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The Awareness and Attitude towards Islamic Banking: A Study in Malaysia

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 Global Review of Islamic Economics and Business, Vol. 2, No.3 (2015) 172-196
Faculty of Islamic Economics and Business-State Islamic University Sunan Kalijaga Yogyakarta
ISSN 2338-7920 (O) / 2338-2619 (P)

The Awareness and Attitude towards Islamic Banking: A Study in Malaysia

2
Buerhan Saiti
1
Institute of Islamic Banking and Finance, International Islamic University Malaysia
Address: Institute of Islamic Banking and Finance, IIUM, Jalan Gombak, 53100 Kuala Lumpur,
Selangor, Malaysia. Tel.: + 603 20822800; fax: + 60 20947728. E-mail: borhanseti@gmail.com

Abstract: The purpose of this study is to establish the level of awareness that Malaysians have
in relation to the culture of Islamic banking, the attitude of Malaysians towards Islamic banking
and a ranking of the bank selection criteria of Malaysians – and for each part of the study, to see
if Muslim responses are different from non-Muslim responses. A sample of 150 Muslim and
non-Muslim customers in Klang Valley was surveyed utilizing a questionnaire containing
specific questions relating to the awareness and attitudes of Islamic banking to their ranking of
the services required. It is found that the Muslims are more aware toward the culture of Islamic
banking, and as consequences, be more aware of the meaning of fundamental terms used in
Islamic banking and finance. In the case of the attitudes towards Islamic banks, there were
many differences in attitudes between Muslims and non-Muslims in country with majority of
Muslims. In the context of bank selection criteria, there are four significant differences among
Muslims and non-Muslims such as, mass media advertising, credit on favorable terms, financial
counseling and location near my place of work, while the others 18 criteria shows no significant
difference. The findings can be utilize by banks to measure the level of attitudes and acceptance
towards Islamic Banking among Muslims and non-Muslim and for those who is considering
setting up an Islamic banking operations in the country with majority of Muslims.

Keywords: Islamic Banking, Muslim, Non-Muslim, Awareness, Attitude.

Introduction

Although the practice of Islamic banking and finance in Malaysia is relatively new and
fast growing, Malaysia today has one of the world's most sophisticated banking environments
with a well developed financial market. The Islamic financial industry in Malaysia has
experienced rapid transformations the operating environment of Islamic finance in Malaysia has
also evolved dramatically. The product range has now expanded into broad array of innovative
instruments using contracts beyond Murabahah or Bai Bithaman Ajil (BBA). In past few years,
several new Islamic financial products were introduced which included residential mortgage
backed securities, commodity based financing, as well as investment and equity linked product
based on Musharakah, Mudarabah and Ijarah.
Islamic banking has become an important service being offered. There are several
relevant principles of Islam, to aid a better understanding of Islamic banking, namely Shariah
and Muamalat. Islamic law was a unique combination of different types of law, some
unchangeable like divine law as prescribed in the Al-Quran, and the hadis and sunnah, being
sayings and doings of the Holy Prophet; whilst others are open to modification and re-
interpretation.
Over the past three decades, Islamic banking has emerged as one of the fastest growing
industries. It has spread to all corners of the globe and received wide acceptance by both
Muslims and non-Muslims alike (Iqbal and Molyneux, 2005). Islamic banks perform the same
 Global Review of Islamic Economics and Business, Vol. 2, No.3 (2015) 172-196 173

essential functions as banks do in the conventional system, except that the need for them to
carry out their transactions in accordance with the rules and principles of Islam (Henry and
Wilson, 2004; Iqbal and Mirakhor, 2007).
As one of the most important players in service industry today, Islamic banking is no
longer regarded as a business entity striving only to fulfill the religious obligations of the
Muslim community, but more significantly, as a business that is ineluctably in need for winning
over customers whilst retaining the old ones (Wilson, 1995).
It is common misunderstanding that, Islamic banking is merely another form of
conventional banking minus the interest element, or a mere play of semantics by replacing the
word "interest" with "profit" (The Malaysian Bar, 2007). For a correct understanding of Islamic
banking, one must recognize and accept that at its very essence Islamic banking and
conventional banking is two distinct activities based on different principles and considerations.
Conventional banking, in four simple words is, "lending money at interest"; whereas
interest or riba in Islam is strictly prohibited (The Malaysian Bar, 2007). How then, the question
arises, is Islamic banking carried on? In Islamic banking, there is no lending or Islamic loans,
safe for qard hassan, an interest-free loan. Islamic banking is essentially a trading transaction,
based on an asset (which may be tangible or not) or an economic activity. Therefore, what is
done with the asset (or the activity) is the underlying transaction as opposed to conventional
banking where the underlying transaction is money-lending at an interest. Put differently, the
money is asset for conventional banking where the bank sell money based on money; however,
it is medium of exchange in Islamic banking where the money just facilitate our transactions.
The nature of Islamic finance today is largely fashioned by Islamic finance jurists who
hold the authority in determining the Shariah value of financial products. Shariah status is given
by virtue of contract validation. That is, a financial instrument that uses a contract deemed valid
by Islamic finance jurists is usually granted Shariah-compliant status.
Since the Holy Quran has condemned interest and enjoins profit creation via trading, the
Islamic finance jurists have resorted to applying the explicit meaning of al-bay, i.e. trading in
determining the Shariah legitimacy of financial instruments. By trading, they usually make
reference to sale of goods and services. For example, a contract of sale consists of the following
pillars:

i. Buyer and seller

ii. Object of sale
iii. Price
iv. Offer and acceptance

A valid contract must ensure that each of the above pillars does not contain the following
prohibitions:

i. Interest as riba
ii. Ambiguities (gharar)
iii. Gambling (maisir)
iv. Prohibited commodities such as liquor, pork etc.

While bankers see Islamic finance as a growth area, but they acknowledge that it's not for
everyone. First, not all Muslims are as fastidious about how their cash is invested as others,
which limits the appeal of these carefully constructed investments. Some investments have no
interest-free equivalent, which may also crimp the sector's growth. Plus, while profit margins on
shariah-compliant products are comparable with interest rates on non-Islamic investments, they
often cost more to set up. And Islamic scholars still differ on key aspects of shariah, making it
difficult to standardize all products across the Islamic world.
174 Saiti: The Awareness and Attitude towards Islamic Banking: A Study in Malaysia

At the same time, given a choice, many Muslims do opt for Islamic-approved banking.
That may eventually eat into traditional financial services, which is one reason Western banks
active in the Muslim world are so eager to bolster their shariah credentials. There is a segment
of customers within the current market that would switch to Islamic if the quality and benefits
offered were as good as conventional financial products. Clearly, Islamic finance has moved
into the mainstream.

Problem Statement

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.
The Islamic banking and finance today has emerged as an important component of the overall
Malaysian financial system that contributes to the growth and development of the Malaysian
economy.
From the discussion above, we understand that the level of understanding of the concepts
of Islamic banking would be the factor that would determine their acceptance of the Islamic
banking. However, as a country with majority of Muslims and minority non-Muslims, the
understanding and acceptance of the concepts may differs among these two groups. Following
that, it comes to few questions for the country with majority of Muslims, such as Malaysia that
“to what extent are local people aware of the culture of Islamic banking?” second, “what is the
attitudes of local people towards Islamic banking?” third “what are the bank selection criteria
for the local people?” By sampling both the Muslims majority and the non-Muslims in minority,
an appropriate comparison can be made.

