Islamic Banking Acts As A New Born

Published Date: 02 Nov 2017

Student Details:

Name

Students ID

Famiza Farhani Binti Mohd Fadzil

2010741567

Masitah Binti Zulham

2010924173

Nur Ain Binti Mohammad Zaini

2010172723

Siti Nurfatin Binti Khasim

2010199881

Group: JBM 2225A

Overall Marks : ________________ Mark

ANd9GcS6OYaLEXwib8Eg1S6BjeLssgvSONWOnVFtqTDzhfW5LzOqBAM_

LETTER OF DECLARATION

BACHELOR OF BUSINESS ADMINISTRATION (HONS) MARKETING

FACULTY OF BUSINESS MANAGEMENT

UNIVERSITI TEKNOLOGI MARA

SEGAMAT, JOHOR

We, Nur Farahin Bt Ishak (I/C Number: 900404-01-5430), Nurul Amanina Bt Dollah (I/C Number: 900331-01-5092), Nurul Fatin Nadiya Bt Jamil (I/C Number: 900825-10-6074) and Siti Hamra Bt Yahia (I/C Number: 890418-05-5154)

Here by, declare that,

This work has not previously been accepted in substance for any degree, locally or overseas and is not being concurrently submitted for this degree or any other degrees.

This project paper is the result of my independent work and investigation, except where otherwise stated.

All verbatim extracts have been distinguished by quotation marks and sources of my information have been specifically acknowledged.

Signature: _______________ Signature: _______________

(Nur Farahin Bt Ishak) (Nurul Amanina Bt Dollah)

Signature: _______________ Signature: _______________

(Nurul Fatin Nadiya Bt Jamil) (Siti Hamra Bt Yahia)

Date: _________________

ACKNOWLEDGEMENT

Assalamualaikum W.B.T,

Alhamdulillah, we would like to thank the people who directly and indirectly involved in getting this assignment done. Of course all of the hard work and effort cannot be done without Allah’s permission. We are forever grateful because we are able to finish the assignment that had been given the period range. Not only that, we are really glad for having such a handy lecturer, Veera Pandiyan a/l Kaliani Sundram for guiding us in order to finish this assignment. Like we mentioned before, the indirect person who were involved in getting this assignment done also must be thankful for. Thus, this includes all the Faculty of Business Management’s lecturer for lending their advice.

For our family who give support no matter how hard we struggle to get this work done. Friends are the closest person to us that keeps on giving advice on what we should do and should not. What we are trying to say is that, for the entire hard situation that we are now and in the future, all of the people will always have our back no matter what happens. This is simply because they know who we really are and our capability of doing things.

(SITI NURFATIN BT KHASIM) (FAMIZA FARHANI BT MOHD FADZIL)

(MASITAH BINTI ZULHAM) (NUR AIN BINTI MOHAMMAD ZAINI)

ABSTRACT

To investigate the conditions under which Islamic banks can successfully compete with conventional banks by understanding customer attitudes towards Islamic banking products.

First, studies and relevant literature were view to get in deep information on choice criteria of customer. Second, studies on independence variable such as data provided, survey of customer selection also others quantitative and qualitative method. Finally, the information obtained and customer’s selection can be set. Most importantly, this study considers establishing a specific rank of choice criteria for Islamic home financing. Moreover, these choice criteria will also be ranked according to the selected demographic elements such as gender, marital status and age range.Islamic banking is an emerging financial system in the contemporary world.The result of this study, from an Islamic point of view, ‘‘Shariah principle’’, ‘‘lower monthly payment’’,‘‘transparency practice’’, ‘‘interest-free practice’’ and ‘‘100 per cent financing’’ are considered to be the first five choice criteria affecting a bank customer’s decision to choose a mortgage provider, notably an Islamic bank.

Table of Contents

CHAPTER 1: INTRODUCTION

1.1 INTRODUCTION

In this chapter, this paper will be discussed about the background of the study, problem statement, research question, research objective, and significance of the study, limitation, definition of terms and summary of the study.

