 Hypothesis Testing for Demographic Factors using Correlation

Based on the correlation coefficient test in the table 4.13, it shows that

demographic factors have small relationship with the customers confidence

towards the products. The result from the table shows correlation between

demographic factors and customers confidence towards the products is r= .344.

It means that it has low correlation and proves to have small relationship

between demographic factors and customers confidence towards the products.

From the correlation, it shows that the null hypothesis is accepted indication that

the association is statistically not significant at the 0.05 levels.

It is clearly stated that:

Degree of significant > 0.05 = Null hypothesis (H0) is accepted)

In this study, the result is:

0.007 > 0.05 = Ha is rejected

From the result, the hypothesis 1 is rejected because it has low correlation and

proves to have small relationship as statistically the association is not significant

at the level is significant value. The conclusion for this finding is demographic

factors is the factor that did not contributed to the customers confidence towards

the products.

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4.3.2.2 Hypothesis Testing for Religious Perspectives using Correlation

Table 4.13 shows the hypothesis testing for the second independent variable,

religious perspectives. From this finding, it shows that there is a positive

relationship between religious perspectives and customers confidence towards

the products. Moreover, from the table, it shows the result of correlation between

religious perspectives and customers confidence towards the products is r =

.570. Looking at the theory fromGuilford , this result is moderate correlation and

proves to have substantial relationship between religious perspectives and

customers confidence towards the products From the correlation, it shows that

the null hypothesis is rejected indication that the association is statistically

significant at the 0.05 levels.


Degree of significant < 0.05 = Null hypothesis (H0) is rejected)


0.000 < 0.05 = Ha is accepted

From the result, the hypothesis 2 is acceptable although it is moderate

correlations and has substantial relationship as statistically the association is

significant at the level is significant value. The conclusion for this finding is

religious perspectives is one of the relevance factors of customers confidence

towards the products.

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4.3.2.3 Hypotheses Testing forCustomers Perception using Correlation

Table 4.13 shows the hypothesis testing for the third independent variable,

customers perception. From this finding, it shows that there is a positive

relationship between customers perception and customers confidence towards

the products. Moreover, from the table, it shows the result of relationship

between customers perception with customers confidence towards the

products is r = .783. This means that, between customers perception and

customers confidence towards the products has high correlation and proves to

have marked relationship. From the correlation, it shows that the null hypothesis

is rejected indication that the association is statistically significant at the 0.05

levels.


Degree of significant < 0.05 = Null hypothesis (H0) is rejected)


0.00 < 0.05 = Ha is accepted

From the result, the hypothesis 3 is acceptable because it has high correlation

and proves to have marked relationship as statistically the association is

significant at the level is significant value. The conclusion for this finding is

customers perception are the factors that influence customers confidence


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4.3.2 Hypotheses Testing Using F-Test

In order to test the statistics, calculated f-statistics will be compared with its critical

value. If the calculated value greater than critical value, the regression equation is

significant to explain the changes in dependent variables.

Calculated F-statistics > critical value (> 5%), there is significant relationship

between independent variables and dependent variables.

Calculated F-statistics < critical value (< 5%), there is no significant relationship

between independent variables and dependent variables. The model is not valid

for forecasting.

ANOVAb

Model

Sum of

Squares df Mean Square F Sig.

1 Regression 62.839 3 20.946 30.492 .000a

Residual 31.600 46 .687

Total 94.439 49

a. Predictors: (Constant), Customers' Perception, Religious

Perspectives, Demographic Factors

b. Dependent Variable: Customers' Confidence Towards The

Products

TABLE 4.14 Regression Analysis Summary of the Research Model

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Whereby;

K = number of independent variables + dependent variable

N = number of observation

F = R2 / (k 1)

(1 R2) / (n k)

= 0.665 / (4 1)

(1 0.665) / (50 4)

= 30.442

Df numerator = K 1

= 4 1

= 3

Df denumerator = N K

= 50 3

= 47

F - Statistics Vs F Table

30.442 > 2.8387

So, there is significant relationship between independent variables and dependent

variables since F - statistics greater than F - table.

