Demographics Among The Consumer

Published Date: 02 Nov 2017

The issue of demographics among the consumer in so far as a numerous studies have been undertaken to examine issues of consumer adoption of Islamic banking products and services in the specific context of Malaysia has been rather limited. Therefore, the study of relative importance of consumer perception on Islamic Banking products and services differ from one location to another in Malaysia depending upon the age, gender, income, marital status, occupation and cultural background of customers as well as the type of bank either Islamic or conventional bank. Thus, the study is aims to address the question about the different location based on consumer demographics in Malaysia toward perception on consumer toward Islamic banking products and services.

2.1.1 Location

According to Ahmad et al.(2002); Abbas et al.(2003); Asyraf et al.(2007); Aziz(2010) which found that crucial to gain a thorough knowledgeable of the differentiated needs and preferences of customers between these two regions. However the previous studies by Asyraf et al.(2007) reported the Islamic banking adoption in Malaysia is found to be limited in scope, either due to limited sample size or restrictive in representation. As for Kader (1993, 1995) and Haron(1994), their samples were restrictive and they were collected from one single location or district. Kader’s study (1993, 1995) the survey was confined to one location, that is, Kuala Lumpur. While, Asyraf and Nurdianawati (2007) have included only the major cities of Malaysia which are Kuala Lumpur and Johor. Besides, the researcher identified that is hardly covered any rural areas of Malaysia. So that these efforts could be inadequate to represent the overall needs and demand of the Islamic banking consumers in Malaysia.

2.1.2 Religious

Different religious such as Buddhism, Christianity ,Islam and others have different belief revealed by Rehman,A. and M.S Shabbir(2010). Furthermore, according to Haque et al.(2009) found that a significant between race and perception towards Islamic Banking. The study explored by the Yousuff, R. and K.N.Md. Azurah,(2006) that the demographic factors such as religion & knowledge are playing a significant role to select a bank. Researcher found that customers do not have so much knowledge for those Islamic term products such as Mudharaba, Mushaaraka and Murabaha but they buy these products for the reason of religion.

Other than that, a studied conducted by Khan et al.(2008) was found that religious principles is the key bank selection criterion of the Islamic bank customers through an investigation on 100 customers of Islamic bank customers in Bangladesh. Customer demographics on bank selection criteria is an effective measurement tool to understand or clarify group-behavior of the customer and therefore easier for bank to positioning and branding activity. For instance, Erol and El-Bdour(1989) & Erol, Kaynak and El-Bdour (1990) examined 3 keys selection criteria for Islamic Bank: fast and efficient services, reputation and confidentiality .Religious was not a primary intention influence consumers perception towards Islamic banking products and services.

2.1.3 Educational

Another factor is based on the educational background among the bank consumer when deal with Islamic Banking services which conducted by Kaynak et al.(1991). According to Khan et al.(2008), the respondents have been found to posses a high level of education which 29% having a bachelor degree and 44% with either a Master or a PhD degree. Only 17% of the respondents have education at or below high school level. About three fourth of the customers surveyed were either college/bachelor or master/PhD. Such a finding indicates that Islamic bank customers have high formal education. According to the researcher of Kaynak et al.(1991) that bank customers who had higher level of education are more concern about the friendliness of bank employees, fast and efficient service, the bank location and availability of credit as compared to the customers who only had a primary or secondary school education level.

2.1.4 Marital Status

Besides, according to Boyd et al.(1994) which emphasize that the marital statuses are different in bank selection toward its products and services either married or unmarried of the customers .The selection factors such as reputation, cost-benefit, efficiency and others. However, the report showed that customer those are single have lack of priorities on reputation rather than married customers. Another important demographic variable is the size of the household in terms of number of family members will affect the total monthly income as well. As a result, the dependents was tested and the study found that heavy households emphasis on reputation, cost-benefit and efficiency whereas the others put more importance on convenience and cost-benefit issues.

2.1.5 Occupation

Boyd et al.(1994) reported that occupation of the respondents was another demographic segmentation take into account. The report disclosed that more white-collar households are emphasizing on reputation, modern facilities, and convenience. However, the blue-color households are more emphasize on core banking on availability of basic services or cost-benefit issues. In Malaysia, Haque et al.(2009) was found that there is no significant relationship with overall perception towards Islamic bank. This shows that occupation will be influencing the awareness of Islamic banking products and services but it will not affect the perceptions of Malaysians with different occupation towards the Islamic Banks.