Background of the study will explain about the topic that had been chosen. It tells the general view of Islamic Banking for the readers get some ideas of what is Islamic Banking. The problem statements try to figure out criterion of customers why Islamic bank is the excellent choice to be chosen. For the research question, it derived from the problem statement and the answer of the questions stated in the research objectives. The significant of the study is to increase the customer’s information and knowledge about Islamic Banking. Thus, it will increase the employee awareness about Islamic Banking. There is some limitation throughout this research which is lack of availability and accuracy information and also cost that involved. Definition of terms will explain the meaning of the specific words which stated in this paper. Lastly, summary will summarize all the relevant information that included in chapter 1.

1.2 BACKGROUND OF STUDY

Islamic banking acts as a new born in the banking industry. Nowadays, it is growth fast and acceptable by the consumers from Muslim and non-Muslim. Islamic Bank is a financial institution that performs all the function as conventional bank but it is accordance to the Syariah principle. There are a few limitation in the Islamic principle namely as riba’ which is to be avoided because it consist of additional incremental of principle value. It also prohibits the issue of gharar which means uncertainty, risk and

speculation. The Islamic Bank is more focus on halal (religiously permissible) activities. The first Islamic banking in Malaysia was established in 1983 which named Bank Islam Malaysia Berhad (BIMB). According to (Kamal Khir, 2008) said that it is estimated that there are more than 250 Islamic banks now operating in over 75 countries. Even in countries with Muslims minorities such as the United States of America, Australia and Thailand attempts are being made to set up Islamic financial institutions.

1.3 PROBLEM STATEMENT

Islamic banking developed to be one of the fastest growing industry in the financial world and is acknowledged to both Muslims and non-Muslim (Iqbal and Molyneux, 2005, cited by Awan and Bukhari, 2011). Islamic banking product and services are much different from those of conventional banking. The Islamic banking institution prohibits the act pertaining to gharar (uncertainty), maysir (gambling) and riba’(interest). With so many differences between Islamic and conventional it is relevant to enquire more information on the product features of Islamic banking. Many customers would consider selecting Islamic bank because of religious purposes therefore would rather participate in the Islamic field rather than the conventional. Religion may not be the only reason to why customers prefer Islamic bank rather than conventional bank. The criterion of customers is to be explored in order to know why Islamic bank is the excellent choice to be investing in. Therefore it is relevant for a research on what are the criterions customer prefers to use for selecting an Islamic bank in Malaysia (Awan and Bukhari, 2011) to be done.

1.4 RESEARCH QUESTION

Islamic banking product and services are much different from those of conventional banking. Many customers would consider selecting Islamic bank because of religious purposes therefore would rather participate in the Islamic field rather than the conventional. Religion may not be the only reason to why customers prefer Islamic bank rather than conventional bank. The criterion of customers is to be explored in order to know why Islamic bank is the excellent choice to be investing in. There are piles of factors that can be evaluated.

Therefore it is only relevant for a research on what are the criterions customer prefers to use for selecting an Islamic bank in Malaysia (Awan and Bukhari, 2011) need to be done with these questions in mind:

1.4.1 What are the product features of Islamic bank?

1.4.2 How quality services effect the customers’ criteria in choosing Islamic bank?

1.5 RESEARCH OBJECTIVES

The main objectives of this research are as follows:

1.5.1 To ascertain the product features of Islamic bank.

1.5.2 To examine the quality services affecting the customers’ criteria.

1.6 SIGNIFICANCE OF STUDY

The outcomes of this study are to increase the customers understanding in terms of the dissimilar of the banking product between the Islamic banks and conventional banks. On the other hand, this study is also to assist each and every employee of the bank to increase their awareness about the key conventions of the Islamic financing options.

1.7 LIMITATION

1.7.1 Lack of Availability and Accuracy Information

To produce a better study, the accuracy of data is important in order to support the research and give some additional information while doing the research. However, when the questionnaire is distributed, not all the respondent will answer the questions with utter truth. The collection of data may not be valid and complete.

1.7.2 Cost Involved

All types of cost involved during the completion of this research such as information needed must be consider.

1.8 DEFINITION OF TERMS

1.8.1 Profitability

It shows one’s efficiency in order for the companies or individuals to gain a profit. On the other hand, it can be said as the way to measure the companies or individuals ability to generate earning. Profitability is usually measured by using the price to earnings ratio. It is vital to measured one’s profitability as they are parallel to the success of the business itself.