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4.3.3 Hypotheses Testing Using T-Test

To test the hypothesis, we make comparisons between the absolute value of the t-

statistics to the tabulated value of t-table with the degree of freedom. Normally, we

take a significant value at level 95% confident interval. The symbols we use to test

the hypothesis are:

H0 = null hypothesis

HA = alternate hypothesis, also known as H1

Thus, the decision rule is;

At 95% confidence interval:

t-statistics > t-table ; reject H0, accept HA

t-statistics < t-table ; reject HA, accept H0

Coefficientsa

Model

Unstandardized Coefficients

Standardized

Coefficients

t Sig.B Std. Error Beta

1 (Constant) .522 .664 .787 .435

Demographic Factors -.550 .368 -.154 -1.493 .142

Religious Perspectives .264 .105 .261 2.524 .015

Customers' Perception .822 .122 .728 6.752 .000

a. Dependent Variable: Customers' Confidence Towards The

Products

Table 4.15 Standardized Coefficients of the Research Model

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Whereby;

K = number of independent variables

N = number of observation

i. Test the significant of each independent variable (T-Test)

a. State the hypothesis : H0 :

H1 :

b. Degree of freedom : df = n k 1

df = 50 - 3 - 1df = 46

Thus, T-table = 2.013

c. Calculate t-statistics : t = 22

SE (2)

1) Demographic Factors : t = -0.550 0

0.368

= -1.494 < 2.013

There is no significant relationship between demographic factors and

customers confidence towards the product.

Thus, we accept H0, and reject HA.

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2) Religious Perspectives : t = 0.2640

0.105

= 2.514 > 2.013

There is significant relationship between religious perspectives and


Thus, we reject H0, and accept HA.

3) Customers Perception : t = 0.8220

0.122

= 6.738 > 2.013

There is significant relationship between customers perception and


Thus, we reject H0, and accept HA.

4.4 REGRESSION ANALYSIS

Researcher uses the regression method in order to test the hypotheses and whether to

accept or reject. According to Burns and Bush (2000), multiple regression analysis is an

expansion of bivariate regression analysis in that more than one independent variable is

used in the regression equation. The researcher chooses multiple regressions because

there are three independent variables need to be predicting in this research. The

interpretation of the regression analysis is based on the standardized coefficient beta ()

and R square (R) which provide evidence whether to support or not to support the

hypotheses stated earlier in the early chapter.

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Regression analysis was chosen for it fits well for the hypotheses testing and analyzing

how independent variables can be used to predict a dependent variable. According to

Maholtra (2006) Regression analysis is a powerful and flexible procedure for analyzing

associative relationship between dependent variable and one or more independent

variables. Fitness of the model built for this study is examined by this kind of standard

regression analysis. The analysis shows how much of the total variance in the

dependent variable (customers confidence towards the products) is possible to explain

by the independent variables: demographic factors, religious perspectives and

customers perception.

Model Summaryb

Model R R Square

Adjusted R

Square

Std. Error of

the Estimate

Durbin-

Watson

1 .816a .665 .644 .82883 1.820



b. Dependent Variable: Customers' Confidence Towards The Products

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ANOVAb

Model

Sum of

Squares df Mean Square F Sig.1 Regression 62.839 3 20.946 30.492 .000a

Residual 31.600 46 .687

Total 94.439 49



b. Dependent Variable: Customers' Confidence Towards The

Products

TABLE 4.14 Regression Analysis Summary of the Research Model

4.4.1 Coefficient of Determination (R2) = 0.665

Coefficient of determination shows the explanatory power of the equation. It determines

how much change in the dependent variable in relation to the independent variables.

The linear regression analysis been presented in Table 4.14. The linear regression test

of the model reveals that the R-square of the model is .665. This means the model

explains 65.5% of the variance in the dependent variable, customers confidence

towards the products. Meanwhile, the remaining 35.5% cannot be explained. This

means there were other factors that can be used to determine the factors on customers

confidence towards the products. The coefficient of correlation (R square) that

obtained from Table 4.14 which is .665 is close to 1 and its indicates a strong positive

linear correlation.

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4.4.2 Durbin Watson = 1.820

Durbin Watson is used to test whether serial correlation is present in the term of

regression or not. It measured through the range from 1.5 to 2.5, which measures the

correct model used for this study. Furthermore, the linear regression test of model

reveals that the Durbin-Watson of the model is 1.820. The Durbin-Watson statistics lies

in the range is 1 to 4. A value of 2 or nearly 2 indicates that, there is no first order

autocorrelation and an acceptable range is 1.50 to 2.50. So that, for Durbin-Watson of

the model which is 1.820 is acceptable and no first order autocorrelation.

For conclusion, this is significance, meaning the fitness of the model in explaining the

customers confidence towards the products is good. According to the ANOVA F test,

the result of f-statistic is 30.492 and the p value = 0.000, which means the null

hypotheses is rejected and this model is statistically significant.

Coefficientsa

Model

Unstandardized

Coefficients

Standardized

Coefficients

t Sig.B Std. Error Beta

1 (Constant) .522 .664 .787 .435

Demographic Factors -.550 .368 -.154 -1.493 .142

Religious Perspectives .264 .105 .261 2.524 .015

Customers' Perception .822 .122 .728 6.752 .000

a. Dependent Variable: Customers' Confidence

Towards The Products

Table 4.15 Standardized Coefficients of the Research Model

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Therefore, this regression equation is significant. Through this finding and analysis, the

researcher fails to reject the null hypotheses (H0) for hypothesis one. It is because there are no

relationship between demographic factors and customers confidence towards the products.