Research Objectives

This research is a study of Islamic banking in Malaysia, a country which has a majority of
Muslims in its population. More particularly, the study seeks to establish the level of awareness
that Malaysians have in relation to the culture of Islamic banking, the attitude of Malaysians
towards Islamic banking and a ranking of the bank selection criteria of Malaysians – and for
each part of the study, to see if Muslim responses are different from non-Muslim responses. In
the context of what is said immediately above, the following three hypotheses were formulated:

1. Muslims, in contrast to non-Muslims, will be more aware of the culture of Islamic

banking and, as a consequence, be more aware of the meaning of fundamental terms used
in Islam and Islamic banking and finance.
2. Muslims, in contrast to non-Muslims, presently have a different attitude towards Islamic
banking.
3. There will be no significant differences between Muslims and non-Muslims in the
ranking of the various bank selection criteria.

Literature Review

The Culture of Islamic Banking

The Qur’an, the Muslims‟ Holy Book, explicitly deals with economic-related
matters and how they apply in Islam. The Shariah, this being the Islamic law of human
conduct, is derived from the Qur‟an. The Shariah prohibits what is called “Riba” (i.e.
payment over and above what has been lent – which causes the payment of interest or
usury to be a wrong). What the Shariah does not prohibit is profit acquired from a
 Global Review of Islamic Economics and Business, Vol. 2, No.3 (2015) 172-196 175

trading activity, the reasoning behind this positive stance being that there is a risk of
loss involved in any trading activity. With Riba, in theory, there is no risk of loss. For
example, with a conventional fixed-term deposit, all a depositor has to do is wait until
the maturity date of the deposit comes along and, if the mandate that he or she gave to
the bank was for the repayment of capital and interest, that is what the depositor will get
back (in essence, placing monies in a traditional fixed term deposit involves no risk).
Because of Riba, Islamic banks have had to develop financial products which are not in
conflict with the Shariah. This has resulted in traditional deposit and lending products,
which are made available by what can be called “conventional” banks, being restyled so
as to satisfy the Shariah. The task has been achieved by creating a number of special
financial products (Ali and Ali, 1994). With each of these products, the parties (i.e. the
depositors and the borrowers) can be considered as operating in a partnership to which a
risk is attached. Both will receive a rate of return which is based on performance –
rather than pay interest or receive interest at a pre-determined rate. The four types of
product are briefly described below.
The first product is called “Ijara” and involves a bank purchasing an asset and
leasing it to a client. The second product is called “Mudaraba” and involves a contract
being entered into between an Islamic bank and a client whereby the Islamic bank
provides all the capital a client needs for an enterprise. The client receives a share in the
profit as compensation for his know-how and management. The third product is called
“Musharaka” and it is very similar to “Mudaraba”. However, with “Musharaka”, the
client provides a proportion of the capital in addition to management and know-how.
The fourth product is called “Murabaha” and involves an Islamic bank purchasing
goods, or raw materials, or equipment, or machinery or any other items of economic
significance from a third party at the request of a client. These “goods” are then sold by
the bank to the client on a spot or deferred payment basis at purchase price plus an
agreed profit for the bank (some describe this as cost-plus or mark-up financing).
The main goals of an Islamic Banking and Financial system are to:
Implement the value system of the Qur'an and the Sunnah (tradition or practice of
Prophet Muhammad (SAW) in the realm of the Muslim socioeconomic system. Ibn
Taymiyahr.a. (n.d.), a distinguished scholar of Islam, explicates this as follows: ``In
mu'amalat (business transactions) all activities are permissible unless forbidden by
revelation (Qur'an) or the practice of Prophet Muhammad (SAW)''. The examples of
prohibited business activities would include dealing in gambling, liquor, pork etc. The
financial contracts of Islamic banks need to be clearly documented, equitable and avoid
the elements of Riba as explained in the above section.
Foster the growth of the economy of Muslim nations by developing financial
markets, institutions and instruments. A well-developed capital market, with efficient
institutions offering diverse financial facilities, can reduce the overall cost of capital. It
can enhance social welfare by facilitating the acceptance of projects whose (i) present
value of all relevant cash in-flows (benefits) after tax is greater than the present value of
all cash out-flows (cost) of the project; or (ii) the expected internal rate of return is
greater than a minimum threshold rate (or cost of capital). Furthermore, these necessary
conditions should also be satisfied for each party financing the project to alleviate
agency effects. This entails economic development, which is promoted in Islam, as
Prophet Muhammad (SAW) exhorted Muslims to undertake business ventures (tijarah)
as described in the following hadith (narration). Nu'aym ibn Abd Al-Rahman has
176 Saiti: The Awareness and Attitude towards Islamic Banking: A Study in Malaysia

quoted the Prophet (SAW) as saying: ``Nine tenths of earnings (Rizq) is in bai'
(business ventures), and tenth in cattle''. This was reported by Ibrahim Al-Harbi (Al-
'Iraqi, 1992) and by Sa'id ibn Mansur (Al-Suyuti, 1990).
Dampen the shocks of extreme economic output by promoting risk sharing
instruments whose payoffs are strictly contingent on the profitability of a firm or project
at a micro level. Financial facilities with fixed costs can severely strain the resources of
borrowers during a slowdown, which lead to bankruptcies and structural impairment of
the economy. The gist of Islamic financial securitization is summarized by the
following well-known hadith quoted by Kahf and Khan (1992), ``Alkharaj bi al
Daman.'' This implies that entitlement of return from assets vests in the one bearing the
risk of it.
Apart from the definition given above and as per the study by Gerrard and
Gunningham (1997), the level of awareness on the culture of Islamic banking is low for
Muslims and non-Muslims group in the country with minority of Muslims such as
Singapore and, as consequences, the awareness of the meaning of fundamental term and
Islamic banking are low as well.
From the description above, it comes to the question that in country with
majority of Muslims such as Malaysia, whether it means that the level of awareness on
the culture of Islamic banking will be higher for Muslims in comparing with the non-
Muslim groups.

Attitudes towards Islamic Banking

Part of the study of Erol and El-Bdour (1989), conducted in Jordan, and aimed at
establishing the attitude of local people towards Islamic banking. The authors designed nine
questions and/or statements which were published in the appendix of their article. They
concluded religious motivation did not appear to play a primary role in bank selection; the
opening of new branches was not an important factor in increasing the utilization of financial
services provided by Islamic banks; while 39.4 per cent of respondents would withdraw their
deposits if an Islamic bank did not generate sufficient profit to make a distribution in any one
year, 30.4 per cent would retain their deposits because the Islamic bank could distribute a higher
dividend the following year; there was a belief that Islamic banks were not offering sufficient
interest free loans which could contribute to solving community problems in a just and efficient
manner; the elimination of pre-determined interest rates on loans provided for, say, housing
construction, would benefit borrowers; and, if respondents came into an unexpected sum of
money, they would predominantly either start a small enterprise or project or place the monies
in a profit earning investment.
A number of similar studies were subsequently undertaken in a variety of contexts. In
Bahrain, Metawa and Almossawi (1998) concluded that the most important factor in
determining the attitudes of Islamic bank customers was religion then profitability. In addition,
most Bahraini bank customers were satisfied with the quality of Islamic bank services,
especially investment accounts. On other hand, the lowest satisfaction was with more complex
Islamic financing schemes because of the relatively high costs. In Jordan, Naser et al. (1999)
extended the early work by Erol and El-Bdour (1989), but concluded that the bank reputation
and the religious beliefs were the two most important factors motivating the use of Islamic
banks services. And in Kuwait, Al-Sultan (1999) considered the attitudes of several hundred
customers towards the products and services offered by the interest-free Kuwait Finance House.
Al-Sultan (1999) confirmed that adherence to Islam was the primary motivating factor for
Kuwaitis dealing with an Islamic bank. That said, slightly more than half of the respondents
preferred to deal with a conventional banks because of the better service record. This meant that
 Global Review of Islamic Economics and Business, Vol. 2, No.3 (2015) 172-196 177