1.8.2 Demographics

A study of a population including age, gender, income, schooling and occupation is called demographics. The key to one’s business success is closely linked on how one does manage to understand the demographics of the target customers. Not only do you need to understand them in order to decide exactly what your product and services mixes will include, but this information will also reflect the overall business.

1.8.3 ANOVA

ANOVA in the complex name is called Analysis of Variance. In order to know whether all sample groups in a study will be influence by the same factors and degree, a statistical test will be conducted. While the groups are being kept apart independently from one another, the result then will be compared. The sample groups are examined to see if the average within each group is the same and how much impact different variables have on the test.

1.8.4 Riba’

The basic principle of Islamic banking is the prohibition of riba. Riba translates literally from the Arabic as an increase, growth, augmentation or accretion. In Islam, lending money should not generate unjustified income. In the Islamic terminology, interest means effortless profit or profit that increases the principal amount without putting any effort. Thus, riba in general, is an unearned income, which comes as a growth of increase to the owner of money.

1.8.5 Gharar

Gharar means uncertainty, hazard, chance or risk. Islam prohibits uncontrollable risks or uncontrollable obligations as it leads to speculation. The definition of uncertainty in the muamalat transaction is where there is a matter that is concealed by one party, where it can raise a sense of inequality as well as tyranny to another party. On the other hand, gharar means to undertake a venture blindly without sufficient knowledge or to undertake an excessively risky transaction.

1.9 SUMMARY

A problem statement is presented to show the significance of the study. Finally, the scope and limitation of the study will be discussed. The next chapter of this research paper will explain more in details in order to get more understanding on the research being done.

CHAPTER 2: LITERATURE REVIEW

2.1 INTRODUCTION

Under this chapter, the principles of Islamic Banking, level of awareness by consumers, bank selection criteria will be discussed more explicitly. In principles of Islamic Banking, it tells about conditions and prohibitions of Islamic Banking. Islamic Banking has to in line with the Syariah Compliance. Nowadays, many people did not understand about the differences of Islamic Banking and Conventional Banking. The level of consumer awareness is still in lower stage. Majority for the Islamic countries will concern about the Islamic Banking. An attitude towards Islamic Banking describes the growth of Islamic Banking, services and product offer and satisfaction of customer towards Islamic Banking. There are several of reasons why consumers choose Islamic Banking as preferred. It can be in term of region, profit, satisfaction and etc. This will discuss more details in bank selection criteria. Lastly, summary will summarize all relevant information include in this chapter.

2.2 PRINCIPLE OF ISLAMIC BANKING

Islamic bank is is initially a banking business with theories behind its products, as well as the ability to put such theories into practice as far as their products are concerned. The products and operations of the business must follow the permissible rules as proposed through Ijtihad, which is in line with the Shariah Islamiyyah.Islamic banks have to operate under strict religious guidelines, which are based on different principles than those of conventional banks (Haron, 2005; Ghani, 1999).

These principles are:

Prohibition of interest in all forms of transactions – Islamic prohibits interest due to the fact to combat the concentration of wealth in the hand of few. It is important to do so, as it is able to promote social harmony (Khir et al., 2007; Ahmad, 2000)

Undertaking business and trade activities on the basis of fair and legitimate (halal) profits-Islamic allows trade activities but not to interest taking activities. This has been documented by many works that deal with fairness in Islamic banking activities (Khir et al., 2007; Mirakhor, 2000;Warde, 2000)

Payment of the poor due (zakat) from their operations (Lewis and Algaoud, 2001) , zakat is the most important instrument for the redistribution of wealth. This is a compulsory levy and it constitutes one of the five basic tenets of Islam. Many Islamic banks in Malaysia become collectors for zakat such as BIMB, BMMB, Public Bank and Maybank Islamic Berhad to name a few.

Prohibition of exploitative monopoly of resources or economy activitie and cooperation in the development of society, by investing only in businesses and trades, which are not prohibited by Islam.

2.3 LEVEL OF AWARENESS

These studies had examined perceptions of Islamic banking in Malaysia generally viewed as the largest centre for Islamic finance outside the Middle East. (Abdul Halim Abdul Hamid, 2001) focused on the awareness of Malaysian customers towards Islamic banking within the context of the wider promotion of Islamic education. They found that most Malaysians did not differentiate between Islamic and conventional bank products and services, though the majority had sufficient knowledge of the existence and services offered by Islamic banks in Malaysia. However, as a country with majority of Muslims and minority of 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 (Amir Ranjbar, 2008).