While for hypotheses two and three, the researcher fails to accept the null hypotheses since

there are have relationship between religious perspectives and customers perception with

customers confidence towards the products.

Multiple regressions:

Y= B + B2X2 + B3X3 + B4X4

Y= 0.522-0.550+0.264+0.822

Where,

Y = Customers Confidence Towards The Products

X2 = Demographic Factors

X3 = Religious Perspectives

X4 = Customers Perception

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From Table 4.16, R2 = 0.665 means that 65.5% have been covered by demographic

factors ( = -0.550), religious perspectives ( = 0.264), and customers perception ( =

0.822). By analyzing this result, Table 4.15 showed that the variables making the

biggest contribution to the model are customers perception and religious perspectives

then it is followed by demographic factors.

Here I can interpret that two independent variables have significant relationship with the

dependent variable which is customers confidence towards the products. But for the first

independent variable which is demographic factors, there is negative relationship with

the customers confidence towards the products. It means that when the demographic

factors decrease, so the customers confidence towards the products is increase.

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CHAPTER 5: CONCLUSION AND RECOMMENDATIONS


Following the research result, the last chapter summarizes and concludes the findings of

the research. Subsequently, this chapter highlights the problem arise in Islamic banking

system. This chapter also presents the implications of the study as well as some

recommendations for future research. Lastly, this chapter discusses the whole of the

research findings and recommendations in the conclusion section.

5.1 CONCLUSION

The operations of Islamic banks are based on Islamic Law which is different in terms of

spirit, cultural background and practice from conventional banks. However, both

conventional and Islamic banks operate in a globally integrated banking industry which is

characterized by strong competition and rapid changes in technology. Since the products

provided by both banks are generally undifferentiated, Islamic banks will have to compete

on the basis of high quality of products offered to its customers if they want to gain a

competitive edge against their rivals. Thus, it can gain customers confidence to attract

them in using Islamic banking products.

The researcher has concluded from the whole study on the findings and the analysis of the

data from the study undertaken. Through the interpretation and finding analysis from the

questionnaires, researcher is able to prove the problem statement thus reaching the

research objectives thoroughly. Basically, the problem statement was extracted from

literature review and being applied to specific problems on customers confidence towards

Islamic banking products.

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In analyzing customers confidence towards Islamic banking products, this research

focuses on demographic factors, religious perspectives and customers perception as the

independent variables while customers confidence towards the products as dependent

variable. Through this analysis, we will know whether the independent variables have

relationship with dependent variable or not.

From literature review, researcher discovered that there are lots of variables in determining

the selection of Islamic banking products among the customers. These variables were

choose to be fitted with customers confidence among the individuals who have use Islamic

banking products or not.

5.1.1 Demographic Factors

For the first independent variable, the result indicates that the Cronbachs Alpha

measure is 0.459. The result shows that this independent variable is range and

poor. It can be concluding that this variable is having low reliability and

acceptable.

The correlation between demographic factors and customers confidence

towards the products r= 0.344. It means that it has low correlation and proves to

have small relationship between demographic factors and customers confidence


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5.1.2 Religious Perspectives

For the second independent variable, the result indicates that the Cronbachs

Alpha measure is 0.915. The result shows that this independent variable is

range and excellent. It can be conclude that this variable is having high reliability

and acceptable. From the hypothesis testing, it shows that there is a positive

relationship between religious perspectives and customers confidence towards

the products.

Moreover, from the table, it shows the result of correlation between religious

perspectives and customers confidence towards the products is r = 0.570.

Looking at the theory from Guilfords, this result is moderate correlation and

proves to have substantial relationship between religious perspectives and

customers confidence towards the products.

5.1.3 Customers Perception

For the third independent variable, the result indicates that the Cronbachs Alpha

measure is 0.696. The result shows that this independent variable is range and

moderate. It can be concluding that this variable is having high reliability and

acceptable.

Moreover, from the table, it shows the result of relationship between customers

perception and customers confidence towards the products is r = 0.783. This

means that, between customers perception and customers confidence towards

the products has high correlation and proves to have marked relationship.

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From the hypothesis testing, there are two independent variable which religious

perspectives and customers perception are accepted as the factors of customers

confidence towards the products. These independent variables have a positive

relationship with the dependent variable where customers perception has strong

relationship with the dependent variable (customers confidence towards the products) at

significant level below 0.05 followed by religious perspectives. T

The other independent variable which demographic factors are rejected as the factors of

customers confidence towards the products since the significant

proposal_2009872522

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