FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS CHAPTER 1: INTRODUCTION

2011

1.0 CHAPTER DESCRIPTION The first chapter of this report provides an overview of the Islamic banking industry both globally and in Malaysia, the importance of Islamic banking and the factors that led the researcher to conduct research in this area. It highlights the background of the study, problem statement, objectives of the study, theoretical framework, research questions and hypothesis of the study, significance of the study, definition of terms, limitation of the study and lastly scope of the study.

1.1 BACKGROUND OF THE STUDY Islamic banking refers to a system of banking that complies with Islamic law. The underlying principles that govern Islamic banking are mutual risk and profit sharing between parties, the assurance of fairness for all and that transactions are based on an underlying business activity or asset. These principles are supported by Islamic banking's core values whereby activities that cultivate entrepreneurship, trade and commerce and bring societal development or benefit is encouraged. Activities that involve interest (riba), gambling (maisir) and speculative trading (gharar) are prohibited (BNM, 2010). As stated in the Quran “Allah forbids riba”. Riba means an increase and under shariah the term refers to the premium that must be paid by the borrower to the lender along with the principle amount as a condition for the loan.

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FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS

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Those who devour usury will not stand except as stand one whom the Evil one by his touch Hath driven to madness. That is because they say: "Trade is like usury," but Allah hath permitted trade and forbidden usury. Those who after receiving direction from their Lord, desist, shall be pardoned for the past their case is for Allah (to judge) but those who repeat (The offence) are companions of the Fire: They will abide therein (for ever).

(Al-Baqarah : 275)

Over the last three decades Islamic banking and finance has developed into a fullfledged system and discipline reportedly growing at the rate of 15 percent per annum. Today, Islamic financial institutions, in one form or the other, are working in about 75 countries of the world. Besides individual financial institutions operating in many countries, efforts have been underway to implement Islamic banking on a country wide and comprehensive basis in a number of countries. Islamic banking and finance has satisfy the Muslim community needs, to a multibillion dollar industry upholding Islamic principles since it undergone rapid transformation and growth from an industry striving. Islamic banking is now a well-known term and has emerged as one of the most important industries worldwide. Over recent decades, the Islamic banking industry has emerged as one of the fastest growing industries and has spread to all corners of the globe, receiving wide acceptance from Muslims and non-Muslims (Iqbal and Molyneux, 2005; Asyraf and Nurdianawati, 2007).

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FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS

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The emergence of strong Islamic movements has generated a renewed interest in Islamic economics, especially in Islamic interest-free banking. Iran and Sudan have instituted Islamic banking systems, while many other countries have established a mixed or dual banking system. Malaysia followed the latter course, with its first Islamic bank, beginning operations in July 1983, Bank Islam Malaysia Berhad (BIMB). The blueprint for the modern Islamic banking system came in 1983, with the introduction and enforcement of two new acts known as the Islamic Banking Act and the Government Investment Act (Remali Yusoff, Rodney Wilson, 2005).

Malaysia has emerged as the first country to implement a dual banking system where Islamic banking system operates side by side with the conventional banking system. The Malaysian model has been recognized by many Islamic counties as the model of the future and many countries have shown interest in adopting this system. In fact, delegates from various countries, mainly Muslim counties have come to Malaysia, particularly to the Central Bank and Bank Islam Malaysia Berhad (BIMB), to study how the dual banking system works (Hamim S. Ahmad Mokhtar, Naziruddin Abdullah, Syed M. Al Habshi, 2006).

The history of Islamic Banking in Malaysia can be traced in 1963 when Tabung Haji was established by the government. It is a specialized financial institution that provides a systematic mobilization of funds of Muslims to assist them to perform pilgrimage in Makkah as well as to encourage them to participate in investment opportunities and economic activities. In fact, due to its uniqueness, Tabung Haji is considered to be the first of its kind in the world and economic activities (Mohammed Siedu, 2002; Ahasanul Haque, 2009). 3|Page

2006). The popularity of the Islamic banking system is not limited to the Islamic banks only. Ahmad Mokhtar. while the intention was to create awareness among the public. Al Habshi. Jamil Osman and Ahmad Zaki Hj Ismail. Increasingly large international conventional banks are showing interest in the Islamic banking system as well. The first phase is considered as the period of familiarization (1983-1992) where BIBM was established and the Islamic banking operations were started in accordance with Shariah principles. At the same time. Lastly. 4|Page .FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 The government of Malaysia had then introduced a coordinated and systematic process of implementing Islamic financial system which is based on the experience of Tabung Haji. When competition intensifies and when banks start to offer more or less similar products and services. Naziruddin Abdullah. the Central Bank paved the way for new foreign Islamic banks to operate in Malaysia by means of issuing licenses to them (Hamim S. 2009). it is the customer's satisfaction that can influence the performance of an Islamic bank and determines its competitiveness and success (Ahasanul Haque. During this period. this was also the period when conventional banks were allowed to offer Islamic banking services by setting up "Islamic banking scheme (IBS)" in 1993. This process can be divided into three phases. The second phase (from 1993-2003) was aimed at creating a more conducive environment for competition among the banks. The consequence of this is that Islamic banks operating in Islamic countries are faced with strong competition not only from Islamic banks but also from non-Islamic rivals. Syed M. especially Muslims. about the benefits of Islamic banking system. it was to give banks ample time to try to capture a large market share.

However. So. This study sought to examine customers‟ understanding towards Islamic banking. 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. The BNM has approved a system of parallel Islamic and conventional banking because of its mixed ethnic and religious backgrounds. Malaysia is the first nation to successfully adopt a dual banking system. The past two years saw many conventional banks rushing to obtain a full Islamic license in order to set up an Islamic bank in Malaysia. it is importance to assess the degree of customers‟ confidence towards Islamic banking products.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 1.2 PROBLEM STATEMENT 2011 Islamic Banking has become a substantial and fastest growing industry during the last four decades. Here. where a full-fledged Islamic system operates side by side with the conventional banking system within a single bank. Nowadays. the products offered are still not fully accepted by customers. it‟s one of the reason why customers especially Muslim do not involve in Islamic banking. Thus. Islamic banking products are available at two full pledged Islamic banks and at all commercial and merchant banks in Malaysia. In Malaysia. religious perspective and customers‟ perception are influenced customers‟ confidence towards Islamic banking products. 5|Page . the issues arise is the problems occur on customers‟ confidence towards Islamic banking product. It becomes a major problem since some of the customers are not understand and lack of knowledge about Islamic banking system. Hence. this research done to measure whether the demographic factors.

A careful review of those questions areas led to the development of the following specific research objectives:  To determine if the demographic factor influence customers‟ confidence towards Islamic banking product  To examine if the factor of religious perspective influence customers‟ confidence towards Islamic banking product  To know whether the factor of customers‟ perception influence customers‟ confidence towards Islamic banking product  To study which is most influence factor that contributed to the customers‟ confidence towards Islamic banking products 1.4 THEORETICAL FRAMEWORK In the study. the researcher identified study areas to be addressed. A variable is anything that can take on differing or varying value. In the theoretical framework there are two variables are used to identify for each other which is:  Dependent variable (criterion variable) .is the primary interest to the researcher. In defining the limitations of this study.is one that influence the dependent variable in either a positive or negative way 6|Page . the theoretical framework is needed in order to know the relationship from one variable to the other variables.  Independent variable (predictor variable) .3 OBJECTIVES OF THE STUDY 2011 The general purpose of this study is to identify the customers‟ confidence towards Islamic banking products in Malaysia.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 1.