any religious motivation in preferring an Islamic bank was subsumed by the greater concern for
the quality of bank services.
In Singapore, Gerrard and Cunningham (1997) also considered attitudes towards Islamic
banking, though in the context of a banking system where no Islamic banks were yet present.
While the survey results showed, as expected, that non-Muslims were completely unaware of
Islamic methods of finance, Muslims fared little better.
Despite all the study above, however, it is also important to understand in country with
majority of Muslims in this region, such as Malaysia, whether the Muslims are going to have
higher level of attitude towards the Islamic banking due to their entire Islamic environment.

Bank Selection Criteria

Many studies have investigated the bank selection criteria or the reasons on the basis of
which customers choose to bank with specific banks (Anderson et al., 1976; Denton and Chan,
1991; Erol and El-Bdour, 1989; Erol et al., 1990; Khazeh and Decker, 1992; Kaynak et al.,
1991; Laroche and Taylor, 1988; Levesque and McDougall, 1996; Tan and Chua, 1986). These
studies have identified a number of such factors: convenience (i.e. the location), friends'
recommendations, reputation of bank, availability of credit, competitive interest rates,
friendliness of bank staff, service charges, adequate banking hours, availability of ATM, special
services and the quality of services on checking accounts. The relative importance of these
factors varies from one country to another depending upon the age, gender, income, marital
status, occupation and cultural background of customers as well as the type of bank (Islamic or
conventional bank).
For example, Anderson et al (1976) used “determinant attribute analysis” in a survey in
the USA and stratified their samples according to convenience and services. Based on 15
selection criteria, convenience customers selected „recommendation by friends” as the most
important factor, followed by “location”, “reputation”, “service charges” and “friendliness of
bank staff.” The service customers ranked “availability of credit” as the most important factor
followed by “reputation”, “recommendation by friends”, “friendliness of staff” and “interest
charged on loans.”
The findings by Anderson et al. (1976) are supported by Tan and Chua (1986). In their
research in Singapore, Tan and Chua found that advice of friends, neighbors and family
members had a stronger influence on customers‟ decisions, compared with other variables in
selecting financial institutions. This finding is consistent with the ethos of oriental culture which
emphasizes social and family ties.
Kaynak et al. (1991) reported differences in bank selection criteria according to gender,
age and educational background of bank customers in Turkey. They reported that factors like
the bank's reputation and its image, business hours, parking facilities, a wide range of services
offered, recommendations of friends and relatives, fast and efficient service, being able to pay
utility bills and financial counseling services were considered as more important by male
customers than the female customers in their selection of a commercial bank in Turkey.
Furthermore, the bank location played a more important role for bank customers under the age
of 40 as compared to other age groups that were studied. Kaynak et al. (1991) also reported that
bank customers who had more than a primary school education considered friendliness of bank
employees, fast and efficient service, the bank location and availability of credit more important
than the customers who only had a primary school education.
Erol and El-Bdour (1989) and Erol et al. (1990) have specifically looked into the bank
selection criteria used by Jordanian customers to bank either with an Islamic bank or a
conventional bank. These studies reported that customers who only banked with the Islamic
banks chose to do so because of: provision of a fast and efficient service; the bank's reputation
and image; and confidentiality of the bank. The same three factors were of greatest to those who
178 Saiti: The Awareness and Attitude towards Islamic Banking: A Study in Malaysia

patronized conventional banks alone, but in a difference sequence, the sequences being:
“confidentially of the bank”, “the bank‟s reputation and image” and “the provision of a fast and
efficient service.” There were significant differences between patronizes of the two types of
bank as regard pricing policies (these being the availability of credit on favorable terms, lower
service charges on cheque accounts and for other services, lower interest charges on loans,
higher interest payments on saving accounts – which were significantly more important as
regards those who patronized conventional banks. Two other bank selection criteria were found
to have significant differences, these beings the need for a wide range of services (this was more
important for those who patronized conventional banks) and those wanting financial consulting
services to be provided (this was more important for those who patronized Islamic banks).
Riggall (1980) surveyed 250 customers who had just opened accounts six months before
and found that the location was cited as the key factor in selecting a bank. Evans (1979)
investigated the influence of situation on an individual‟s choice of a bank. He divided the
selection criteria into two factors, i.e. “service factors” and “situational factors”. The findings
showed that each of the factors had not indicated the same degree of importance in influencing
an individual‟s behavior in his or her selection of bank.
While Erol and El-Bdour (1989) compared Islamic with conventional bank customers,
there is limited research on comparing the Muslim and non-Muslim bank customers‟ perception
towards their bankers in a banking environment especially in country with majority Muslim.
Such a comparison is considered important because the information obtains from such a study
can be used to help both banks enlarge their customer base.
Following that, it comes to our survey that it is important to understand whether there is
any differences consideration for a Muslim in comparing with a non-Muslim when they visit a
bank in Malaysia, the country with majority of Muslims in this region.

Methodology

Type of the Data

A total of 186 questionnaires were distributed and the usable samples are of 150, with the
response rate of 81% for Muslim and non-Muslim in Klang Valley. The Klang Valley was
chosen because it has the highest concentration of banking intuitions in Malaysia. Customers
had a wide range of banks and other non-bank financial institutions from which to choose. The
data for this study were collected through self administered questionnaires distributed by MBA
students group from University Malaya and the distribution took place in a one week period.
People were approached, explaining the nature of the study and asked if they would be prepared
to fill in the questionnaire.

Sampling Technique

Proportionate method was used for this research based on the Population and Housing
Census 2000. The Population and Housing Census 2000 is the fourth Census implemented since
the formation of Malaysia, the previous Censuses being conducted in the years 1970, 1980 and
1991. Malaysia is a multi-religious society and Islam is the official religion. According to the
Population and Housing Census 2000 figures, approximately 60.3% of the population practiced
Islam, 19.2% Buddhism, 9.1% Christianity and 6.3% Hinduism. The remaining of 5% was
accounted for by other faiths, including Animism, Shamanism, Sikhism, Baha, Taoism,
Confucianism, and other traditional Chinese religions. In other words, the total of Muslims is
60% versus of the non-Muslims of 40%.
From here, the distributions of survey forms were targeting of 60% Muslim respondents
and 40% of non-Muslims respondents so that they were in line with ratio of Muslims to non-
Muslims as quoted in the Population and Housing Census 2000. Altogether, 150 respondents
 Global Review of Islamic Economics and Business, Vol. 2, No.3 (2015) 172-196 179

were received. With 92 Muslim respondents (61.3%) and non-Muslims (38.7%), this is very
close to the national percentage of 60% Muslims: 40% non-Muslims.