2.1.6 Age

Kaynak et al.(1991) reported that the convenience played important role for customer under age 40 especially bank location as compared to other age of groups . According to Khan(2007) studied that found that majority of the Islamic banking customers in Bangladesh are ranged between 25 to 35 year of age might maintain long-term relationships with their banking service providers. According to Loo (2010), non-Muslim X-Gen and Baby Boomers have significant differences in their perceptions.

In contrast, according to Haque, Osman and Ismail(2009) indentified that with 95% confidence among Malaysia customers, age does not have significant relationship or do not influence with overall perception towards Islamic bank. However, researcher by Haron, Ahmad and Planisek(1994); Dusuki and Abdullah(2006); Thambiah, Nathan and Eze(2008) found that X-Gen is significantly more willing to do business with Islamic banks than Baby Boomers which X-Gen stood at 34% and Baby Boomers only stood at 14%.

Kangis and Voukelatos (1997) found that younger age 18-24 will examine the good appearance of staff and the lower queuing time. Young adults age 25-34 will experience the modern equipment, problem solving, willingness of staff to help, explanations of the services given, friendliness, courtesy, professional knowledge of the staff and the location of the branch. Mature adults age 35-45 as well as the other older age groups are more concern for the dimensions other than seeking a reduction in queuing time. Almossawi(2001) was also revealed that gender of the respondents also reflected on bank selection criteria.

2.1. 7 Income Level

According to Khan et al(2008) studied that the relationship between bank selection criteria and level of income shows that the choices of family and friends and convenient location depend significantly at 5% level on level of income. Most of the Islamic bank customers are of the middle income level. Although income will influence the understanding of Malaysian towards Islamic banking, but it did not show significant relationship with overall perception towards Islamic bank. This means that perceptions towards Islamic Bank are not affected by the monthly income that conducted by Haque et al(2009). Due to Khattak and Rehman(2010), perception dealing with Islamic banking is varied among the different income group people as there is significant difference when they are accepted the Islamic bank products and services.

Islamic banking use information & Knowledge on Islamic banking

In 1983, the first Islamic bank, Bank Islam Malaysia Berhad (BIMB) was started its Islamic banking system in Malaysia. While in 1993, Bank Negara Malaysia or the Central Bank of Malaysia was introduce a dual banking system called "Interest-Free Banking Scheme" (Shahril Shafie, 2004). There are around twenty-one Islamic products were developed to cater this scheme with the participants of three major banks in Malaysia. The main purpose of this system is allow the conventional bank to offer Islamic Banking products and services to their customers besides their own products and services (Abdul Aziz Abdullah, 2012).

Islamic banking was in response to the market needs of Muslims, these banks are not religious institutions, as in the same times they also provide banking services for non-Muslim customers as well (Zairani Zainol, 2008). Indeed, it have received wide acceptance from both Muslim and non-Muslim (Mohamad Abdul Hamid, 2011). Although Islamic bank is expected to run according to Islamic Law (Shari’ah), their banking business is no different with other financial institutions or banks. Thus, the competitors that Islamic banks face are not only from conventional banks, but also from new market entrants as well (Shahril Shafie, 2004).

The products and services development in Malaysia can slot into four phases which are earliest product, additional products, new product and current product. For the earliest product it included the mudharabah investment account, wadiah saving account, wadiah current account and Bai Bathamin Ajil housing financing. After that, the second phases are additional product which included interbank Islamic Money Market, murabahah working capital finance, and securitization of assets. Follow by new product which is Islamic high purchase, Islamic credit card, and Ijarah fixed financing. The last phases are the current product which is musyarakah & musyarakah mutanaqisah financing, structured deposit and derivatives, mudharabah financing and hedging product (Bahari, 2009).

As mentioned by Khir et al. (2008) in Islamic banking, mobilisation of deposits and application of funds are through contracts in compliance with the Syariah principles. Contracts can be classified into three board categories which are trading contracts, participation contracts and supporting contracts.

Trading contract is a sale contract where it can be sale for goods, cash and debt. These contracts are based on the principle of buying and selling of assets (Khir et al., 2008). The most common trading contracts in the Islamic banks are following:

Murabahah (cost-plus sale): A sale on mutually agreed profit. Khan (2010) stated that it is a sale contract in which client requests the bank to purchase an item for his or her from third party. Bank resells it to the client on the cost plus profit basis once bank receive it.