Moreover, even though half of respondents of this study dealt with Islamic banks, they were in need of extra understanding of Islamic banks’ products. Subsequently, (Zainuddin, 2004) also surveyed Malaysian bank customers to illustrate the different perceptions of users and non-users of Islamic banking services. They concluded that most Islamic bank users were older than thirty with relatively stable family incomes. On the other hand, most non-users were single, aged less than 30 years with low incomes. One important finding in this study was that the decision-making processes of Islamic banks’ users were affected by spouses, friends and relatives, as well as their innate religious motivation.

Two recent studies on the perceptions and understanding of Islamic finance deserve special note. In the first, (Kuehn, 2004) business students’ knowledge of financial aspects of Islamic and conventional banks in the United Arab Emirates (Sharjah). This is particularly noteworthy in that this sample included a relatively high proportion of students knowledgeable of general financial practice and comprised students of both an Arabic and non-Arabic Muslim background. The major finding was that Muslim students preferred Islamic bank services because of religious motivations. A secondary finding was that while Arabic Muslims displayed a high level of knowledge of Islamic financial terms and concepts, non-Arabic Muslims students had a higher level of knowledge of conventional banking. That said most students’ banking knowledge was generally at a low level. The second study of note is working on customer satisfaction with interest-free banking and bank selection criteria in Turkey by (Okumus, 2005). The most important finding was that the majority of Islamic bank customers responded that religion was the primary motivation in the use of Islamic products and services (Omer, 1992; Metwally, 1996; Metawa and Almossawi, 1998; Al-Sultan, 1999; Bley and Kuehn, 2004). A second motivation was that the Islamic financial institutions in question also offered conventional bank products and services. This led to an even higher level of satisfaction with the offered portfolio of Sharia-compliant and non- compliant products and services.

2.4 CUSTOMERS ATTITUDE

Customers’ attitude towards a product or service is influenced by a match of the product or service user image with the customer self-concept (Ekinci and Riley, 2003; Sirgy et al., 1992; Wang and Heitmeyer, 2005). Since, generally attitude develops over time through a learning process which is affected by reference group influences, past experience, and personality (Assael, 1981), or it is a general evaluation about something, liking or disliking, and the strength of the feelings. Customer satisfaction is the feeling or attitude of a consumer toward a product or service after it has been used (Solomon, 1996; Wells and Prensky, 1996). When customers are pleased and feel content about the product and service being used, consumers will repeat the purchase of the product and convey positive messages about it to others (Dispensa, 1997). Customer satisfaction is becoming so important to the extent that some banks consider it as a chief element in their marketing strategies. The term "after marketing" has been widely used to mean focusing attention and efforts on current customers in order to maximize their satisfaction so to secure their retention (Vavra, 1995).

To satisfy customers, banks use various tools, ranging from reengineering all services to focusing on some specific services (Motley, 1994). One of the areas which is growing and believed to have a significant impact on customer satisfaction is telemarketing (Sion, 1994). White (1994) has examined the importance of telemarketing in satisfying customers and concluded that "telephone banking could become a key aspect of customer satisfaction". In Singapore banks are continually involved in improving the core technology that makes self-service banking products possible in order to achieve better marketing, customer satisfaction and retention (Kass, 1992). The Co-operative Bank in the UK has applied another strategy to satisfy its customers. The bank encouraged customers to communicate directly with its account management centre, rather than contacting the branches, for any problem or complaint they might have. This strategy has helped Co-op to gain one of the highest customer satisfaction ratings (IJRDM, 1995a).

Kaynak and Harcar (2004) also added that managing service quality in a commercial bank is rather challenging because so much depends on how well the bank employees (internal customers) respond to the needs and expectations of the customers. Bank customers, in most cases, evaluate commercial banks on the bank employee dimension when they place a heavy emphasis on positive staff attitude, knowledgeable staff, friendliness of bank personnel, employee professionalism, courtesy of personnel, and timely employee responses to correspondence. Arasli, Katircioglu, and Mehtap-Smadi (2005) asserted that customer contact personnel played a vital role in the delivery of high quality service.