5.5 RESEARCH QUESTIONS AND HYPOTHESIS OF THE STUDY 1.5.1.5.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS The schematic diagram for the theoretical is as follow: 2011 Demographic Factors Religious Perspective Customers‟ confidence towards the product Customers‟ Perception Independent Variable (IV) Dependent Variable (DV) 1.3 Does customers‟ perception influence customers‟ confidence towards Islamic banking products? 7|Page .1.5.2 Does religious perspectives influence customers‟ confidence towards Islamic banking products? 1.1.1 RESEARCH QUESTIONS 1.1 Does a demographic factors influence customers‟ confidence towards Islamic banking products? 1.

In general the null statement is expressed as no (significant) relationship between two variables or no (significant) difference between two groups. it is expected that solutions can be found to correct the problem encountered. In this study. the first one is null hypothesis (Ho) which is the proposition that the states a definitive.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 1. The second type is the alternate hypothesis (Ha). exact relationship between two variables. three hypotheses have built that are related with the objective of the study: Hypothesis 1 Ho: There is no relationship between demographic factors and customers‟ confidence towards Islamic banking products Ha: There is a relationship between demographic factors and customers‟ confidence towards Islamic banking products Hypothesis 2 Ho: There is no relationship between religious perspectives and customers‟ confidence towards Islamic banking products Ha: There is a relationship between religious perspectives and confidence towards Islamic banking products customers‟ 8|Page .2 HYPOTHESIS OF THE STUDY 2011 Hypothesis can be defined as a logically conjectured relationship between two or more variables expressed in the form of a testable statement. By testing the hypotheses and conforming the conjectured relationship. There are two differential hypotheses. which is the opposite of the null that is expressing a relationship between two variables or indicating differences between groups.5.

Through this study. It will give information to them the most factors that influence customers‟ confidence towards Islamic banking products.6.2 To The Researcher It is the best way for the researcher to apply all those theories that have been learned in class.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS Hypothesis 3 2011 Ho: There is no relationship between customers‟ perception and customers‟ confidence towards Islamic banking products Ha: There is a relationship between customers‟ perception and customers‟ confidence towards Islamic banking products 1. they might gain knowledge and share their ideas and findings regarding to the area of study.6 SIGNIFICANT OF THE STUDY 1. At the same time it can improve Islamic banking performance by increasing customer demanding on their products. 1. So.1 To The Islamic Banking in Malaysia This study provides clear reason how to attract customers in selecting Islamic banking product rather than conventional product. As a Finance student. 9|Page .6. this study will be positively beneficial for them to apply all those theories that have been learned in class. they can know the problem arise and try to encourage the customers in choosing Islamic banking products.

Both distributions and trends of values within a demographic variable are of interest.7 DEFINITION OF TERMS 1. (Wikipedia. the customer itself will be able to know their level of knowledge and understanding towards Islamic banking products. 2011). even location. 10 | P a g e . These types of data are used widely in sociology.3 To The Customer 2011 This study will also give some knowledge and increase the awareness of customers that Islamic banking is on par with conventional banking in term of their products nowadays. trends describe the changes in demographics in a population over time. By answering the questionnaire.6. and age. income.1 Demographics Demographics are the characteristics of a human population. and marketing. public policy. employment status.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 1. 1. educational Demographic attainment. Commonly used demographics include gender. race.7.

7. Many religions have narratives. and the cognitive sciences. When someone is confident. Confidence is about trust and a feeling of assurance and security. symbols.3 Perception In philosophy. 2011).4 Confidence Confidence is generally described as a state of being certain either that a hypothesis or prediction is correct or that a chosen course of action is the best or most effective. 2011). and means "receiving. by establishing symbols that relate humanity to deeper truths and values. traditions and sacred histories that are intended to give meaning to life. (Wikipedia. when it was predicted that building perceiving machines would take about a decade. 1. (Wikipedia. (Wikipedia. apprehension with the mind or senses. ethics. There is no fear of failure. It is a task far more complex than was imagined in the 1950s and 1960s. psychology. perception is the process of attaining awareness or understanding of sensory information. 11 | P a g e .7.7.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 1. and action of taking possession. 2011). religious laws or preferred lifestyle from their ideas about the cosmos and human nature. they know they can achieve what they want to do. a goal which is still very far from fruition." Perception is one of the oldest fields in psychology. 1.2 Religious 2011 Religion is often considered a cultural system that creates powerful and long-lasting meaning. They tend to derive morality. percipio. collecting. The word comes from the Latin words perceptio.

8.1 Time constraint It is difficult to complete the research within a specified time frame.2 Cost constraint This study was the liability of the researcher. So that it also restrains the researcher‟s effort in completing this project paper. 1. In this short time period. Since the research was not sponsored. the researcher has a financial constraint to carrying out the project paper. it will not be able to obtain more information for completing the research. the researcher also needs to concentrate on the practical training during the working hours. As a student. Several limitations have been identified while completing this research such as: 1.8 LIMITATIONS OF THE STUDY 2011 In completing this research. A lot of money had to be spent in gathering data and information. the researcher has to face a few limitations that could affect the result of the study. 12 | P a g e . The studies conducted are accomplished within a short period. Time period also becomes a constraint for the researcher to get more accurate and reliable data. Limited budget and energy prevented the researcher to get further information.8. However these limitations differ from one researcher to another researcher where it depends on the subject matter of the study itself. the researcher had to bear all the cost.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 1. At the same time.

most students are not experts in using this program. In other words. researcher needs to be familiar with SPSS function and program.3 Computer expertise 2011 This research uses lots of data for analyzing.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 1. The researcher needs to know how to use the SPSS program to analyze data. as they did not answer the questionnaires fully especially when it involves their time spending. Besides.8.8. It is not easy to gain cooperation from the respondents. The researcher have to do a lot of study about Islamic banking product and need to increase the communication skill in order to persuade customers answer the questions at the same time. 1. the researcher must spend more time to understand and learn this program. the questionnaires were distributed among the respondents within the sample chosen. But. Some of the respondents unable to give good commitments and support during answering the questionnaires.8.5 Lack of experience As this is the first time for the researcher to do this research. therefore it may be quite difficult to collect data and manage time. 13 | P a g e . All data will be collected and analyzed. Therefore. the researcher has limited knowledge about general information of Islamic banking system in Malaysia. it gave a lot of problems to the researcher in the process of interpreting data precisely.4 Lack of cooperation In gathering data. 1. So.

9 SCOPE OF THE STUDY 2011 This study is conducted to focus on the factors that influenced customers‟ confidence towards Islamic banking products. questionnaires were distributed to 50 respondents who live in Kuala Lumpur.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 1. A total of 50 respondents participated in the study and data were collected using self-administered questionnaires. religious perspective and customers‟ perception as the independent variable and customers‟ confidence towards the products as the dependent variable. For the purpose of the study. The scope of the study involves the relationship between the demographic factors. 14 | P a g e .

Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah. Islamic banking products and past literature that is related to this study. 2006). 2007. 2005. they play as a business that is ineluctably in need for winning over customers whilst retaining the old ones (Wilson. Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah. 2006). More significantly.0 Chapter Description This chapter presents a detailed discussion on the subject matter.1 Overview of Islamic Banking Islamic banking has emerged as one of the fastest growing industries over the past three decades. Islamic banking is no longer regarded as a business entity striving only to fulfill the religious obligations of the Muslim community since it is one of the most important players in service industry today. there is a different between them where Islamic bank carry out their transactions in accordance with the rules and principles of Islam (Henry and Wilson. 15 | P a g e .FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS CHAPTER 2: LITERATURE REVIEW 2011 2. However. Iqbal and Mirakhor. Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah. 1995. 2006). This section also highlights the findings of past researchers on issues in the Islamic banking industry and also secondary sources information on the prospects for the Islamic banking industry. The functions of Islamic bank are similar as banks do in the conventional system. 2. This describes the nature of Islamic banking. It has spread to all corners of the globe and received wide acceptance by both Muslims and non-Muslims alike (Iqbal and Molyneux. 2004.

whereby the lender agrees to finance the project on a profit-sharing basis according to a predetermined ratio agreed by both parties concerned. If there are any losses the lender will bear all the losses. Qard Hasan and Al-Wakalah: (Sudin Haron. Murabahah. Musyarakah Musyarakah means a partnership between capital provider and customer. Islamic institution provides capital to the customer with the aim of making profit for a specific business. All parties agree. if there are any losses. There are a lot of Islamic banking products. Al-Ijarah. 16 | P a g e .FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 Malaysian commercial banks face even more challenges than most with other financial institutions because they have to compete with the new competitors which offer similar services but are based on Islamic principles. 1994). The applicable principles are called Mudharabah. Mudharabah This is basically an agreement between a lender and an entrepreneur. Norafifah Ahmad and Sandra Planisek. through negotiation. on the ratio of distribution of profits generated from the business activity. all parties bear the loss in proportion to their shares in the financing. The lender not only provides the capital but also participate in the management. The Islamic principles which govern the operations of Islamic banks are also known as Shariah principles. however in Malaysia there are some famous Islamic products that will be discussed briefly in this section. Musyarakah. However. The first Malaysian commercial bank which fully operates based on Islamic principles is Bank Islam Malaysia Berhad (BIMB). Al-Bai Bithaman Ajil.

However. Al Ijarah This is the Shariah’s concept of leasing finance whereby the bank purchases the asset required by the customer and then leases back to the customer for a given period. Bai Bithaman Ajil is the most popular product used by Malaysian financial institutions in providing financing facilities to their customers. Means. Financial institution sells the goods to the customer at a price covering the purchase price plus the profit margin agreed on by both parties concerned. The lender buys the goods wanted by the borrower for resale to the borrower at a higher price agreed on by both parties. The lease rental and other terms and conditions having been agreed on by both parties. the borrower is allowed to defer settlement of the payment for the goods purchased within the period which agreed by both parties.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS Murabahah 2011 This is basically the contract of sale. the borrower has the discretion to reward the lender for his/her loan by paying any sum over and above the amount of the principal. Qard Hassan This is a “benevolent loan” which obliges a borrower to repay the lender the principal sum borrowed on maturity of the loan. 17 | P a g e . Al Bai Bithaman Ajil Known as deferred payment sale.

FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS Al Wakalah

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This is an agreement between a customer and his or her bank in which the former appoints the latter as his or her agent in undertaking a certain transaction on his or her behalf.

Islamic banking products are increasing day by day and previous studies found that Islamic banking products are on a par with conventional banking products. The establishment of Islamic banking and finance in 1983 has contributed to the growth and sustainability of the Malaysian economy evidently. Since then, the strong growth of the Islamic banking in Malaysia is expected to continue due to new players who have joined the bandwagon in relation to the strong demand for Shariah-compliant financial products and services (Ismah Osman, Husniyati Ali and Anizah Zainuddin, 2009).

2.2

Customers’ confidence towards the products As more conventional banks participating and offering banking products and services based on Islamic principles, the development of the Islamic banks in Malaysia is increasingly challenging after two decades of its establishment. Thus, in order to confront and respond vigorously to the robustness of the global financial environment, it is very important for the players in the Islamic banking industry to better position themselves (Ismah Osman, Husniyati Ali et al., 2009).

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FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS

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Bank‟s name and reputation are strongly effect on selecting a bank. The reputation and image factor are evidenced as one of the important criteria in the banking selection decision (Ahasanul Haque et. al, 2009). The most important criteria considered by the customers are provision of fast and efficient services, bank‟s reputation and image, and confidentiality (Erol and El-Bdour, 1989; Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006).

The Islamic financial system prohibits the involvement in interest-based transactions and requires a trade-based arrangement where specific object of sale must be exchanged. It is further suggested that the Islamic financial market is better able to weather economic and financial crisis compared to the conventional financial market. The rapid demand for the Islamic financial products and services in both the Muslim and non-Muslim countries have also been contributing to the unprecedented growth of the Islamic financial industry (Salina H. Kassim and M. Shabri Abd. Majid).

Today, the Islamic banking and finance has emerged as an important component of the overall Malaysian financial system that contributes to the growth and development of the Malaysian economy. Since 2000, the domestic Islamic banking industry has been growing at an average rate of 18 percent per annum in terms of assets (Aziz, 2006; Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006). It is the aspiration of the Malaysian government to have a strong Islamic banking industry capturing 20 percent of market shares of financing and deposits in the Malaysian financial industry by 2010 (Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah, 2006). 19 | P a g e

FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2.3 Demographic Factors

2011

The dimensions of value, cost, and prior satisfaction are the combination of product attributes that best meet customers‟ needs. They make product or service choice based on these combinations (Kotler, 1997; Ahasanul Haque, 2010). Consumer‟s attitude or behavior should be studied through demographics, beliefs, and attitudes. It has been widely recognized that demographic factors have a great impact on consumer attitudes and behavior (Jayawardhena and Foley, 2000; Mattila, 2001; Karjaluoto et al., 2002; Ahasanul Haque, 2010). It is important for the Islamic banking service providers to recognize them, understand them, and use them to design a gender specific strategy since gender is a key variable for marketing analysis (Nicovich et al., 2005; Ahasanul Haque, 2010).

In order to provide best service to the customers, it is better to understanding the motivation, expectations, and desires (Ahasanul Haque, 2010). It may even provide information on making improvements in the nature of business (Naylor and Greco, 2002; Ahasanul Haque, 2010). Indeed, what remains is to propose and test relevant hypotheses examining perception about Islamic banking in terms of gender beliefs, attitudes, and behavior pattern. Besides that, race and ethnicity is also important for the question of effects. Since, the democratic anthropological sense describes a “whole way of life”, which is ordinary in every society and in every mind (Haq and Smithson, 2002; Ahasanul Haque, 2010).

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2010). the sufficient flexibility are needed to support Islamic banking. The Qur‟an argued that interest constitutes an unfair business transaction as profits realized from loans are risk-free with no evidence of value-addition by lenders (Saiful Azhar Rosly and Mohd Afandi Abu Bakar. The Qur‟an prohibits the taking and receipts of interest (riba) while making trade and commerce (al-bay‟) permissible (halal). 2000. 2003). This removes a long standing argument that Islamic banking is infeasible in a regulatory sense (Warde. 21 | P a g e . to the local world of interaction (Haq and Smithson. Ahasanul Haque. In order to accommodate the additional changes in conventional banking. Ahasanul Haque. 2003. Musyarakah. 2009). but they buy these products for the reason of religion (Ahasanul Haque et al. Islamic banking came into existence to satisfy the financial needs of Muslims who have to observe the prohibition of interest-based transactions (Haq and Smithson.4 Religious Perspectives 2011 Some customers do not have so much knowledge about the Islamic banking products such as Mudarabah. Ahasanul Haque. Religion does not just lie in its capacity for differentiation but also lies in its ability to structure and lend meaning to the everyday. 2010).FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2. Murabahah and etc. It is more than ecology of themes for social communication rather it is a specific way of communicating. 2003. 2010). The key element to describe a cluster of beliefs is a religion.

FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 As it can be seen in the recent growth of „ethical‟ banking. Ahasanul Haque. Ahasanul Haque. Hence the quality of service. Ahasanul Haque. social and cultural values embedded within the development goals of projects shape the development and use of technology (Madon. 1994). 2000. Since 1983. al. spurred on by changes at national and global levels (Haynes. where non-Islamic customers refuse to invest in companies engaged in unethical and socially harmful activities (Warde. The political. all at once Western attitude are also changing. 22 | P a g e . Haq and Smithson.5 Customers’ Perception In Malaysia. Currently we are witnessing a wide religious reinterpretation. 2010). 1999. 2000. 2006). 2010). 2. 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. 2010). and products and services offered must be compatible with those offered by the commercial banks (Sudin Haron et. 2003. whereby the Islamic banking system operates in parallel with the conventional system (Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah. 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. Malaysia to date has a dual banking system.

Accordingly. First. Islamic banking constructed upon the principle of brotherhood and cooperation. carving the conscience of entrepreneur and firm. 2000. 2000. Lastly. 2005. Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah. which stands for a system of equity sharing. fair and balanced society as envisioned by the Islamic economics (Mirakhor. risk sharing and stake taking. Accordingly. It promotes such sharing and cooperation between the provider of funds (investor) and the user of funds (entrepreneur) (Ahmad. gambling.1992. Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah. 2006). 2000. Iqbal and Molyneux. Islamic banks cannot finance any project which conflict with the moral value system of Islam such as financing a brewery factory. 2000. 2006). 2000. Islamic banking is also characterized by ethical norms and social commitments. 2000. Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah. a night club or any other activity clearly prohibited by Islam or known to be detrimental to society (Ahmad. Chapra. a casino.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 Although Islamic banks perform mostly similar functions to that of conventional banks. Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah. There is a moral filter based on the definitions of halal (permissible) and haram (prohibited and undesirable) operating at different levels. 2006). 2006). Warde. excessive risks and etc are to protect the interests and benefits of all parties involved in market transactions and to promote social harmony (Ahmad. the many prohibitions like interest. their approach is distinctly different. and providing an expedient legal framework (Chapra. Second. 2006). Asyraf Wajdi Dusuki and Nurdianawati Irwani Abdullah. 23 | P a g e . Islamic banking strives for a just. promoting a positive social climate for society.

2001). but always in the framework of total human development and never in a form divorced from this perspective (Al-Harran.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 The performance of an Islamic bank are based on customer‟s satisfaction when competition intensifies and when banks start to offer more or less similar products and services. M. and Ahmad Zaki Hj Ismail. Shahid Ebrahim. 24 | P a g e . 2009). Jamil Osman. The main objective of Islam is to guide human development along the correct lines and in the right direction. thus. 1993. Islam deals with all aspects of economic development. it will determines its competitiveness and success (Ahasanul Haque.

It is also include a framework for specifying the relationships among variables (Rozieana. data collection method. 25 | P a g e . This chapter will explain in detail the sources of data and the formula used in order to gain the results. 2009). measurement. In this research. It is conducted to identify cause and affect relationship among variables. types of data. (Rozieana. religious perspective and customers‟ perception are influenced customers‟ confidence towards Islamic banking products.1 Research Design Research design is a master plan specifying the methods and procedures for collecting and analyzing the needed information. 3.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS CHAPTER 3: RESEARCH METHODOLOGY 2011 3. it will be covered research design. On this chapter. 2009).0 Chapter Description This chapter consists of the research methodology used in order to complete the study. Causal Research Design was used. sampling and data analysis. where the research problem has already been narrowly defined. questionnaire development. The importance of research design includes a plan selecting sources and types of information used to answer the problem statement. The researcher wants to identify whether the factors such as demographic factors.

1.2. In this section. The questionnaires were designed to collect and gather the data collection for the study. nominal scale question is used for the question such as gender.2. Section C and Section D.2.2 Types of Data Collection 2011 3. questionnaires were administrated personally and being typed in 2 versions. Section B. age. 3.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 3.1 Section A: Demographic Questions are constructed by the researcher for collecting all the information regarding the background of respondents in order to get a brief background. 26 | P a g e . 3. These questionnaires have been divided into four sections.1 Primary Data The primary data with specific purpose of address the research problem will be obtained through distribution of questionnaire to customers who are interest in answering the question.1. English and Malay version. and education level. which are Section A.1 Questionnaires Questionnaires were designed and distributed to the respondents who are aware about Islamic banking system.1. Nominal Scale is one that allows the researcher to assign subject to certain categories or groups. For this study.

1.1. Mudharabah and Bai Bithaman Ajil. this section sought to examine religious factor an enough to drive Muslim to use Islamic banking product 3. likert scale questionnaire is used to measure the level of perception among the respondents. For this section.1.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 3.2. So.1. Researcher found that customers do not have so much knowledge about the Islamic banking products such as Musyarakah.4 Section D: Customers’ confidence towards the product The questions designed are focused to gather information of customers‟ confidence towards Islamic banking system.2.3 Section C: Customers’ Perception Questions are constructed by the researcher in order to reveal actual perception of customers‟ towards Islamic banking product. likert scale questionnaire is used to measure the level of confidence among the respondents. 27 | P a g e .1. 3.2 Section B: Religious Perspectives 2011 The questions are designed by the researcher in order to determine whether the religious factor is the main reason customers buy the Islamic banking products. For this section.2.1.

FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 3. The sample will be selected on a non-probability basis from all respondents. All the journals can help the researcher to conduct this research and gather more additional information that relates to the case study. 3. Eligible customers are between the age of 21 and above 50 years. the population refers to all respondents that interest in answering the questionnaire.1 Population Population refers to the entire group of people. the researcher will also refer to secondary sources to collect more information in order to complete this study. Most of the secondary sources were collected from journals and articles.2 Secondary Sources 2011 In doing this research. 3.3.2. For this study.2 Sample A survey of approximately 50 respondents who have answered the questionnaire will provide the database for this study. Secondary sources are very useful for the researcher to better define the problem of the study and can interpret primary data more meaningful. event and things of interest that the researcher wants to investigate.3. 28 | P a g e .3 Sampling Technique 3.

1.4 Data Analysis 3. 3.1 Statistical Procedure of Social System (SPSS) The analysis will be done to get the finding to the study after all the data is collected.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS . 29 | P a g e .4. 3.4. That is the respondents have to answer and fill in the questions given. An analysis of the data can be made by using the Statistical Procedure of Social System (SPSS). 3. All the data is treated and interpreted by using relevant information from analysis method.3. The questionnaire that has been collected by the time the respondents had completed the questionnaire. then interpret the result findings. A frequency of distribution simply reports the number of respondents that each questionnaire received and determined the empirical distribution of the variables.1 Frequency Distribution The frequency provides statistics and graphical display that is used to describe many types of variables.3 Collection Technique 2011 This study has used self-administrative questionnaire for the collection technique.

