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Table of Contents
CONCLUSION ........................................................................................................................ 7
APPENDIX ............................................................................................................................... 9
REFERENCES ....................................................................................................................... 12
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Abstract:
Islamic banking system in Malaysia was established in1983. The success story of the rapid
development of it in pass 10 years was intentioned by globe. Unfortunately, most people prefer
conventional banking product more than Islamic banking product. The study revealed that
religious value be the most important factor, second factor is going to be the people have lack of
knowledge about Islamic banking product. Cost and benefit are the last important factor in their
consideration. It is to be concluded that, if want to increase the acceptance of general public for
Islamic banking products in coming future, it should be take time for improvement of the
marketing strategy of Islamic banking for capture the attention of public, and also conduct some
events or talk to let people get more knowledge about it. So that it could gradually change the
image of general public for Islamic Banking product.
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Introduction
Since 1983, Islamic banking system has been established for 31 years until now. Nowadays,
Malaysia is the country which owns the second largest Islamic Funds Assets (Islamic Financial
Services Industry, 2013). The rapid grow of Islamic Bank Industry had been obvious by whole
world. The elements that made it so successful are the timely adjustment policies, strong
financial infrastructure and focusing on training Islamic finance professionals. (APEC, 2011)
Besides that, Islamic Financial Services Board locates at Malaysia. From 2005 to 2009, the
annual assets of Malaysia Islamic Bank grew 20% averagely, assets amount reach 78.6 billion
USD in 2009, which was 19.6% of total assets of Malaysias bank.(Bank Negara Malaysia,2009)
The total assets already reached 140billion USD in 2013 and expected it will reach 392billion in
2018. (Bank Negara Malaysia, 2013)
In Malaysia, there are 16 licensed Islamic Bank; Affin Islamic Bank, Alliance Islamic Bank,
Bank Islam Malaysia, Bank Muamalat Malaysia Berhad, CIMB Islamic Bank Berhad, Hong
Leong Islamic Bank Berhad, Maybank Islamic Berhad, Public Islamic Bank Berhad, RHB
Islamic Bank Berhad and so on.
In 2009 the world's largest Islamic bank rankings, the top 10 Islamic banks from the Middle East
oil producers, Iran 6, UAE 2, Saudi Arabia and Kuwait each one. In between 11-20, there is a
total of three ENTRY Malaysia, Bahrain 2. Malaysia ENTRY is Maybank Islamic (Top 13th),
BIMB Holdings (Top 15th) and CIMB Islamic Bank (Top 17th). Obviously, the Malaysian
Islamic banking competition strength was among the world's top. (The Asian Banker, 2009)
Sources of funds in the bank's products (liabilities) include three kinds of deposit accounts and
two kinds of investment accounts. In terms of funding products (assets) are relatively abundant,
as many as 30 types (MIFC, 2010) Takaful. However, these products are not fully accepted by
all people. In this project, we focus on the perception of general public of Malaysia.
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Chapter 2- The reasons make those people chose Islamic Banking Products
The research found that quality of customer service appears more important than price and
customers use additional criteria beyond price, efficiency and access to evaluate and choose
between banks. (D.A. Bednar, 1996.)
On the others hand, a study concluded that benefit and cost are the most important factors
considered in bank selection decisions. (N. Al-Saleh, 2009). In addition, some Islamic bank
aware that just only 40 percent of Muslim believe that the religion of the customer is the main
factor behind the reason why they maintain an account with Islamic bank. (S.L. Planisek, 1994)
A survey of 480 Malay Muslim workers in Lembah Klang found that the workers who are more
religious tend to choose Islamic Bank for depositing money and financing purpose. (Che Seman,
2008) As they found Muslims belief and social responsibility are the most important factor, cost
and benefit is the second most important factors considered in bank selection. The quality of
services includes factors like treating customers with courtesy and respect, staffs ability to
convey trustfulness and confidence, effectiveness in handling any transaction and knowledge to
provide the solutions and answer concerning Islamic banking product.
The Table 4 (Appendix) presenting the ranking importance of Islamic Bank criteria factors. The
responders believes the most important factor makes Muslim select Islamic bank is the religious
value (mean=4.411), followed by ATM service provided by Islamic bank (mean=3.856) and the
least important is attractiveness (mean=2.907), this result was further proved that religion is the
main factor influence customers prefer Islamic bank. Religious value includes factors like
Islamic bank did not involve in any regulation or acts against Shariah, free from speculation, no
riba charged. So all these factors make Islamic bank provided a good, justice and honesty image
to Muslim customers.
Chapter 3 - Islamic Banking Product which most people like
According to table 1, the result is getting from Non-Muslim respondents. There are 11
respondents among the all Non-Muslim respondents used current accounts for their daily
transactions under Islamic bank which is 24.2% among the all respondents while 11.1% had both
in conventional fixed deposits facilities and bankers acceptance. Fixed deposits, followed by
overdraft, bank guarantee and letters of credit was the less popular facility for Islamic financing
and trade facilities, while ECR, bond, note issuance facility were unpopular among the NonMuslim respondents. (Norafifah Ahmad, 2011)
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Based on the finding in table 1, Non-Muslim used current accounts most frequently for their
daily transactions among all the Islamic banking facilities. However, Islamic banking was still
considered not popular among Non-Muslim customers as only 11 Non-Muslim respondents
maintained banking relationships under the Islamic banking system. (Norafifah Ahmad, 2011)
On the other hand, the Muslims usage and preferences of Islamic banking products are also our
main concern in this study. According to result from Muslims respondents in table 5, there are
122 Muslim respondents open saving account in Islamic bank which occupy 62% among the
total 196 Muslim respondents. The housing loan and hire purchase was chosen by 21 and 26
Muslims respondents as the services they will use in Islamic Bank which is the second and third
frequent service utilized. Credit card, followed by current account, personal loan and unit trust
was the less popular service utilized by Muslims, while fixed account and insurance were
unpopular among Muslims as only 4 Muslims respondents out of 196 Muslims respondents
choose the services in Islamic bank. (IDOSI Publication, 2011)
Based on the finding in table 5, Muslims had open saving account as the most frequent service
utilized among all the Islamic banking products and services. However, Islamic banking products
and services were still considered unpopular among the Muslims and even the Non-Muslims as
only the minority of them chooses to use Islamic Banking products rather than conventional
banking products.