Owusu-Frimpong (1999), Ta and Har (2000) and Kaynak and Harcar (2005) found that profitability factors, such as low service charges and high interest rates, were the major reasons why customers chose a particular bank. Kaynak and Harcar (2005) also concluded that a fast and efficient service was also an attractive feature valued by current and potential customers, while Gerard and Cunningham (2001) considered that for most customers the most important criterion for bank selection was feeling secure. In terms of outcomes, Pont and McQuilken (2005) concluded that the continuation of customer loyalty towards a particular bank will gain higher level and gives the bank a positive impact in terms of image wise.

2.5 BANKING SELECTION CRITERIA

Literature on banking selection criteria contains numerous features by different researchers across the globe. Among the common factors used to measure customers’ selection criteria are cost and benefits of products offered, service delivery, confidentiality, size and reputation of the bank and convenience of the Islamic banks (Erol and El-Bdour, 1989; Erol et al., 1990; Omer, 1992; Haron et al., 1994; Gerrard and Cunningham, 1997; Metawa and Almossawi, 1998; Naser et al., 1999; Ahmad and Haron, 2002; Abbas et al., 2003) cited by Dusuki A.W (2007). Other than that, a 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, (Ranjbar, 2008). 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." Anderson et al (1976) cited by Ranjbar (2008).

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 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." cited by Ranjbar (2008).

Religious motivation is not the sole criterion for the selection of Islamic banking institutions or services (Dusuki A.W, 2007) while others might say that 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) cited by Ranjbar (20xx). 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. A comparison of Muslim and non-Muslim bank customers’ 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 the survey of this study 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 (Ranjbar, 2008).

A study by Metawa and Almossawi (1998) cited by (Amin H, 2008) pointed out that provision of Shariah compliant products and services were highly regarded by majority customers while selecting banks. Other factors were the reward given by banks, family influence, convenient location and customers’ education and knowledge. Haron et al. (1994) cited by (Amin H, 2008) did a study in Malaysia on the dual banking framework where multicultural societies are found and about 60 per cent of the populations are Muslims. Gerrard and Cunningham (1997) cited by (Amin H, 2008) undertook a study in Singapore where non-Muslims are 70 per cent and over. Conversely, most of the respondents employed by Metawa and Almossawi (1998) cited by (Amin H, 2008) study were Muslim equating to 90 per cent and over. These factors have contributed to different results.

Other studies had been conducted about the Jordanian customers’ satisfaction which mainly focused on the bank’s name, image, confidentiality and reputation. Indeed, provision of fast and efficient services are always regarded as high-quality services by bank customers who value time and expect the transaction to be completed as quickly as possible. Therefore, it is argued here that in order to survive, Islamic banks should not rely on religious factor alone since other factors as stated earlier are also important (Amin H, 2008). Dusuki and Abdullah (2007) cited by (Amin,H 2008) also argued that Islamic bankers can no longer depend on the marketing strategy of attracting pious and religious customers who might only concern about Islamicity of financial products. Other factors beyond religious factor are required to attract bank customers for businesses.

Table 1 provides a summary of the customers’ selection criteria based on the patronage studies on Islamic banking. Table 1 depicts, patronage studies on Islamic banking have so far largely focused on the combination of various religious, reputation, commercial, service satisfaction, staff, confidentiality and convenience factors. On the other hand, both religious and economic factors are equally important for customers in patronizing Islamic banks (Kader, 1993, 1995; Haron et al., 1994; Gerrard and Cunningham, 1997; Ahmad and Haron, 2002) cited by Dusuki A.W (2007). Locational factors have decreased in importance, while certain criteria such as the bank’s image and reputation and expectations about level of service have retained their degree of importance in consumers’ minds (Amin H, 2008). In summary, previous results suggest that Islamic banks must not rely solely on religious factors as a strategy to secure customers’ allegiances but they should also emphasize providing quality and efficient product and services (Dusuki A.W, 200

Table 1 Patronage studies on Islamic banking‹‹‹‹

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2.6 SUMMARY

In this chapter several factors were reviewed based on the principles of Islamic banking, what are the level of awareness of the customers towards their knowledge in Islamic banking, the customer’s attitude in selecting or perspective about Islamic banking institutions’ products and services and also the banking selection criterion in choosing the right Islamic banking for customers.