Bai Bithaman Ajil (deferred payment sale): Sale of goods on a deferred payment basis at a price that includes a profit margin agreed upon by both buyer and seller (Khir et al., 2008).

Bai Dayn (sale on debt): Refers to debt financing such as provision of financial resources required for production, commerce and services It can be traded only the documents have proven that the real debts arising from bona fide merchant transactions (Khir et al., 2008).

Bai Inah: According to Khan (2010) it is a contract of selling an asset by the bank to the customer through deferred payment and repurchases the asset by the bank from the customer on cash terms at a later date.

Ijarah (leasing): An arrangement in which bank purchases the equipment or property selected by the customer and then leases it to the customer on predetermined fixed rate , as agreed by both parties (Nanava, 2007).

Ijarah Thumma Bai (leasing followed by purchase): A simple leasing for the leasing period with an option for the leasee to purchase the property at the end of the leasing period through a contract of purchase.

Bai Salam (future delivery): A contract where payment is made in advance for a good to be delivered in the future (Khir et al., 2008).

Istina (sale by order): A buyer orders an item for the manufacture based on period, criteria, terms and conditions earlier agreed. Buyer (customer) can make the payment in installments to the seller (bank) when the goods have been received. At the time of contract, the item does not exist (Khir et al., 2008).

Sukuk (bond): As Nanava (2007) stated sukuk are new development Islamic financial product on a market, there is increasingly high demand on an innovation. Besides, Sukuk are asset-backed securities and comply with the Syariah principles. They issued bonds to raise funds and these funds are invested in a project. After that, income from a project is distributed to the holder of the bonds.

Islam encourages equity based participation where focus is on profit and loss sharing. Banks and lenders become partners in business instead of becoming creditors by investing their money. The objective is the risky investments provide motivation to the economy and encourages entrepreneurs to maximize their efforts. The most common participation contracts in the Islamic banks are following:

Musyarakah: Musyarakah is a contract of equity participation which used to finance medium and long-term investment (Khir et al., 2008). Two or more parties entered into the contract and form a joint venture. Each of the parties contributes capital and participates in the management of project. Profit is shared according to the proportion of shares or according to the agreement in fraction, ratio or percentage. The loss should born by all partners according to proportion of shares. The profit and loss are cannot be shared in absolute amount.

Mudharabah: Mudharabah is a trustee finance contract or passive partnership and providing only profit sharing (Khan, 2010). The profit does not have predetermined profit since the deposit is guaranteed that there is no risk of loss. In this transaction, one party (bank) provides capital and other party (entrepreneur) offers labour and expertise. While, the loss is borne by the owner(s) of capital only; the liability of entrepreneur is limited to their time and effort.

There are other contracts that support and facilitate trading and mobilisation of deposits which compliance with the Syariah principles. The most common supporting contracts in the Islamic banks are following:

Rahnu (mortgages): An agreement whereby a valuable asset is collateralized for debt (Khir et al., 2008).

Kafalah (guarantee): A contract of guarantee by the contracting parties. Third party becomes the guarantor of the debtor for the payment of debt (Khir et al., 2008). Third party assures that the debtor will repay the debt to the creditor.

Wakalah (Agency): A person assigns someone else to carry out a certain task on his or her behalf usually will charge certain fee ((Khir et al., 2008).

Qardh Hassan (benevolent loan): Refers to a zero- interest loan in which there is no interest charge for the loan (Khan, 2010). The borrower only required to repay the principle amount borrowed from the lender.

Wadiah Yad Dhamanah (savings with guarantee): Refers to goods or deposits, which have been deposited with another person, for safe-keeping (Khir et al., 2008). The custodian is permitted to use the deposited amount for trading and investment. The profit derived from utilizing the deposits is distributed to the custodian only.

The products can be sold to Muslims and Non-Muslims, through this way; they would be able to enjoy the Islamic banking facilities together. Generally, Malaysia Islamic bank have put many effort in introduce various and profit lost sharing products and services to their country citizen (Bahari, 2009). This is due to Islamic banking is the alternative to the conventional banking, so Islamic banks need to do more innovation in term of their products and services. Through this way, Islamic banks just can sustain their competitive advantages against others foreign and conventional banks which offer the similar Shariah compliance facilities (Azmi, 2006). In the same times, it is to ensure the future growth of the Islamic banking markets (Seethaletchumy Thambiah, 2010).