Instrument

The questionnaire had four sections to it. The first section listed six terms (namely, Riba,
Shariah, Ijara, Mudarabah, Musharaka and Murabaha, all of which have been briefly described
in the literature survey section of this paper) which are used in Islam or are used in Islamic
banking and finance. The respondents were asked to indicate if they knew what the term meant
and, if so, to briefly describe the meaning of each term.
The second section contained a series of statements or questions that were styled on those
used by and published at the end of the study of Erol and El-Bdour (1989) and Gerrard and
Gunningham (1997).
In the third section of the questionnaire, the respondents were asked to indicate, on a
Likert-type scale, ranging from “of no important”, “not important”, and “important” to “very
important” on how they viewed a series of factors in selecting a bank. Many of the factors were
adapted from Kaynak (1986), Erol and El Bdour (1989) and Gerrard and Gunningham (1997).
The fourth section was designed to gather the information about the samples‟ personal,
demographic such as gender, age and religion and economic characteristic.

Research Results and Discussion

Demographics Profile of the Respondents

Table 1 summarizes the basic statistics on religion, age, educational level, type of
employer and job, years of experience and monthly income or sales of the respondents. The
respondents are predominantly Muslim, constituting 61 percent of the respondents. Almost 84
percent of respondents fall in the range of 20-39 years of age and we believe that customers and
depositors within this age group are likely to have far-reaching influence on the Islamic banking
policies. This may be plausible since banks normally regard clients within this age category as
relatively less risky age groups, especially in advancing loans and other financing transactions.
The results reported in the table above also indicate that the majority of respondents are
well educated, with more than 84 percent holding a bachelor degree or above while 10.7 percent
are professionals. Majority of the respondents (58 percent) work in the private sector while 34.7
percent of the respondents are in the management position. More than 44 percent of the
respondents have working experience of between 5 and 14 years.
180 Saiti: The Awareness and Attitude towards Islamic Banking: A Study in Malaysia

Table 1. Profile of the Respondents

Items Frequency Percent

Religion
Muslim 92 61.3
Non-Muslim 58 38.7

Age
20 – 29 74 49.3
30 – 39 52 34.7
40 – 49 20 13.3
>50 4 2.7

Level of Education
Secondary 7 4.7
University/College 127 84.7
Professional 16 10.7

Employer
Private 87 58.0
Government/Public Agency 32 21.3
Self Employed 30 20.0

Type of job
Professional 38 25.3
Management 52 34.7
White Collar 27 18.0
Blue Collar 2 1.3
Own Business 30 20.0

Years on Job/Business
<5 61 40.7
5–9 36 24.0
10 – 14 31 20.7
15 – 20 13 8.7
>20 9 6.0

Monthly Income
<RM1,000 7 4.7
RM1,000 – RM1,999 13 8.7
RM2,000 – RM2,999 31 20.7
RM3,000 – RM3,999 22 14.7
>RM4,000 47 31.3

Monthly Sales
<RM15,000 8 5.3
RM15,000 – RM29,999 3 2.0
RM30,000 – RM44,999 3 2.0
RM45,000 – RM59,999 2 1.3
>RM60,000 13 8.7
 Global Review of Islamic Economics and Business, Vol. 2, No.3 (2015) 172-196 181

Given the respondents working experience, as depicted in the table, majority (31.3
percent) of the respondents are earning more than RM 4,000 per month. Almost 21 percent of
the surveyed respondents earn between RM 2,000-RM 2,999 per month. Combined together, the
respondents in those two income groups represent approximately 42 percent of the total sample.
This result indicates that most of the respondents can be classified as middle-class income
earners.
From 150 respondents, 20 percent have their own business with majority (8.7 percent) of
respondents having their own business generating more than RM 60,000 in sales per month.
Thus, with this sample, the study may provide useful insights on how these promising
respondent groups perceive the patronage factor of Islamic banks.

Culture of Islamic Banking

Hypothesis 1: Muslims, in contrast to non-Muslims, will be more aware of the culture of

Islamic banking and, as a consequence, more aware of the meaning of fundamental terms used
in Islam and Islamic banking and finance.

Frequency Analysis of Culture of Islamic Banking

This subsection of the analysis sets out to address the first hypothesis. Not surprisingly, as
shown in Table 2, the non-Muslims had little awareness of the meaning of fundamental terms in
Islam – with only 20.7% of the answers accurately describing the term Riba and also 20.7%
accurately describing Shariah.
What is not surprising is the general high of awareness by Muslims of the meaning of
Riba and Shariah, with 85.9% knowing the meaning of Riba and 73.9% Shariah. In the context
of Islamic financial terms, Muslim could explain the meaning of Murabaha, Ijara, Mudarabah
and Musharaka, percentage are accordingly 43.5%, 43.5%, 40.2% and 34.8%, where as non-
Muslim are 8.6%, 13.8%, 10.3% and 5.2%.

Table 2. Frequency Analysis of Knowledge of Basic Terms in Islam and Islamic Banking

Knowledge of Basic Terms in Islam and Islamic Banking

Muslim Responses Non-Muslim Responses

n=92 n=58
Term Correct Correct
Riba 79 (85.9%) 12 (20.7%)
Shariah 68 (73.9%) 12 (20.7%)
Ijarah 40 (43.5%) 5 (8.6%)
Mudarabah 40 (43.5%) 8 (13.8%)
Musharakah 37 (40.2%) 6 (10.3%)
Murabahah 32 (34.8%) 3 (5.2%)

The previous study in Singapore found that both Muslim and non-Muslim have poor
awareness of the culture Islamic banking (Gerrard and Cunningham, 1997). This can be
explained that Singapore is a country with minority Muslim country. With that, the
understanding of non-Muslims group toward the Islamic term is very low and this also includes
the Muslims in compare with the Malaysian. In Malaysia with majority of Muslims, customer
182 Saiti: The Awareness and Attitude towards Islamic Banking: A Study in Malaysia

will have higher positive perception towards the Islamic banking due to the more Islamic
environment here.
Besides, with the aggressive of Malaysian government to promote Malaysia to become
the country famous with Islamic banking in the region, this had helped to create more awareness
to Malaysians. This can be proved again with the statistics from our Bank Negara Malaysia that
since year 2000, the domestic Islamic banking industry has been growing at an average rate of
18 percent per annum in terms of assets (Aziz, 2006).