CHAPTER 3: RESEARCH METHODOLOGY

3.1 INTRODUCTION

In this chapter, it focused more on the methodologies that will be using in the study. It include the data collection, data source, variables, research design which consist of six basic aspects that are purpose of study, types of investigation, research interference, study setting, unit of analysis and time horizon, theoretical framework, data analysis and treatment, hypotheses statement and conclusion. There are a few basic methodologies are used in measuring the customer’s criteria for selecting an Islamic bank.

3.2 DATA COLLECTION

In this study, all the data are gathered and collected from the secondary data. Secondary data are gathered and recorded by someone else prior to (and for purpose other than) the current needs of the researcher. It is usually historical in nature and has already been assembled. It is cost and time saving. For this study, the data collected mostly from articles, journals, websites in the internet, and from the textbooks. The data of the choice criteria based on time-series data, which is in daily basis from year 2007 to 2011.

3.3 DATA SOURCE

In this study, most of the data collected and gathered from the secondary data. To make it more accurate and reliable, only relevant and related data had been chosen based on this study will be use. The sources of data are come from the follows:

3.3.1 Journals

All the journals that been taken is used for references and for the literature review. These journals are taken from the several resources such as International Journal of Housing Markets and Analysis, International Journal of Social Economics, Journal of Islamic Marketing and International Journal of Bank Marketing.

3.3.2 Internet

Internet also was used in order to find the additional information that can be used in the research as the supporting information.

3.3.3 Textbooks

Textbooks were used to understanding more details of the specific terms that been using in this study and also to get more information.

3.4 VARIABLES

A variable is anything that can take on differing or varying values. The values can differ at various times for the same objects or person. The variables consist of dependent and independent variables.

3.4.1 Dependent Variables

The dependent variables (criterion variables) defined as variable of primary interest to the researcher, whose measures the effects of the independent variables. In this study, dependent variables are customer’s criteria.

3.4.2 Independent Variables

The independent variables (predictor variable) influence the dependent variable that explains the variance in dependent variables either in positive or negative way. Independent variables Product features and quality service include in the independent variable in this study.

Both variables were used in this study. This is because, this study is to identify the customer’s criteria in selecting Islamic Bank product which there are came from several factors that will give impact to customers such as the product features and quality services of the bank.

3.5 RESEARCH DESIGN

This study engages in hypotheses testing that will explain the customers’ criteria in selecting Islamic bank.

3.5.1 Purpose of the study

The purpose of this study is to ascertain the product features of Islamic bank and to examine the quality services affecting the customers’ criteria in choosing Islamic bank. Therefore, this research has a descriptive purpose.

3.5.2 Types of Investigation

This investigation is categorized under the clarification investigation because the research is explaining the products being offered by the Islamic bank and also revealing the factors that influences the customers’ in selecting the bank.

3.5.3 Extend of Researcher Interference

The study is conducted in the natural environment of the organization with minimum interference by the researcher with the normal flow of work.

3.5.4 Study Setting

The study setting in this research is non-contrived as there are no intrusions surrounding the study environment.

3.5.5 Unit of Analysis

The unit of analysis for this study is at group level because based on the research objectives; this study is related to a group of customers in selecting Islamic bank.

3.5.6 Time Horizon

This research is based on cross sectional which means the data is gathered only once in order to meet its research objectives.

3.6 RESEARCH FRAMEWORK

Independent Variable Dependent Variables

Quality

Services

Customers’ Criteria in Selecting Islamic Bank

Product

Features

3.7 DATA ANALYSIS AND TREATMENT

Data analysis can be defined as the steps or process of gauging data using systematic and logical reasoning to investigate every single component of data that had been provided. When we are about to conduct a research experiment, this form of analysis is just one of the many step that must be completed. Data from numerous sources is collected, evaluated and then analyzed in order to find findings or conclusion. Data mining, text analytics, business intelligence and data visualizations are the several of specific data analysis method. For this study, ANOVA is the data analysis that had been used. ANOVA in a simple word is Analysis of Variance.

ANOVA is used in order to know whether all sample groups in a study will be influence by the same factors and degree. While the groups are being kept apart independently from one another, the result then will be compared. The sample groups are examined to see if the average within each group is the same and how much impact different variables have on the test.