Null hypothesis will be rejected where calculated value is greater than level of significance value. 3. Cronbach‟s alpha is computed in terms of the average intercorrelations among the items measuring the concept.4.1. The closer Cronbach‟s alpha is to 1. the higher the internal consistency reliability.3. The calculated value from Pearson Chi Square has been compared with the level of significance.4.1 Correlation Coefficient Researchers used the correlation to know the relationship between the dependent and independent variables.1. 3. The questions that have been tested are the combination of questions for each independent variable after all of them have been cross-tabulated with the dependent variable. the researcher tried to obtain the observed value with critical value in determining whether to reject or fail to reject the null hypothesis.3 Hypotheses Testing By analyzing the result from the questionnaires.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 3.4.2 Reliability Analysis 2011 Reliability of a measure is established by testing both consistency and stability.1. Cronbach‟s alpha is a reliability coefficient that indicates how well the items in a set are positively correlated to one another. The correlation were used to determine whether the relationship weak or strong with the negative or positive association. 30 | P a g e .

the researcher must run regression analysis to make sure the hypothesis support or not.2 F-Statistics 2011 F-test is used to test the overall model. From the correlation analysis obtained on this research. fstatistics tests whether a significant proportion of the total variation independent is explained by the estimated regression equation.4. 3.3. Moreover.3. all hypothesis are accepted but to make sure there are actual relationship between two variable.3 T-Statistics T-statistics will use to test the hypothesis either hull hypothesis and alternate hypothesis.1.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 3. 3. The interpretation of the regression analysis is based on the standardized coefficient beta (β) and R square (R2) which provide evidence whether the independent variable and dependent variables have a relationship or not.4 Regression Analysis Regression analysis is used when independents variables are correlated with one another and with the dependent variable.4. It is also to test whether there is statistically significant relationship between the dependent variables and independent variables.4. 31 | P a g e .1.1. It provides an overall appraisal of the regression equation appeased in evaluating the significant of each component in the model.

5. I used nominal scale mainly for the purpose of identifying the respondents‟ variables in term of their gender.2 Likert scale data The likert scale is one of the famous attitudes rating scale used by the researchers in their questionnaire. The likert scale is designed to examine how strongly subjects agree or disagree with statement on a 7-points scale. education level. 32 | P a g e . marital status.5.1 Nominal scaled data Nominal scale data described the variable in term of its category and the measure differs in term of quality rather than quantity. respectively. In this research. The scales are ranging 1 to 7 from strongly agree to strongly disagree. There are seven different scale used to differentiate the degree of agreement and disagreement.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 3. race. It assigned to represent the categories of which the characteristic of data belongs. 3.5 Measurement 2011 Types of Measurement 3. and so on.

1 describes the findings on issues related to the demographic characteristic of respondents. Here the interpretation data is use only for nominal scale which refers to the correspondent profile.0 in order to analyze and measure the dependent and the independent variables. Because of limitation of time. The study is involved with customers who live in Kuala Lumpur. 4.3 the hypotheses testing and discussion to test the relationship between independent variable and dependent variable. version 16. only fifty (50) sets of questionnaires were distributed in that area.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS CHAPTER 4: FINDING AND ANALYSIS 2011 4. The major advantage using this software is that its ability to perform various advanced statistical analysis. Researcher had used the Statistical Package for Social Sciences (SPSS) system. private sectors and other sectors. The first section 4. section 4.4 gathers results of regression analysis. The second section 4. as well as producing statistic charts and table. 33 | P a g e .2 presents the reliability analysis of the research followed by section 4. This chapter presents the detailed findings of the primary data. Lastly. It covers different sectors of occupations such as government sectors.1 DATA INTERPRETATION ON FREQUENCY Frequency distribution indicates how many participants are in each category. variable transformation.0 CHAPTER DESCRIPTION This chapter represents the finding and analysis on the factors that influence customers‟ confidence towards Islamic banking products.

The gap between female respondents and male respondents are 8 (16%).1 GENDER 29 30 25 20 15 10 5 0 Male Female 21 Male Female FIGURE 4.1 GENDER From the Figure 4.0 TABLE 4.1.0 Valid Percent 42.1 and Table 4. it shows the number of respondents.0 Percent 42.1.0 58.0 100.0 100.0 58. The table reveal female is higher with 29 respondents (58%) than the male with 21 respondents (42%).0 100.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.1 GENDER 2011 Cumulative Frequency Valid Male Female Total 21 29 50 Percent 42. 34 | P a g e .

These are 21 to 30 years old.0 4. 35 | P a g e .2. It is followed by the respondent‟s age between 31 to 40 years old which is 11.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.0 8.0 8.2 and Table 4.0 Valid Percent 66.2 AGE 2011 Cumulative Frequency Valid 21-30 31-40 41-50 50 years above Total 33 11 4 2 50 Percent 66. respondents‟ age has been diversified into four groups. 41 to 50 years old and 50 years old and above.0 TABLE 4.0 100.0 100.0 88. 4 of the respondents are in the range of 41 to 50 years old and only 2 are 50 years and above.0 22.0 96.1.0 22.2 AGE 35 30 25 20 15 10 5 0 33 21-30 11 4 2 50 years above 31-40 41-50 50 years above 21-30 31-40 41-50 FIGURE 4.2 AGE From the Figure 4.0 Percent 66. 31 to 40 years old. It shows that the majority of the respondents are between 21 to 30 years old with 33.0 100.0 4.

1. 36 | P a g e .0 38.0 100.0 100.0 38.3 RACE 2011 Cumulative Frequency Valid Malay Chinese Indian Total 27 19 4 50 Percent 54.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.0 TABLE 4.3 RACE 30 25 27 19 20 15 10 4 5 0 Malay Chinese Indian Malay Chinese Indian FIGURE 4.3 RACE Table 4.0 100.0 92. 19 from Chinese (38%) and the rest are only 4 respondents (8%) which are Indian.3 above show the race of the respondents.0 8.3 and Figure 4. The table revealed that almost 27 respondents (54%) are Malay.0 Valid Percent 54.0 Percent 54.0 8.

0 100.0 Percent 64.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.1.4 MARITAL STATUS From the Figure 4.0 100.4 MARITAL STATUS 2011 Cumulative Frequency Valid Single Married Total 32 18 50 Percent 64.0 36.0 Valid Percent 64.0 100. the results show that majority of the respondents are single with 32 (64%). It is followed by 18 (36%) of the respondents are married.4 and Table 4. 37 | P a g e .4.0 TABLE 4.4 MARITAL STATUS 35 30 25 32 18 20 15 10 5 0 Single Married Single Married FIGURE 4.0 36.

0 60.0 12.0 10.0 10.0 60.0 90.1.0 Percent 14.0 4.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.0 30.0 12.0 18.5 EDUCATION LEVEL 10% 14% 4% SPM STPM 12% Diploma Degree Master 60% FIGURE 4.0 100.0 100.5 EDUCATION LEVEL 2011 Cumulative Frequency Valid SPM STPM Diploma Degree Master Total 7 2 6 30 5 50 Percent 14.0 100.5 EDUCATION LEVEL From the Figure 4.0 TABLE 4.5 and Table 4.0 Valid Percent 14.0 4. 7(14%) of the respondents have SPM and followed by 6 (12%) of the respondents have diploma. 38 | P a g e . the results show that 30 (60%) of the respondents have degree. The rest of the respondents which represents only 5(10%) and 2 (4%) which are Master and STPM respectively.5.