According to ‘Ismah Osman (2009), the improvement in service quality in the same time can increase their customer’s loyalty and customer satisfaction also. Services quality is a customer perception that judge by customer depends on how well the services meet their expectation but not judge by companies and organization that offer them. In order to achieve this, the organization must try to develop their service quality to meets their customers’ expectation. The study discovered that, most of the customers make their choices toward products and services through the dimensions of value, cost and prior of satisfaction.

The researcher also comes out a study to examine the perceptions of Islamic bankers respecting Islamic banking products and services. It is important because Islamic bankers deliver the products and services directly to customers at the branch level. By giving detailed explanations of the areas concerned, it is easier for them to market the products and services. In additional, customers nowadays have high education level and more knowledgeable of the wider financial world (Zairani Zainol, 2008). Furthermore, the research also found that employees working on the front-line play important roles in representing the organization to the outside world, and they can indirectly influence the behaviours and awareness, as well as the assessment made by customers.

Nordin (2001) conducted a research to determine the importance of education in Islamic banking, and a viable strategy by which Islamic banks could face the new millennium.

Based on the previous research, it could be concluded that Islamic banking products and services are well-received by Muslims. They discover that non-Muslim customer possess very limited knowledge of Islamic banking, but most of the respondent which include the non-Muslim still can differentiate between Islamic banking products and conventional banking products. The research have highlighted that most of the corporate banking customers clarified that they had very limited knowledge of Islamic banking. The authors further stressed that the banks do not put much effort into marketing their products or educating their customers.

Appealing Islamic banking products and services

Nowadays, there are the intense competitions between the Islamic banking institution and the conventional banking institution to attract customers in selecting their product.The research which found out that has six factors of behavioural responses to describe the satisfaction of customer to choose the banking products and services. (Athanassopoulos, Gounaris &Stathakopoulos,2000)

Employee competence

Reliability

Physical evidence

Product innovation

Value of money

Convenience

Based on these factors are the key forces that making satisfaction of customers’ .As nature of measurement, it will also influence the customer to purchase or continue using the existing products and services. Customers also take care about the security and safety of products and services that provide by the bank. The researchers figure out the customers who lack of trust on ATM machine and the safety issue about the internet banking. Through it, the bank need to improve and measure that is high security in every aspect of services that are provided. It helps to rebuild the trust of customers and attract them to using the bank services and products. (Omar, Sultan & Zaman,2011)

Carbo-Valverde, Hannan & Rodriguez-Fernandez(2011) find out that the deposit interest rate will be more attractive to customers in the greater in-migration area and the switching cost for the pricing of services and products. The result shows that the bank located at area with much in-migration and the bank with fewer locked-in depositors will offer higher rates. These two factors which help capture and retain of customers.

Titko & Lace (2012) had evaluate that the staff development which are the first steps to capture new customers and retain customer loyalty. The researchers find out that banks need provide the training on customer service management to staff. These helping the staff to demonstrate in their promise and shows their friendly to customer.

After investigate the results shows that Muslim and non-Muslims have many similarities in selection of banks and services provided (Haron, Ahmad, & Planisek, 1994). Haque,Osman and Ismail(2009),stated that there has the positive relationship of quality of services, social and religious perspective, availability of services towards the Islamic banks in Malaysia . Although that, the customers which have high satisfaction level to the service and particularly in term of quality of conventional bank compare to the Islamic bank (Osman, Ali, Zainuddin, Rashid, Jusoff, 2009). These factors will influence the customer mind to choose the Islamic banking through better understanding about the Islamic bank and how the bank operation.

There is the relationship between the service quality and the satisfaction of customers towards Islamic bank. In addition, the Islamic bank which need to upgrade it physical facilities. These are the important issues which are making customer satisfaction towards the Islamic bank (Saad,2012).There has the strong significant relationship between service quality and image with customer satisfaction towards Tabung Haji service. It is provide the empirical evidence that demonstrate high satisfaction level of customers towards the service and image (Kassim &Nordin,2012). In Malaysia, there are some studies was conducted to investigate customer satisfaction towards Islamic banking services. Customer was found that they are more satisfied with some facilities but there still need improvement for some facilities. According to Tan (2009), transaction speed, convenience of location, fast and efficient service, parking facilities and accessibility was found satisfied by the customers. However, the customers are not very satisfied with the bank external appearance, bank size, ability to meet individual requirements, overdraft privileges and mass media advertising in the Islamic banking of Malaysia.