Chi-Square Analysis of Knowledge of Basic Terms in Islam and Islamic Banking

Table 3. Chi-square Analysis of Knowledge about Riba by Respondents’ Religion

Respondent's Religion
Muslim non-Muslim Total
Knowledge about Know Count 79 12 91
Riba % within
Respondent's 85.9% 20.7% 60.7%
Religion
Do not Count 13 46 59
know
% within
Respondent's 14.1% 79.3% 39.3%
Religion
Total Count 92 58 150
% within
Respondent's 100.0% 100.0% 100.0%
Religion
2 (1, 150) =63.34, p < .05

Table 4. Chi-square Analysis of Knowledge about Shariah by Respondents’ Religion

Respondent's Religion
Muslim non-Muslim Total
Knowledge Know Count 68 12 80
about Shariah % within
Respondent's 73.9% 20.7% 53.3%
Religion
Do not Count 24 46 70
know
% within
Respondent's 26.1% 79.3% 46.7%
Religion
Total Count 92 58 150
% within
Respondent's 100.0% 100.0% 100.0%
Religion
2 (1, 150) =40.49, p < .05
 Global Review of Islamic Economics and Business, Vol. 2, No.3 (2015) 172-196 183

Table 5. Chi-square Analysis of Knowledge about Ijara by Respondents’ Religion

Respondent's Religion
Muslim non-Muslim Total
Knowledge Know Count 40 5 45
about Ijara % within
Respondent's 43.5% 8.6% 30.0%
Religion
Do not Count 52 53 105
know
% within
Respondent's 56.5% 91.4% 70.0%
Religion
Total Count 92 58 150
% within
Respondent's 100.0% 100.0% 100.0%
Religion
2 (1, 150) =20.58, p < .05

Table 6. Chi-square Analysis of Knowledge about Mudarabah by Respondents’ Religion

Respondent's Religion
Muslim non-Muslim Total
Knowledge Know Count 40 8 48
about % within
Mudarabah Respondent's 43.5% 13.8% 32.0%
Religion
Do not Count 52 50 102
know
% within
Respondent's 56.5% 86.2% 68.0%
Religion
Total Count 92 58 150
% within
Respondent's 100.0% 100.0% 100.0%
Religion
2 (1, 150) =14.41, p < .05

From the Tables 3-8, Chi-square analysis is used to test the significant level because the
data we collected are nominal data and to compare at the two different groups of Muslims and
non-Muslims. Overall, from Chi-square analysis we found out that there is a significant
difference between the religion and the Islamic banking terms at significant level of p < .05.
Thus, Muslims were more aware of the meaning of fundamental terms in Islam, Islamic
financial system where as non-Muslims were almost unaware of the meaning of Islamic
financial terms. The first hypothesis is accepted in the context of fundamental terms in Islam
and Islamic banking and finance terms.
184 Saiti: The Awareness and Attitude towards Islamic Banking: A Study in Malaysia

Table 7. Chi-square Analysis of Knowledge about Musharaka by Respondents’ Religion

Respondent's Religion
Muslim non-Muslim Total
Knowledge Know Count 37 6 43
about Musharaka % within
Respondent's 40.2% 10.3% 28.7%
Religion
Do not Count 55 52 107
know
% within
Respondent's 59.8% 89.7% 71.3%
Religion
Total Count 92 58 150
% within
Respondent's 100.0% 100.0% 100.0%
Religion
2 (1, 150) =15.52, p < .05

Table 8. Chi-square Analysis of Knowledge about Murabaha by Respondents’ Religion

Respondent's Religion
Muslim non-Muslim Total
Knowledge Know Count 32 3 35
about Murabaha % within
Respondent's 34.8% 5.2% 23.3%
Religion
Do not Count 60 55 115
know
% within
Respondent's 65.2% 94.8% 76.7%
Religion
Total Count 92 58 150
% within
Respondent's 100.0% 100.0% 100.0%
Religion
2 (1, 150) =17.44, p < .05

Attitude towards Islamic Banking

Hypothesis 2: Muslims, in contrast to non-Muslims, presently have a different attitude

towards Islamic banking.
 Global Review of Islamic Economics and Business, Vol. 2, No.3 (2015) 172-196 185

Chi-Square Analysis of Attitude towards Islamic Banking

This section is related to attitudes towards Islamic banking. We analyze the attitudes
towards Islamic banking by six different questions. We analyze the first three questions by Chi-
square analysis.

Table 9. Chi-square Analysis of Reason which motivate people to deposit their money at
an Islamic Bank
Respondent's Religion
Muslim non-Muslim
NO % NO %
The reasons which 1.Religious reasons solely 31 33.7% 9 15.5%
motivate people to deposit
their money at an Islamic
bank are:
2. Profitability reasons solely 3 3.3% 17 29.3%

3.Religious and profitability 56 60.9% 18 31.0%

reasons combined

4. I do not know 2 2.2% 14 24.1%

2
 (1, 150) =45.20, p < .05

Table 10. Chi-square Analysis of reaction of customers to bank announcement of no profit

distribution on investments
Respondent's Religion
Muslim non-Muslim
NO % NO %
In case an Islamic bank 1. Keep the deposit at the same or 40 43.5% 3 5.2%
announced that it had no a different Islamic bank, because
profit to distribute on placing the deposit with a non-
investment and savings Islamic bank contravenes Islamic
deposits for any one year, if principles?
you were an depositor,
would you:
2. Withdraw all deposits at once 18 19.6% 34 58.6
and switch them to one or more %
banks which guarantee a return?
3. Remain a depositor at the 22 23.9% 11 19.0
Islamic bank because it could %
distribute high profits in
subsequent years?
4. Consult relatives and 7 7.6% 2 3.4%
neighbors, and then decide what
to do?
5. I do not know 5 5.4% 8 13.8
%
2 (1, 150) =38.15, p < .05

In the first question, we ask about the reasons which motivate people to deposit their
money at an Islamic bank. They can choose between religious, profitability, the combination of
186 Saiti: The Awareness and Attitude towards Islamic Banking: A Study in Malaysia

them and nothing. From the table 9, we could see that as we predict the religious reason is more
important among Muslims with 33.7% rather than non-Muslims with 15.5%. Also as it was
predictable the profitability reason is more important among non-Muslims with 29.3% while
this reason is not important for most of the Muslims with only 3.3%. One important note in the
analysis is that profitability beside religious is much more important rather than religious reason
solely among Muslims with 60.9%. Also it is very interesting that this reason also is the most
important motivation among non-Muslims with 31%.
When we compare our results with other works in this field such as Gerrard and
Cunningham (1997), we found the almost the same results in all of them. In Gerrard and
Cunningham (1997), they also found that religious and profitability are most important reason
to invest in Islamic banks, and the religious solely as a reason has the second rank.
In the second question we asked about reaction of customers to bank announcement of
no profit distribution on their investments. As we forecasted, the large portion of Muslims keep
the deposit at the same or a different Islamic bank, because placing the deposit with a non-
Islamic bank contravenes Islamic principles. On the other hand, Table 10 informed us that, this
is the least popular reason among non-Muslims with only 5.2%. Also as we forecasted in this
situation 58.6% non-Muslims withdraw all deposits at once and switch them to one or more
banks which guarantee a return while only 19.6% of Muslims will switch to another bank for
this reason.