0 20.0 20.0 38.6 OCCUPATION LEVEL 16% 2% Student 20% Businessman Government Employee Private Sector Employee 62% FIGURE 4.6 show that the highest percentage of respondents occupation is 31 (62%) which is the private sector employee. For student stated 8 (16%) and the rest of the respondents with 1 (2%) are businessman.0 62.0 100. followed by government employee with 10 (20%).6 OCCUPATION LEVEL 2011 Cumulative Frequency Valid Student Businessman Government Employee Private Sector Employee Total 8 1 10 31 50 Percent 16.0 Valid Percent 16.6 OCCUPATION LEVEL From the Figure 4.0 62.0 2.0 Percent 16.0 100.0 2.0 TABLE 4. 39 | P a g e .6 and Table 4.1.0 100.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.0 18.

0 70.0 30.7 MONTHLY INCOME Figure 4. This is followed by 13 (26%) of the respondents who earned an income ranging from RM1000 to RM2000 per month.0 8.0 22.0 100.0 30.0 Valid Percent 14.0 26.1.0 8.6 and Table 4.0 TABLE 4.0 100.0 100. The rest of the respondents have income less than RM1000 and above RM4000 are 7 (14%) and 4 (8%) respectively.0 92. 40 | P a g e .FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.0 40.7 MONTHLY INCOME 16 14 12 10 8 6 4 2 0 13 7 15 11 4 less than RM1000 RM1000-RM2000 RM2001-RM3000 RM3001-RM4000 Above RM4000 FIGURE 4.0 22.7 MONTHLY INCOME 2011 Cumulative Frequency Valid less than RM1000 RM1000-RM2000 RM2001-RM3000 RM3001-RM4000 Above RM4000 Total 7 13 15 11 4 50 Percent 14.0 26.6 represent the result of respondents‟ income level.0 Percent 14. and 11 (22%) of the respondent who earn RM3001 to RM4000. It shows that there are 15 (30%) of the respondents who earned an income for ranging from RM2001 to RM3000.

0 54.8 HAVE EVER USE ISLAMIC BANKING PRODUCT BEFORE 2011 Cumulative Frequency Valid yes No Total 23 27 50 Percent 46.0 Valid Percent 46.0 100.0 54.8 28 27 26 25 yes 24 23 22 21 yes No 23 27 No FIGURE 4.8 shows the result whether the respondents have ever use Islamic banking products before.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4. 41 | P a g e .0 TABLE 4.0 100.8 Figure 4.1.0 Percent 46. It represent 27 respondents (54%) are not using Islamic banking products before and the rest 23 respondents (46%) are have used Islamic banking products.8 and table 4.0 100.

6 to < . A Coefficient Alpha is often used to measure reliability.6 are consider to be poor.8 to < . According to Uma Sekaran (2003). the reliability of a measure indicates the extent to which it is without bias (error free) and hence ensures consistent measurement across time and across the various items in the instrument. Consistency reliability or Cronbach‟s Alpha reliability gets to 1. In general reliability less than 0.0 is the better.9 . In other words.6 .8 range are good. It is to know whether this research reliable or not.8 . reliability of a measure is an indication of the stability.7 .7 range are acceptable and those in the 0. The findings of reliability test shows as follow: Alpha Coefficient Range < .2 RELIABILITY ANALYSIS 2011 Here the researcher measures the reliability of the research. Those in the 0.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.7 to < .9> Strength of Association Poor Moderate Good Very Good Excellent 42 | P a g e .

2. It can be conclude that the questionnaire about Demographic Factors is having low reliability and acceptable. 43 | P a g e .459. The result shows that this independent variable is range and poor.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 4.459 Based on Standardized Items .405 N of Items 8 TABLE 4. the result indicates that the Cronbach‟s Alpha for six (8) items in Demographic Factors (independent variables) measure is .9 RELIABILITY ANALYSIS FOR DEMOGRAPHIC FACTORS For the first independent variable which is Demographic Factors.1 Reliability Test: Independent Variable (Demographic Factors) Reliability Statistics Cronbach's Alpha Cronbach's Alpha .

the result indicates that the Cronbach‟s Alpha for six (6) items in Religious Perspectives (independent variables) measure is .2 Reliability Test: Independent Variable [Religious Perspectives] Reliability Statistics Cronbach's Alpha Based on Cronbach's Alpha Standardized Items . 44 | P a g e .10 RELIABILITY ANALYSIS FOR RELIGIOUS PERSPECTIVES For the second independent variable which is Religious Perspectives. It can be conclude that the questionnaire about Religious Perspectives is having high reliability and acceptable.920 N of Items 6 TABLE 4. The result shows that this independent variable is range and excellent.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 4.915 .915.2.

the result indicates that the Cronbach‟s Alpha for seven (5) items in Customers‟ Perception (independent variables) measure is .FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 4.3 Reliability Test: Independent Variable [Customers’ Perception] Reliability Statistics Cronbach's Alpha Based on Cronbach's Alpha .11 RELIABILITY ANALYSIS FOR RELIGIOUS PERSPECTIVES For the third independent variable which is Customers‟ Perception.2.694 N of Items 5 TABLE 4. 45 | P a g e .696. It can be conclude that the questionnaire about Customers‟ Perception is having high reliability and acceptable.696 Standardized Items . The result shows that this independent variable is range and fair.

3 HYPOTHESIS TESTING AND DISCUSSION 2011 4. there will be some changes taken in action if the Ha is accepted. opinions or beliefs that the researcher wishes to accept or to rejected base on the data collected.1 INTRODUCTION Hypothesis is a statement. These are three hypotheses to be tested: Hypothesis 1 Ho: There is no relationship between demographic factors and customers‟ confidence towards Islamic banking products Ha: There is a relationship between demographic factors and customers‟ confidence towards Islamic banking products Hypothesis 2 Ho: There is no relationship between religious perspectives and customers‟ confidence towards Islamic banking products Ha: There is a relationship between religious perspectives and customers‟ confidence towards Islamic banking products 46 | P a g e . The main objective of hypothesis testing is to make a judgment about the different between two samples statistic and a hypothesized population parameter. Alternatives hypothesis (Ha) exist for the purposes of the comparing the null hypothesis (H0). Since Ha is a statement in which no difference or effect is expected.3.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.

almost negligible relationship Low correlation.70 .70 .00 Interpretation Slight.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS Hypothesis 3 2011 Ho: There is no relationship between customers‟ perception and customers‟ confidence towards Islamic banking products Ha: There is a relationship between customers‟ perception and customers‟ confidence towards Islamic banking products 4.40 .2 Hypothesis Testing Using Correlation In this section. dependent and independent variable.12 Interpretation for value “r” that being propose by Guilford (1956) 47 | P a g e . Pearson Correlation Coefficient is used for test the hypothesis. in this case a relationship exists.90 – 1. definite but small relationship Moderate correlation. however.90 . the goal is to reject the null hypothesis and accept the alternative hypothesis...3. In other words. As in all hypothesis tests. substantial relationship High correlation.40 . as seen in the correlation coefficient (r).. very dependable relationship Table 4. it is to decide that an effect. The hypothesis tested is that linear relationship exists between two variables. marked relationship Very high correlation. states that no linear relationship exists between the two variables. The null hypothesis.20 . “r” value Less than .20 .