3.8 HYPOTHESES STATEMENT

Hypothesis can be defined as unproven statement of proposition about a factor of phenomenon that is of interest to the researcher. A good hypothesis should fulfill three conditions which are adequacy for its purpose, testable and better than its rivals. Hypothesis act as an uncertain estimation on the projected result depends on the current facts or data, then only a person can decide whether to accept or reject the hypothesis that had been generated. Using the hypothesis, it gave a direction of the study and it can recognize facts and data whether it is related or not.

The elements of hypothesis are:

3.8.1 Null Hypothesis (Ho)

The null hypothesis is expressed as no (significant) relationship between two variables or no (significant) relationship difference between two groups.

3.8.2 Alternate Hypothesis

The alternate hypothesis is a statement expressing a relationship between two variables or indicating differences between groups.

The hypothesis is logically developed relationship between two or more variables. The study should also decide whether to accept or reject the null or alternate hypothesis.

The hypothesis that being tested for this study are:

3.8.3 Hypothesis Statement

H0: There are no relationship between product features and quality services towards customer’s criteria for selecting an Islamic Bank.

H1: There are relationship between product features and quality services towards customer’s criteria for selecting an Islamic Bank.

3.9 CONCLUSION

At the end of this chapter, it can be able to develop a set of hypotheses to be tested whether the product features and quality services give an impact towards customer’s criteria for selecting an Islamic Bank. On the other hand, it also enables to establish the link among those two dependent and independent and evolve a theoretical framework. To sum up, it can be decided for the type of analysis required, purpose of the study, study setting, extent of researcher interference, time horizon of the study and the population to be studied.

CHAPTER 4: FINDINGS AND ANALYSIS

4.1 INTRODUCTION

In this study, 150 respondents were given out a questionnaire for the purpose of examining the quality services affecting the customers’ criteria in selecting Islamic banking and ascertaining the product features of Islamic banking.

After the data are gathered and collected, this chapter will summarize the findings based on the analysis that has been done in this study. Every result from the test and analysis that is taken earlier will be analysed in order to make decisions. An accurate result and substantial results are expected from this test.

By using SPSS, the data that were collected is analyzed in order to determine which of the banking choice criteria were preferred by the customers of Islamic banking in Malaysia. According to this study, the regression method is used to analyze the hypothesis to examine whether there are relationship between product features and quality services towards customer’s criteria for selecting an Islamic Bank.

4.2 ANALYSIS OF DATA AND FINDINGS

Table 1C:\Users\mimi\Desktop\catskk.jpg

A coefficient was taken between relationship of customer’s criteria and products features. It was hypothesized that the model have a strong relationship exists between the two variables. Results of the coefficient indicates that product features increases, then the customers criteria for selecting a bank will increase (Sig. 0.043, Sig. < 0.05)

H0: There is no relationship between product features towards customer’s criteria for selecting an Islamic Bank.

H1: There is relationship between product features towards customer’s criteria for selecting an Islamic Bank.

Test: Whether to accept H0 if Sig.-value is = 0.05 or > 0.05.

Result: Reject H0, since Sig.-value is < 0.05.

Conclusions: There is sufficient evidence to conclude, that there is a relationship exist between the product features and customer’s criteria for selecting an Islamic Bank.

Table 2C:\Users\mimi\Desktop\SQ.jpg

A coefficient was taken between relationship of customer’s criteria and service quality. It was hypothesized that the model have a strong relationship exists between the two variables. Results of the coefficient indicates that service quality provided increases, then the customers criteria for selecting a bank will increase (Sig. 0.042, Sig. < 0.05)

H0: There is no relationship between service qualities towards customer’s criteria for selecting an Islamic Bank.

H1: There is relationship between service qualities towards customer’s criteria for selecting an Islamic Bank.

Test: Whether to accept H0 if Sig.-value is = 0.05 or > 0.05.

Result: Reject H0, since Sig.-value is < 0.05.

Conclusions: There is sufficient evidence to conclude, that there is a relationship exist between the service quality and customer’s criteria for selecting an Islamic Bank.

4.3 CONCLUSION

In a nutshell, by having 500 respondents to answer the questionnaire contributes to adequate evidence that there is a relationship in both service quality and product features that helps the customer to select an Islamic bank.

CHAPTER 5: CONCLUSION AND RECOMMENDATIONS