Table 11. Chi-square Analysis of if you unexpectedly acquired a substantial sum of money
Respondent's Religion
Muslim non-Muslim
NO % N %
O
If I unexpectedly acquired a 1. Deposit the money in a commercial 9 9.8% 10 17.2%
substantial sum of money, I bank which guarantees a return in
would: accordance with an interest-based
system
2. Start up a small enterprise or project 21 22.8% 7 12.1%
which would earn profits
3. Deposit the unexpected sum in an 28 30.4% 16 27.6%
Islamic bank operating in accordance
with the profit-loss-sharing system
4. Purchase a larger house 5 5.4% 1 1.7%

5. Exchange my car for a new and 2 2.2% 0 .0%

luxurious model
6. Invest the money, but not deposit it 17 18.5% 14 24.1%
into an account at either an Islamic or
non-Islamic bank
7. Combination of the above 10 10.9% 10 17.2%

2 (1, 150) =7.986, p>.05

Also in the similar situation more Muslims will remain a depositor at the Islamic bank
because it could distribute high profits in subsequent years rather than non-Muslims. When we
compare our results with Gerrard and Cunningham (1997) we see that the majority of non-
Muslims will withdraw their money in this situation in both researches. Also, we can see that
the majority of Muslims keep their investments in both researches, but the main difference here
is that in Gerrard and Cunningham (1997) they expect a high return in the following year. But in
 Global Review of Islamic Economics and Business, Vol. 2, No.3 (2015) 172-196 187

our research, Muslims keep their money because placing the deposit with a non-Islamic bank
contravenes Islamic principles.
In the third question we asked our respondents that if they unexpectedly acquired a
substantial sum of money, what they will do with this money. As you can see from Table 11,
this motivation does not have any significant difference among Muslims and non-Muslims. The
Chi-Square analysis is 2 (1, 150) =7.986, p>.05 and shows that there is no significant
difference among Muslims and non-Muslims in this field. Deposit the unexpected sum in an
Islamic bank operating in accordance with the profit-loss-sharing system has the highest
probability among both groups with 30.4% and 27.6% respectively.
After this reason starting up a small enterprise or project which would earn profits and
investing the money, but not deposit it into an account at either an Islamic or non-Islamic bank
is most popular reasons among Muslims with 22.8% and 18.5%. On the other hand non-
Muslims prefer to invest the money, but not deposit it into an account at either an Islamic or
non-Islamic bank with 24.1%, and after that depositing the money in a commercial bank which
guarantees a return in accordance with an interest-based system and a combination of all
solutions are popular among non-Muslims with 17.2%.
When we compare our case with Gerrard and Cunningham (1997), we observe that in
their research there is a significant difference between two groups while we could not find any
significant difference between two groups. In Gerrard and Cunningham (1997) most of the
Muslims chose to invest in an Islamic bank operating in accordance with the profit-loss-sharing
system while non-Muslims chose to deposit the money in a commercial bank which guarantees
a return in accordance with an interest-based system.

Mann-Whitney U Test of Attitude towards Islamic Banking

We analyzed the remaining questions of this section with Mann-Whitney test. As we

predicted, in all the questions the analysis shows a significant difference among Muslims and
non-Muslims.
The first question we asked from our respondents was about the level of their agreement
about if more branches of Islamic banking institutions open up throughout a country, more
people will utilize the services provided by these banks?
The analysis of the results in Table 12 showed a significant difference (Mann-Whitney U-
test = 1697.5, z = -4.157, p <.05). This means Muslims are more concerned about Islamic
banking and if they have enough facilities especially convenient access to the bank branches,
they will invest more than before in Islamic banks. The analysis shows that the mean rank
among Muslim respondents is 86.05 while this is much less among non-Muslims with only
58.77. Because in our scaling we use higher values from agreement and lower values for
disagreement, we can see the higher agreement of Muslims to this issue. In Gerrard and
Cunningham (1997), also we see that the majority of Muslims strongly agree with this question
while the non-Muslim respondents disagree or just agree with this question and there is
significant difference among two groups.
188 Saiti: The Awareness and Attitude towards Islamic Banking: A Study in Malaysia

Table 12. Mann-Whitney U Test Comparison of attitudes towards Islamic Banking

Respondent' N Mean Sum of
s Religion Rank Ranks

Do you agree that if more branches of Islamic banking Muslim 92 86.05 7616.50
institutions open up throughout a country, more people will
utilize the services provided by these banks? Non-Muslim 58 58.77 3408.50

Total 150

Do you agree that the granting of interest-free loans by Muslim 92 84.97 7817.50
Islamic banks is considered a contribution on the part of the
bank to help the community in a just and efficient manner? Non-Muslim 58 60.47 3507.50

Total 150

Do you agree that the elimination of pre-determined interest Muslim 92 84.76 7797.50
rates charged on loans provided for investment projects,
purchasing cars and financing on the basis of profit-loss- Non-Muslim 58 60.82 3527.50
sharing between the bank and the borrower will be
advantageous to the borrower? Total 150

In the second question we asked them about their level of agreement related to consider
the granting of interest-free loans by Islamic banks as a contribution on the part of the bank to
help the community in a just and efficient manner.
In this part also we observe a significant difference among Muslims and non-Muslims
respondents (Mann-Whitney U-test = 1796.5, z = -3.77, p<.05). While most Muslims are
strongly agree with this question with mean rank equal to 84.97, the non-Muslim respondents
are almost neutral about this with mean rank equal to 60.47. This shows granting of interest-free
loans by Islamic banks can be considered by Muslims as the bank contribution to help
community in a just and efficient manner while it is not so important among non-Muslims. In
Gerrard and Cunningham (1997), also we see that the majority of Muslims around 86% strongly
or just agree that interest-free loans are a way to help community. On the other hand, the non-
Muslim respondents disagree or just agree with this question and there is significant difference
among two groups.
The third question was about the level of agreement of respondents about the issue the
elimination of pre-determined interest rates charged on loans provided for investment projects,
purchasing cars and financing on the basis of profit-loss-sharing between the bank and the
borrower will be advantageous to the borrower.
In this section also we found a significant difference between Muslims and non-Muslims
(Mann-Whitney U-test = 1816.5, z = -3.611, p<.05). The majority of Muslims strongly agree
that elimination of pre-determined interest rates charged on loans will be advantageous to the
borrower with a mean rank of 84.76%. On the other hand we observe that non-Muslims are
almost neutral about this issue with mean rank equal to 60.82%.
When we compare our results with Gerrard and Cunningham (1997), we see that they
also found a significant difference among Muslims and non-Muslims. In their research, they
found that more than 76% of Muslims strongly or just agree with this issue while less than 12%
of non-Muslims strongly agree with that.
In summarize to the hypothesis 2 of our study, Muslims, in contract to non-Muslims, have
a significant difference attitude towards Islamic banking is only partially supported in the
country with majority of Muslims, Malaysia.
 Global Review of Islamic Economics and Business, Vol. 2, No.3 (2015) 172-196 189

Bank Selection Criteria

Frequency Analysis of Bank Selection Criteria

Hypothesis 3: There will be no significant differences between Muslims and non-

Muslims in the ranking of the various bank selection criteria.
From the above Table 13, the five most important factors considered by Muslim when
selecting their financial institutions is “provision of fast and efficient service”, “confidential of
banks”, “bank reputation and image”, “a wide range of services provided”, and “friendliness of
bank personnel”. However, for non-Muslims, the top three factors are similar in sequence with
the Muslims while they ranked “lower interest charges of loans” as forth and follow with “a
wide range of services provided‟ and “ friendliness of bank personnel”.