783** .000 50 1 Confidence Towards Correlation The Products Sig.344** .000 50 1 Perception .007 50 .344** .000 50 . Correlation is significant at the 0.007 50 .455** . Table 4.522** .01 level (1tailed). (1-tailed) N Demographic Factors Pearson Correlation Sig.521** .000 50 50 50 1 s .783** .000 50 .570** .521** .000 50 50 .000 50 . (1-tailed) N Religious Perspectives Pearson Correlation Sig.000 50 50 . (1-tailed) N Customers' Perception Pearson Correlation Sig.522** .000 50 .FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 Correlations Customers' Confidence Towards The Products Customers' Pearson 1 Religious Demographi Perspective Customers' c Factors .000 50 . (1-tailed) N **.455** .570** .13 Correlation Coefficient Tests on Hypothesis 48 | P a g e .

344. It means that it has low correlation and proves to have small relationship between demographic factors and customers‟ confidence towards the products. The result from the table shows correlation between demographic factors and customers‟ confidence towards the products is r = .13. It is clearly stated that: Degree of significant < 0.2. the hypothesis 1 is accepted although it has small relationship as statistically the association is significant at the level is significant value.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 4. 49 | P a g e .05 = Null hypothesis (H0 is rejected) In this study. From the correlation.05 = Ha is accepted From the result.1 Hypothesis Testing for Demographic Factors using Correlation Based on the correlation coefficient test in the table 4. the result is: 0. The conclusion for this finding is demographic factors are the factor that contributed to the customers‟ confidence towards the products but it is not really influence the dependent variable.3. it shows that demographic factors have small relationship with the customers‟ confidence towards the products. it shows that the null hypothesis is rejected indication that the association is statistically significant at the 0.007 < 0.05 levels.

it shows the result of correlation between religious perspectives and customers‟ confidence towards the products is r = .570. it shows that there is a positive relationship between religious perspectives and customers‟ confidence towards the products.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 4. From this finding. the result is: 0.000 < 0. From the correlation. Moreover. it shows that the null hypothesis is rejected indication that the association is statistically significant at the 0.2. this result is moderate correlation and proves to have substantial relationship between religious perspectives and customers‟ confidence towards the products.13 shows the hypothesis testing for the second independent variable. 50 | P a g e . from the table.05 = Null hypothesis (H0 is rejected) In this study. Looking at the theory from Guilford. the hypothesis 2 is acceptable although it is moderate correlations and has substantial relationship as statistically the association is significant at the level is significant value.2 Hypothesis Testing for Religious Perspectives using Correlation Table 4.05 = Ha is accepted From the result.3. religious perspectives.05 levels. It is clearly stated that: Degree of significant < 0. The conclusion for this finding is religious perspectives is one of the relevance factors of customers‟ confidence towards the products.

2. The conclusion for this finding is customers‟ perception are the factors that influence customers‟ confidence towards the products. It is clearly stated that: Degree of significant < 0. between customers‟ perception and customers‟ confidence towards the products has high correlation and proves to have marked relationship. From the correlation. customers‟ perception. This means that.000 < 0. it shows that the null hypothesis is rejected indication that the association is statistically significant at the 0.05 = Null hypothesis (H0 is rejected) In this study. it shows that there is a positive relationship between customers‟ perception and customers‟ confidence towards the products.13 shows the hypothesis testing for the third independent variable.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 4. the hypothesis 3 is acceptable because it has high correlation and proves to have marked relationship as statistically the association is significant at the level is significant value. 51 | P a g e . the result is: 0. from the table. Moreover. From this finding.05 = Ha is accepted From the result.05 levels.3 Hypotheses Testing for Customers’ Perception using Correlation Table 4. it shows the result of relationship between customers‟ perception with customers‟ confidence towards the products is r = .3.783.

.839 31. 52 | P a g e . If the calculated value greater than critical value.14 Anova for F-Statistics According to the ANOVA F test table.687 F 30. the regression equation is significant to explain the changes in dependent variables.000a TABLE 4. calculated f-statistics will be compared with its critical value. which means the null hypotheses is rejected and this model is statistically significant. ANOVAb Sum of Squares Regression Residual Total 62.600 94. there is no significant relationship between independent variables and dependent variables.946 . there is significant relationship between independent variables and dependent variables.439 Model 1 df 3 46 49 Mean Square 20.  Calculated F-statistics > critical value (> 5%). the result of f-statistic is 30.3.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4.492 and the p value = 0.2 Hypotheses Testing Using F-Test 2011 In order to test the statistics.  Calculated F-statistics < critical value (< 5%).000. The model is not valid for forecasting.492 Sig.

000 a. At 95% confidence interval:  t-statistics > t-table .122 Standardized Coefficients Beta t . reject H0.787 -.524 6. Dependent Variable: Customers' Confidence Towards The Products Table 4.664 . Normally. accept HA  t-statistics < t-table .261 .522 -. Error .154 . we make comparisons between the absolute value of the t-statistics to the tabulated value of t-table with the degree of freedom. we take a significant value at level 95% confident interval.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4. The symbols we use to test the hypothesis are:  H0 = null hypothesis  HA = alternate hypothesis.752 Sig.142 .015 .550 .15 Testing Hypothesis for T-Statistics 53 | P a g e .105 .728 -1. accept H0 Coefficients a Unstandardized Coefficients Model 1 (Constant) Demographic Factors Religious Perspectives Customers' Perception B .3.3 Hypotheses Testing Using T-Test 2011 To test the hypothesis.264 . the decision rule is.822 Std. also known as H1 Thus. reject HA. .368 .493 2.435 .

FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS Whereby. K = number of independent variables N = number of observation 2011 i.3 .013 – c.013 There is no significant relationship between demographic factors and customers‟ confidence towards the product. State the hypothesis : H0 : H1 : b. Calculate t-statistics : t = 2 2 SE ( 2) 1) Demographic Factors t = absolute value vs tabulated value of t-table = 1. we accept H0.493 < 2. Thus. and reject HA.1 df = 46 Thus. T-table = 2. Degree of freedom : df = n – k – 1 df = 50 . Test the significant of each independent variable (T-Test) a. 54 | P a g e .

According to Burns and Bush (2000). 3) Customers‟ Perception : t = absolute value vs tabulated value of t-table = 6. 4. multiple regression analysis is an expansion of bivariate regression analysis in that more than one independent variable is used in the regression equation. and accept HA. we reject H0. we reject H0.524 > 2. Thus. The interpretation of the regression analysis is based on the standardized coefficient beta (β) and R square (R²) which provide evidence whether to support or not to support the hypotheses stated earlier in the early chapter.013 There is significant relationship between customers‟ perception and customers‟ confidence towards the products.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 2) Religious Perspectives : t = absolute value vs tabulated value of t-table = 2.013 There is significant relationship between religious perspectives and customers‟ confidence towards the product.752 > 2. The researcher chooses multiple regressions because there are three independent variables need to be predicting in this research. Thus. and accept HA.4 REGRESSION ANALYSIS Researcher uses the regression method in order to test the hypotheses and whether to accept or reject. 55 | P a g e .