Meanwhile, the CARTER instrument which demonstrate the service quality and satisfaction of customer toward Islamic product. In depth, it shows the gap between the perception and the expectation of customer toward the service quality (Abedniya,Zaeim,&Hakimi,2011). According Doraisamy, Shanmugam, Raman(2011), there are positive relationship between the perceptive of Malaysian customer towards the Islamic bank product and services. They also find out that Islamic bank need to improve the quality and increase the profitability. Furthermore, the efficiency of transaction and maintain the competitive fees of the products and services also influence the perception of consumer.

While Islamic bank product being rather similar with conventional bank product, they are use the Shariah aspect to analyze the Islamic financial product development and the issues that appear through the process that based on secondary resource. Malaysia Islamic banking institution has introduced the product that have similar device which offer by the conventional bank based on shariah concepts. This which have helping accelerate the product development and preference financial product to the customer (Muda & Jalil, 2007). According to Abdullah and Dusuki (2006), Islamic banks which provides the innovation products to serve the consumer all the time. In this research, the customers have the positive perception towards the new innovation products which is AITAB. Majority of the customers are satisfied with Islamic innovation product.

Social and religious perspectives

Customer perception and satisfaction are regarded as a key determinant for the Islamic banks overall performance in Malaysia. In fact, customer perception has a significant relationship with religious perspective as their higher standard of level enable Islamic banking more comfortable and easier ( Haque et al., 2009). Most of the customer will choose Islamic banking due to the religion responsibility. But there are some research indicated that religious is not a dominant factoring that influencing the chosen of Islamic banking.

Religious factor is perceived as one of the significant criteria in the adoption of Islamic banking in Malaysia (Erol et al., 1990; Haron et al., 1994; Metawa and Almossawi, 1998; Naser et al., 1999). Based on Haron et al. (1994) study, it indicated that only 40 percent of Muslim consumers in Klang Valley are regarding religion factor as important in patronizing Islamic banks. Besides, according to Haque et al. (2009) and Loo (2010), they stated that there is a significant relationship between religions in the perception of disadvantage in Malaysia. The study shows 100% respondents which are Muslims agree that Islamic banking does not conflict with their religion whereas around one-thirds of non-Muslims agreed Islamic banking conflict with their religious belief.

In United Kingdorm, Omer (1992) indicated that religious perspective is the primary variable that affects the volume of Muslims deposits in Islamic financial institution. In his study, he reported that as the religious commitment is high and the general education is low, the stronger the preference for Islamic over conventional. Meanwhile, Othman and Owen (2001) concluded that the most influential factors that affect the selection of Islamic banks in Kuwait were the cultural and religious factors. Furthermore, a study has concluded that religious reason affected majority of customers to bank with the Islamic bank due to the bank operates based on Islamic Shariah principle. The study also revealed that customers who deal with Islamic bank are willing to accept return at anytime because the bank operation is based on Islamic Sharia'h principles and they trust the bank in safeguarding their money and in its ability to satisfy religious concerns (Kamal Naser, Ahmad Jamal, Khalid Al-Khatib, 1999).

On the other hand, Islamic banking is no longer considered as a business entity that strived to meet the religious obligations of Muslim. Indeed, it is more significantly as a business that is ineluctably in getting new customers whilst maintaining the old one (Wilson, 1995). It has also been observed that religious factor is not the main criteria for the adoption of the Islamic banks in Malaysia (Erol et.al (1989), Dusuki et.al (2007), Maran Marimuthu1 et.al ). Due to the interest free system has been recognized in the Islamic as well as in the non-Islamic countries, so it does not create the burden only in Islam and also the riba is not only prohibited in Islam. Hence, it shows that the religious factor is not the main determinants of the adoption of Islamic banks (Ratnawati et al., 2010).

Besides, a study has found that religion did not play a significant role in selecting an Islamic bank in Jordan (Erol, C. and El.B. Radi, 1989). Also, Gerrard and Cunningham (1997) have found that there are no difference between Muslims and non-Muslims on bank selection criteria in Singapore due to the general lacking of the awareness about the Islamic banking system. According to Metawa and Almossawi (1998), they indicated that religion as the most important criteria for customers to patronize Islamic banks and their study has contradicted with the study by Haron et al.(1994) and Gerrard and Cunningham (1997).