Table 13. Bank Selection Criteria Ranking

Respondent Religion
Muslim Ranking Non-Muslim Ranking
Provision of fast and efficient service 3.84 1 3.83 1
Confidentiality of bank 3.83 2 3.71 2
Bank‟s reputation and image 3.67 3 3.53 3
A wide range of services provided 3.61 4 3.45 5
Friendliness of bank personnel 3.61 4 3.45 5
Lower interest charges on loans 3.53 6 3.52 4
Availability of credit on favorable terms 3.47 7 3.21 10
Available parking space nearby 3.43 8 3.31 9
Financial counseling provided 3.4 9 3.12 12
Lower service charges on cheques 3.33 10 3.14 11
Confidence in bank‟s management 3.32 11 3.36 8
Higher interest payment on savings 3.28 12 3.45 5
Reception received at bank 3.26 13 3.09 13
Location near my place of work 3.1 14 2.79 15
Location near my home 3.02 15 3 14
External appearance of bank 2.92 16 2.67 16
Counter partitions in bank 2.73 17 2.47 19
Recommendation of friends 2.4 18 2.4 20
Recommendation of relatives 2.35 19 2.31 21
Interior comfort 2.27 20 2.52 18
Mass media advertising 2.21 21 2.55 17
Overdraft privileges on current account 1.88 22 1.98 22

From here, we can see a very close similarity for Muslim and non-Muslims in Malaysia
when they selecting a bank or financial instructions where they are very much concern on the
fast and efficient services provided to them. In this bank service industry where the selling
products are mostly similar, so the differentiation from the competitors would be how fast and
efficient the service provided in order to obtain the competitive advantages.
Besides, both Muslim and non-Muslims are very concern on the confidentially and
reputation of the bank. It would be not surprise that in dealing with the financial or “money”, all
190 Saiti: The Awareness and Attitude towards Islamic Banking: A Study in Malaysia

the customers are tend to prefer to have their own privacy and in principal, those banks with
high confidentiality would normally have good reputation in the market.
We have review some other journal as per discussed in the literature review, but for the
purpose of this present study, focus will be made on the published works of Erol and El-Bdour
(1989) in Jordan (because the authors compared the bank selection process in relation to
“conventional” and “Islamic” banks and Gerrard and Cunningham (1997) in Singapore (because
the author compared responses about the bank selection criteria of both Muslims and non-
Muslims in the country with minority Muslims).
There are similarities and differences between the findings of this research and the
findings of earlier research. The selection of “fast and efficient service” as one of the most
important factors in selection decision by Muslims and non-Muslims is consistent with the
findings by Erol and El-Bdour (1989) at Jordan and Gerrard and Cunningham (1997) in
Singapore. As such, whether the research conducted in country with majority of Muslim, such
as Jordan and Malaysia or minority Muslims such as Singapore, respondents still consider the
services provided as the most important factor. Similarly in Singapore, Malaysian of Muslim
and non-Muslims also rated high for “confidentiality of bank” and “bank‟s reputation and
image”.
For 5 criteria that are not important at all for Muslims when selecting a bank are
“overdraft privilege on current account”, “mass media advertising”, “interior comfort”,
“recommendation of friends”, and “recommendation of relatives”. However, for non-Muslims,
all the not important criteria are same as Muslims, but in different sequence, except non-
Muslims had selected “counter partition in banks” as one of the 5 less important criteria. From
the above, we can see that overdraft privilege is no longer an important criterion for the
customers probably due to the easier approval of personal loan nowadays. Most of the Islamic
or commercial banks are now offering the short term personal loan to an individual.
“Recommendation by friends and relatives”, which was considered the most important
factor by Erol and Edour (1989), is ranked very low in this research. However, this present
result is similar to the research by Gerrard and Cunningham (1997) in Singapore where he also
found that Muslims and non-Muslims ranked low for “recommendation of friends and relative”.
The inconsistency between the findings can be explained that people in Singapore and Malaysia
(close neighbor) have probably less social links, so friends and relatives‟ advices has less
influence on someone‟s decision-making process. In other words, people in Malaysia and
Singapore would more like to make the decision based on their personality attitude, behavior or
understanding rather than listening to the others. Furthermore, banks have aggressively
advertised their promotions via media such as television, newspaper, magazines, etc. As such, it
is less important for a customer to get recommendation from their friend or relatives as they can
also easily get in touch with the said advertisement.
Convenient location, or location being near home or office, which was found to be not so
important in earlier researches by Gerrard and Cunningham (1997) is also found to be
unimportant in this research. This can probably be explained that the development of Internet
banking nowadays had become very common and useful for most of the customers. With
internet banking, customer can easily access to their account at any place any time to do their
transaction or payment. As such, most respondents rated low for “location being near home or
office”.
Besides, the demographic of this research also found that most of the respondents are
young executive and these groups of customers are believed to have more exposure to the
internet services. Internet has become the natural way of finding information for young and
well-educated people world-wide. The adoption of the internet is faster than it has been for any
media, such as radio took 38 years and TV took 13 years to reach 50 million users while internet
achieved this level in only five years (Ellsworth and Ellsworth, 1997). With that, it is not
surprise that they would mostly prefer to use the internet technology to replace the traditional
banking system.
 Global Review of Islamic Economics and Business, Vol. 2, No.3 (2015) 172-196 191

“Distribution-free” or “nonparametric” tests (Siegel and Castellen, 1988) are employed

for the statistical analyses of results because the scales of the variables are ordinal and tests of
normality in the data (through histogram and normal plot) suggest the data generally are not
normal. Mann-Whitney U Test was employed to test the differences among the two groups of
Muslims and non-Muslims in related to the bank selection criteria.
Table 14 shows the Mann-Whitney U Test comparison of bank selection criteria based on
religion. We have identified earlier on the significant differences level at
P <.05 before the test and four significant differences were observed in the present study.

Table 14. Mann-Whitney U Test Comparison of Bank Selection Criteria by Religion

Respondent's Sum of
Religion N Mean Rank Ranks

Financial counseling provided Muslim 92 81.10 7461.50

Non-Muslim 58 66.61 3863.50

Total 150

Availability of credit on favorable Muslim

92 81.14 7464.50
terms

Non-Muslim 58 66.56 3860.50

Total 150

Mass media advertising Muslim 92 69.23 6369.00

Non-Muslim 58 85.45 4956.00

Total 150

Location near my place of work Muslim 92 81.50 7498.00

Non-Muslim 58 65.98 3827.00

Total 150

First, there is a significant differences between religion and financial counseling provided
by the bank (Mann-Whitney U-test = 2152.5, z = 2.181, p <.05). Muslims have greater intention
to have financial counseling from the bank in compared with non-Muslim. It means that
Muslims would prefer to visit those banks that have provided the financial counseling service to
the customers. From here, we can see that Muslims traditionally have less involved in the
business would prefer the bank to give them a proper guidance regarding their financial issue.
However, from the demographic of this study, we noticed that non-Muslims are mostly referred
to the Chinese group and this group is actually already well famous in running business, so the
financial counseling services seem not an important factor for them.
192 Saiti: The Awareness and Attitude towards Islamic Banking: A Study in Malaysia