Chapter 4- How to increase the acceptance of Malaysian towards Islamic banking product
Most of the Malaysian is still more familiar with the conventional banking products, which
create a fact that many Islamic banks are competing head-on against the conventional banks.
Competing against the conventional banks means attracting customers who place less importance
on Sharia compliance in their financial dealings. (Garbois, 2012)
Besides that, until now the Islamic banking products offered by Islamic banks are still not fully
accepted by customers is because of the problems occur on customers confidence towards
Islamic banking products. It becomes a major problem since many of the customers are not
understand and lack of knowledge about Islamic banking system. Nowadays, customers positive
perception towards Islamic banking is far more crucial due to the fact that it have to compete
with the long established conventional banks in a dual-banking system. (Asyraf Wajdi Dusuki
and Nurdianawati Irwani Abdullah, 2006)
Islamic banks should recognize that customers view them just like any other commercial bank
since religion is no longer the main factor in attracting customers. Hence the quality of service,
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and products and services offered must be compatible with those offered by the commercial
banks (Sudin Haron et. al, 1994).
To successfully increase the acceptance of Malaysian towards Islamic banking products, Islamic
banks must capable to change the misconception of most of the Malaysian against the Islamic
banking, as many of them still has a wrong understanding which among the thoughts are Islamic
banking and its products is only for Muslims and Islamic banking products is not profitable
because no interest is charged. Thus, better understanding and awareness should be creating
among the Malaysian customers that Islamic banking and its products are not only an alternative
financial approach but also in some aspects provide better value propositions to the consumers.
(Dato' Sri Zukri Samat)
In addition, the religious dimension plays an important role in banking selection, however
quality and attractiveness of offerings is also perceived as significantly important for the
customers to patronize Islamic banking. Since some previous research indicated that religion is
no longer the main factor in attracting customers, Islamic banks should recognize that customers
view them just like any other commercial bank (Haron et al., 1994). Thus the quality of service
and the products and services offered must be comparable with those offered by the commercial
banks.
Conclusion
This study effectively delineates empirical evidence on the perception of Malaysian customers
toward Islamic banking product. There are 3 major factor influence the attitude toward Islamic
bank; demographic different, services attributes by banks and religious influence.
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The first thing that can be confirmed is Islamic banking product was not popular in Malaysia,
their assets amount already showed in the annual report are far from conventional bank. One of
the reason is most of the people have less knowledge about Islamic banking products, event no
idea for the profit sharing principle and thought that Islamic banking products are similar with
conventional banking products. From the angle of Non-Muslim, the reasons for those customers
choose the service of Islamic bank is because of their religion, as people always think about
Muslims bank when saw the words Islamic bank. Malaysia government did not generalize
Islamic banking knowledge through education to all the citizens.
The second thing we can strongly confirmed is the religion of the customer is the main factor for
those choosing Islamic bank, cost and benefit is the second most important factor. As Muslims
belief and social responsibility, it will let them obviously show their fidelity for their religion.
As for sure, Islamic banks still have a very long way to educate Malaysians about what kind of
Islamic Banking products they are offering nowadays and how they are different from the
conventional banks and what alternatives products and services they can offer for the Malaysians
consumers of conventional banks. Besides that, Government and Islamic banks carry the very
important role to provide broader information and organize some educational campaigns for the
Malaysian consumers to help them to increase their awareness and understanding towards
Islamic Banking system as most of them who do not hold any Islamic Banking products is due to
lack understanding of what Sharia banking is all about.
In conclusion, Malaysians consumers are still not paying much concern on the Islamic banking
products compared to conventional banking products, but the growth of the Islamic banks over
the past few years continues to prove and generate optimism for the future of the Islamic
Banking. Since there will be always a tight competition between Islamic banks and conventional
banks, Islamic banks must take time to consider strategic choices and address operational
fundamentals to be in a stronger position to capture untapped market opportunities, achieve
greater efficiency and sustaining growth to be able to compete with the conventional banks and
increase the usage of Islamic Banking products by Malaysian consumers in the very near future.
Page8 of 14
Appendix
Table 1: USAGE OF CONVENTIONAL/ISLAMIC BANKING
FACILITIES/DERIVATIVES
Types of Facilities
Conventional
Islamic
Overdraft
42
93.3
6.7
Term/Fixed loan
33
73.3
11.1
Letters of Credit
21
46.7
6.7
Trusts receipts
15
33.3
4.4
Bankers acceptance
25
55.6
11.1
ECR
6.7
2.2
Bank guarantee
38
84.4
6.7
11.1
2.2
Bond
17.8
2.2
Current Account
45
100
11
24.2
Fixed deposit
34
75.6
8.9
Others
13.3
4.4
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Page10 of 14
Items
Sum
Saving
account
122
Current
account
Fixed account
Housing loan
21
Hire purchase
26
Unit trust
Insurance
Credit card
Personal loan
Page11 of 14
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