Furthermore, ethical responsibility is also a factor that influences customer in adopting of Islamic banking products. Based on the research, Metawa and Almossawi (1998) found that Islamic principles were the most important factor in selecting an Islamic bank. According to Karim and Affif (2005), the main reason that customer choose an Islamic bank is due to the strong perception that interest is strictly prohibited in Islam and it is regarded as an attractive elements compared to those conventional banks.

Based on the previous research, it showed that Islamic banking products and services has been well-received by non-Muslims especially in the Klang Valley, Malaysia. It is fast gaining popularity and more widely accepted by the society at large especially for those non-Muslims. The results show that majority of the respondents have both Islamic and conventional banking accounts and it is in line with the wide support worldwide on Islamic banking (Haron et al., 1994). However, the respondents were unsure about the performance of banking facility and products with the establishment of Islamic banking. In addition, they also unsure about the customer’s perception and the potential of Islamic banking products in the future due to lack of information provided to the public.

In addition, according to Haron and Ahmad (2000), they indicated that Islamic banks were using conventional profitability theories in determining their products returns. Hence, it showed that Islamic banks imitate conventional bank practice and there is pressure on Islamic banks to stress on developing pure Islamic and innovative products and stop imitates conventional practice. It also revealed that the legal and regulatory frameworks, terminologies, systems, and products of Islamic banking are still very complicated and irregular. However, a study has showed that Bahrain and Malaysia have expert in building entirely independent nationwide legal, regulatory and financial frameworks for Islamic banking operation and it has been emulate by other Muslim countries as well (M. Mansoor Khan, M. Ishaq Bhatti, 2008).

Moreover, based on the earliest survey conducted by Khan (1983) who observed that Islamic banks operated under a dual banking system in the United Arab Emirates, Kuwait, Bahrain, Jordan and Egypt had confront few difficulty in formulating practices that are consistent with shariah principles. Thus, it revealed that the Islamic banking practices are complex as it compliant with the Islamic rules.

Based on the study, the non-Muslim customers of Kuala Lumpur have positive trend to the Islamic banking products and services. Furthermore, the categories between ages 19-35 years old with higher education have better knowledge about the Islamic products and services. They will establish relationship with Islamic bank if they have sufficient information and news from various sources about the banking operation (Abdullah, Sidek, & Adnan, 2012).

The study find out that the non-Muslims are aware of the Islamic banking products and services. In contrast, they are attracted by the cheaper transaction cost and better services quality that are providing by the Islamic banking. Hence, researches find out that the majority of non-Muslims are satisfying of Islamic banking services and fulfil their banking needs (Hidayat & AI-Bawardi, 2012).

Confidence in Bank

Islamic banking is widely accepted by both Muslims and non-Muslims (Iqbal and Molyneux, 2005). Customers of Islamic banks are therefore perceive as significant to their selection and patronage of banks, hence Islamic banks should improve to greater extent in securing customers’ recognition and acceptance (Asyraf & Nurdianawati, 2007). Consequently, acceptance level of consumer in Malaysia serves as the dependent variable and its relationship with some independent variables are shown in the coming section: awareness towards Islamic banking, appealing Islamic banking products and services, social and religious perspectives, as well as confidence in Islamic banking.

To engage in the Islamic banking, confidence and reliability are the basics of building trust, where trust means having confident in the partner’s reliability and willing to involve in partnership (Moorman, Zaltman & Deshpande, 1992). This is in line with Morgan and Hunt (1994), whom defined trust as a party has confidence to engage in a relationship with another party. Garbarino and Johnson (1999) further explained that trust is the customer confidence in the service quality and reliability. Meanwhile, from the perspective of Islamic banking, trust is a moral obligation where every individual performs his duties and social, political, and economic lives (Hanafi & Sallam, 1997; Wilson, 1997; Haron & Shanmugam, 2001). However, this is opposed by Haque, Osman and Ismail (2009) where they found the confidence in bank has less impact on customer perception. Hence, to summarize, confidence toward Islamic banking can be simplified as the trust that a customer would pay on the Islamic banks for relationship engagement. Here, five major types of confidence will be focused in this research: confidentiality, true and accurate information, transparency, security, and reputation.