Table 15. Mann-Whitney U Test Comparison of Bank Selection Criteria by Religion

Mann-Whitney U Z Asymp. Sig. (2-tailed)
Provision of fast and efficient service 2654.500 -.082 .935
Confidentiality of bank 2344.000 -1.873 .061
Confidence in bank's management 2531.500 -.613 .540
A wide range of services provided 2341.000 -1.465 .143
Bank's reputation and image 2327.000 -1.579 .114
Friendliness of bank personnel 2298.000 -1.652 .099
Lower interest charges on loans 2624.000 -.199 .842
Location near my home 2601.000 -.279 .780
Lower service charges on cheques 2291.000 -1.588 .112
Higher interest payment on savings 2425.000 -1.035 .301
Reception received at bank 2310.500 -1.523 .128
Overdraft privileges on current account 2496.000 -.730 .465
Interior comfort 2246.000 -1.754 .079
External appearance of bank 2225.500 -1.837 .066
Recommendations of friends 2665.000 -.012 .990
Available parking space nearby 2438.000 -.997 .319
Counter partitions in bank 2281.500 -1.571 .116
Recommendation of relatives 2644.000 -.098 .922
a Grouping Variable: Respondent's Religion

Second, there is a significant difference between religion and the availability of credit on
favorable terms. (Mann-Whitney U Test = 2149.5, z = 2.209, p <.05) Muslims have greater
preference to visit bank that have provided the flexibility of credit terms than non-Muslim.
From here, the explanation would be mostly same as above that Muslims who have less involve
in business traditionally would prefer to have more favorable terms on their loans to have better
flexibility due the higher uncertainly and risk in running business.
Third, there is a significant differences between religion and the mass media advertising
(Mann-Whitney U Test = 2091, z = 2.377, p <.05). Bank that is aggressively having the
promotion and advertising via mass media is less importance for the Muslims when selecting a
bank compared with non-Muslims. This result is similar to the research conducted by Gerrard
and Cunningham (1997) in Singapore that both research have found the significant differences
for religion and mass media advertising in Singapore and Malaysia. Although mass media
advertising is considered as one of the 5 least important criteria, non-Muslims still have higher
influence on the advertisement than Muslims.
Fourth, there is a significant difference between religion and the location near of work
place. (Mann-Whitney U Test = 2116, z = 2.287, p <.05). Muslims is considering the location of
bank near to their work place more important than non-Muslims. In other words, it means that
Muslims would prefer to visit a bank that is nearer to their working place.
 Global Review of Islamic Economics and Business, Vol. 2, No.3 (2015) 172-196 193

When reviewing the overall significant differences with the other studies, we found that
the present study identified four significant differences in relation to 22 bank selection criteria
while Gerrard and Cunningham (1997) found 5 significant differences in his study. However,
there was one criterion which was found to be significantly difference in the present study
which was also reported in the previous study. Both the study found that non-Muslims looked
for significantly higher degree of mass media advertising.
Table 15 as listed above shows all the bank selection criteria by religion that is not having
any significant difference via the Mann-Whitney U Test. With that, hypothesis 3 is only
partially supported.

Conclusion

Overview of Study

From the result of this study, it is found that the Muslims are more aware toward the
culture of Islamic banking, and as consequences, be more aware of the meaning of fundamental
terms used in Islamic banking and finance. Furthermore, it is also noted that non-Muslims have
less awareness even though they are in the country with more Islamic environment.
When reviewing on the attitudes towards Islamic banks, there were many differences in
attitudes between Muslims and non-Muslims in country with majority of Muslims. For example,
Muslims are thinking religious is the main reason motivate them to deposit money in Islamic
banks while non-Muslims are motivated by the profitability reason only; most non-Muslims will
withdrawn the money when Islamic bank announced no profit while Muslims will retain their
deposits. Muslims were more of the opinion that an increase in the number of branches would
lead to a greater use of Islamic financial services and more strongly agreed that the granting of
interest free loans by Islamic banks helped the community in a just and efficient manner.
However, the research found that when one unexpectedly acquired a substantial sum of money,
there is no any significant difference among Muslims and non-Muslims on that.
In the context of bank selection criteria, there are four significant differences among
Muslims and non-Muslims such as, mass media advertising, credit on favorable terms, financial
counseling and location near my place of work, while the others 18 criteria shows no significant
difference. Moreover, it is very important that Islamic bank to offer the fast and efficient
services and with high confidentiality in order to attract more customers to visit and use their
service.
From the above end result, it can be utilize by any bank to measure the level of attitudes
and acceptance towards Islamic Banking among Muslims and non-Muslim and for those who is
considering setting up an Islamic banking operations in the country with majority of Muslims.

Implication for Banks

From this study, there are numbers of major implications for local banks especially those
banks that are aggressively implementing on the Islamic system. First, it is seen that there is a
general lack of awareness of the culture of Islamic banking in Malaysia even though we noted
that majority are Muslims in our country. With that, the suggestion would be more informative
advertising campaign is needed to be designed and delivered. The campaign must be aimed at
attracting both Muslims and non-Muslims by giving a clearer understanding of what Islamic
Banking is all about.
Second, Islamic banks should add non-Muslims to their target market besides Muslims, in
the near future of Malaysian market. Non-Muslims in many situations will select Islamic banks
as an investment opportunity. In the years that banks can not offer any profit they should aware
their customers about next years profit to keep their deposit.
194 Saiti: The Awareness and Attitude towards Islamic Banking: A Study in Malaysia

Thirds, it is very important for an Islamic bank to offer a fast and efficient service in
order to attract more customers to visit their banks. Furthermore, confidential of the banks is
also a very important criterion considered by Muslims and non-Muslims group when they select
a bank. In this competitive banking industry, if the bank able to understand clearly on what
customers want and concern about when they visit a bank, then the success of a bank would be
higher and with more competitive advantage in the market.

Limitation

From our studies, we would like to highlight on some of our limitation on the said
research assignment.

1. All the samples that we collected are from the respondents at Klang Valley only. With
that, the respondents may not be good enough in generalize the whole population in our
country in comparing with collecting the data from each state in Malaysia.
2. We have not covered all the issues in Islamic banking besides only covered the awareness
and culture attitudes towards Islamic banking.
3. Factor analysis is not conducted in our Part III (Bank Selection Criteria). After further
review on the other relevant published journals regarding on the similar issue, we have
using the all the criteria, similarly using by Erol and El-Bdour (1989) and Gerrard and
Gunningham (1997) to investigate on ranking of various bank selection criteria by
Muslims and non-Muslims in Malaysia.

Future Studies

From the study, we have recommended on some of the future studies as per below:

1. The study did not specifically find out to what extent the Muslims and non-Muslims
would support an Islamic banking and under what circumstances they will increase their
support. Following that, the future study is recommended to include the study that
whether the higher awareness of Islamic banking would increase more their support or
not.
2. Longitudinal study is recommended for this study. In the context of Malaysia, an
equivalent study to the present one could be conducted, for example two years after the
Islamic banking industry which is aggressively advertised and introduced in our country.
With that, the awareness and culture for the respondents may be different after with more
informative bank advertisement and government support.
3. Further similar study is recommended to be conducted in other Asean countries such as
Brunei and Indonesia with majority of Muslims and to make a comparison with Malaysia
where the government is aggressively support and with intension to become the leader of
Islamic banking industry in this region.
4. Besides, the future studies may also divide clearly into the local bank and foreign bank
that are offering the Islamic banking service. This would help to differentiate the package
that are offerings and whether the respondents are more prefer to the „localize” or other
“international” services.
 Global Review of Islamic Economics and Business, Vol. 2, No.3 (2015) 172-196 195

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