Haron, Ahmad and Planisek (1994) are amongst the earliest to investigate on bank’s confidentiality by proving the confidentiality is ranked fourth and fifth for Muslim and non-Muslim respectively as their selection criteria in Islamic banking. Later, in another research conducted by Naser, Jamal and Al-Khatib (1999) in Jordan, bank’s confidentiality is ranked as the fourth main reason (64%) of patronizing the Islamic banks and around 80% of the respondents are satisfied with the bank’s ability to safeguard the customer confidentiality. This finding is supported by Gerard and Cunningham (2001) who discovered that the most important criterion in selecting a bank is feeling secure. Similarly, in the study of Othman and Owen (2002), factor analysis of bank’s confidentiality is 0.82, indicating it is one of the major factors to positively affect the service quality of Kuwait Finance House customers.

On the other hand, according to Ibn-Miskawayh (1968), by following the Islamic ethics, a person should practise accountability to God and be honest and fair in his activities, for example, only documents that reveal true and accurate specifications in the contracts can be exchanged on hand (as cited in (Hassan, Chachi, & Latiff, 2008)). Based on this context, Parasuraman et al. (1991) found that the customers do not only judge the reliability and accuracy of the information and service but also on own experiences during the service delivery process (as cited in (Naser, Jamal, & Al-Khatib, 1999)). Several marketing literature advised that consumer trust is build on the perceived honesty, benevolence, and competence (Morgant & Hunt, 1994; Ratnasingham, 1998). Recently, Hassan et al. (2008) also recommended that the Islamic bank managers should try to assist and guide their customer relation advisors (CRAs) by giving out true information to the customers. Hence it is vital that customer trust on true and accurate information serve as an investigation point in this Islamic banking research.

Recently, the second edition of the "Shariah Resolutions in Islamic Finance Book" was published by BNM in October 2010, aiming to increase the transparency level on juristic in Islamic finance and increase appreciation and acceptance of Shariah decisions, in order to allow more efficient Shariah governance and prompt to better interpretation and application of Shariah (Bank Negara Malaysia, 2013). As transparency is one of major concerns in Islamic banking, researchers also suggested establishing more transparency to increase customers’ confidence and help avoiding panics (Iqbal, Ahmad, & Khan, 1998). The recent financial crisis strikes the conventional banks has triggered the Islamic banking sector to insulate themselves from crisis through emphasizing on transparency and avoidance of undue risk (Akmal & Saleem, 2008; Johnes, Izzeldin, & Pappas, 2009).

Security system is often linked with online banking, where customers concern on their authentication details whether to be protected. Banks are usually prudent in debt collections and charge all overhead expenses on customers including computer and security systems (Saiful & Mohd Afandi, 2003). Hence, it is crucial to investigate consumer confidence on Islamic banks’ security system. Othman and Owen (2002) proved that security of transaction is measured as 0.75 in the factor analysis which is a positive relationship on service quality, a study targeted on customers of Kuwait Finance House. El Nagar and El Biely (2011) further discovered that, the assurance dimensions stands as the highest impact on customer satisfaction in Kingdom of Saudi Arabia (KSA). For example, if the bank can instil customer confidence in handling customers’ affairs and the security of bank transactions in a professional manner, then customers in KSA will be satisfied through adopting good customer services policies (El Nagar & El Biely, 2011).

Last but not least, Islamic banks are supported by the Islamic teachings, hence it would generate good reputation and instil customers’ confidence in its operation and closed information (Naser, Jamal, & Al-Khatib, 1999). A good image is an important aspect for banks in sustaining trustworthiness and establishing a long term relationship with customers (Barich & Kotler, 1991; Amin, Isa, & Suradi, 2010). Some research found that bank image and reputation was a key factor in consumers’ choice of an Islamic bank (Haron, Ahmad, & Planisek, 1994; Naser, Jamal, & Al-Khatib, 1999). Researchers in Jordan, Norafifah and Haron (2002) stressed that reputation and image as critical factors to win over customers’ confidence in engaging with a bank. Ziaul, Nigar and Muslim (2010) pointed that both Muslim and non-Muslim customers have confidence in Islamic banks’ image, which can enhance customer loyalty. A. Malik, Bhatti, Parveen, and Arshad (2011) supported this point by proving a bank’s reputation is highly significant in retaining customers.