665 Square . religious perspectives and customers‟ Model Summaryb Adjusted R Model 1 R . Customers' Perception. Predictors: (Constant). Error of the Estimate .644 Std. Fitness of the model built for this study is examined by this kind of standard regression analysis.820 a.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 Regression analysis was chosen for it fits well for the hypotheses testing and analyzing how independent variables can be used to predict a dependent variable. demographic factors.82883 DurbinWatson 1. The analysis shows how much of the total variance in the dependent variable (customers‟ confidence towards the products) is possible to explain by the independent variables: perception.816a R Square . Demographic Factors b. According to Maholtra (2006) Regression analysis is a powerful and flexible procedure for analyzing associative relationship between dependent variable and one or more independent variables. Dependent Variable: Customers' Confidence Towards The Products 56 | P a g e . Religious Perspectives.

665 Coefficient of determination shows the explanatory power of the equation.665 is close to 1 and its indicates a strong positive linear correlation. Demographic Factors b.5% of the variance in the dependent variable. This means the model explains 65.16 Regression Analysis Summary of the Research Model 4.16 which is . Religious Perspectives. The coefficient of correlation (R – square) that obtained from Table 4.946 .687 F 30.1 Coefficient of Determination (R2) = 0.492 Sig. The linear regression test of the model reveals that the R-square of the model is .4. customers‟ confidence towards the products. Predictors: (Constant). This means there were other factors that can be used to determine the factors on customers‟ confidence towards the products. Customers' Perception.600 94.16. 57 | P a g e .665.000a a. It determines how much change in the dependent variable in relation to the independent variables. Meanwhile. Dependent Variable: Customers' Confidence Towards The Products TABLE 4. .439 2011 Model 1 df 3 46 49 Mean Square 20. the remaining 35.5% cannot be explained.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS ANOVAb Sum of Squares Regression Residual Total 62.839 31. The linear regression analysis been presented in Table 4.

5 to 2.368 . for Durbin-Watson of the model which is 1.550 .787 -.122 a.000 B .105 .752 Sig. It measured through the range from 1. Coefficientsa Unstandardized Coefficients Model 1 (Constant) Demographic Factors Religious Perspectives Customers' Perception Standardized Coefficients Beta t . Dependent Variable: Customers' Confidence Towards The Products Table 4.142 . there is no first order autocorrelation and an acceptable range is 1.2 Durbin Watson = 1. the linear regression test of model reveals that the Durbin-Watson of the model is 1.820 is acceptable and no first order autocorrelation.261 . A value of 2 or nearly 2 indicates that.820. Error .493 2.822 Std.154 .435 . So that. .264 .4.17 Standardized Coefficients of the Research Model 58 | P a g e . which measures the correct model used for this study. The Durbin-Watson statistics lies in the range is 1 to 4. Furthermore.728 -1.524 6. this is significance.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 4. For conclusion. meaning the fitness of the model in explaining the customers‟ confidence towards the products is good.015 .50 to 2.5.664 .820 2011 Durbin Watson is used to test whether serial correlation is present in the term of regression or not.50.522 -.

550+0. Y = Customers‟ Confidence Towards The Products X2 = Demographic Factors X3 = Religious Perspectives X4 = Customers‟ Perception 59 | P a g e .822 Where.264+0. Through this finding and analysis. While for hypotheses two and three.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 Therefore. the researcher fails to reject the null hypotheses (H0) for hypothesis one. the researcher fails to accept the null hypotheses since there are have relationship between religious perspectives and customers‟ perception with customers‟ confidence towards the products.522-0. Multiple regressions: Y= B + B2X2 + B3X3 + B4X4 Y= 0. It is because there are no relationship between demographic factors and customers‟ confidence towards the products. this regression equation is significant.

665 means that 65.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 From Table 4. R2 = 0.5% have been covered by demographic factors (β = -0. and customers‟ perception (β = 0. By analyzing this result.264).16. there is negative relationship with customers‟ confidence towards the products. 60 | P a g e . But for the first independent variable which is demographic factors.822). Table 4. Here I can interpret that two independent variables have significant relationship with the dependent variable which is customers‟ confidence towards the products.17 showed that the variables making the biggest contribution to the model are customers‟ perception and religious perspectives then it is followed by demographic factors.550). religious perspectives (β = 0.

0 CHAPTER DESCRIPTION Following the research result. Subsequently. cultural background and practice from conventional banks. this chapter highlights the problem arise in Islamic banking system. 5.1 CONCLUSION The operations of Islamic banks are based on Islamic Law which is different in terms of spirit. both conventional and Islamic banks operate in a globally integrated banking industry which is characterized by strong competition and rapid changes in technology. Lastly. Through the interpretation and finding analysis from the questionnaires. 61 | P a g e . The researcher has concluded from the whole study on the findings and the analysis of the data from the study undertaken. This chapter also presents the implications of the study as well as some recommendations for future research. However. Basically. researcher is able to prove the problem statement thus reaching the research objectives thoroughly.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS CHAPTER 5: CONCLUSION AND RECOMMENDATIONS 2011 5. the last chapter summarizes and concludes the findings of the research. this chapter discusses the whole of the research findings and recommendations in the conclusion section. Since the products provided by both banks are generally undifferentiated. the problem statement was extracted from literature review and being applied to specific problems on customers‟ confidence towards Islamic banking products. Islamic banks will have to compete on the basis of high quality of products offered to its customers if they want to gain a competitive edge against their rivals hence gain customers‟ confidence in using Islamic banking products.

The correlation between demographic factors and customers‟ confidence towards the products r = 0. 62 | P a g e . Through this analysis. the result indicates that the Cronbach‟s Alpha measure is 0. 5.1 Demographic Factors For the first independent variable. researcher discovered that there are lots of variables in determining the selection of Islamic banking products among the customers.1.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 In analyzing customers‟ confidence towards Islamic banking products.344.459. It can be concluding that this variable is having low reliability and acceptable. These variables were choose to be fitted with customers‟ confidence among the individuals who have use Islamic banking products or not. The result shows that this independent variable is range and poor. we will know whether the independent variables have relationship with dependent variable or not. It means that it has low correlation and proves to have small relationship between demographic factors and customers‟ confidence towards the products. religious perspectives and customers‟ perception as the independent variables while customers‟ confidence towards the products as dependent variable. From literature review. this research focuses on demographic factors.

The result shows that this independent variable is range and moderate. it shows the result of correlation between religious perspectives and customers‟ confidence towards the products is r = 0.1. this result is moderate correlation and proves to have substantial relationship between religious perspectives and customers‟ confidence towards the products.696.915. Moreover.783. Looking at the theory from Guilford‟s. the result indicates that the Cronbach‟s Alpha measure is 0. 63 | P a g e . it shows that there is a positive relationship between religious perspectives and customers‟ confidence towards the products. Moreover. The result shows that this independent variable is range and excellent.2 Religious Perspectives 2011 For the second independent variable.1. between customers‟ perception and customers‟ confidence towards the products has high correlation and proves to have marked relationship. It can be conclude that this variable is having high reliability and acceptable. This means that. from the table. It can be concluding that this variable is having high reliability and acceptable. 5. From the hypothesis testing.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 5. from the table.3 Customers’ Perception For the third independent variable. the result indicates that the Cronbach‟s Alpha measure is 0. it shows the result of relationship between customers‟ perception and customers‟ confidence towards the products is r = 0.570.

From these findings there are several recommendations that appropriate to Islamic banking in order to gain customers‟ confidence in using Islamic banking products. These independent variables have a positive relationship with the dependent variable where customers‟ perception has strong relationship with the dependent variable (customers‟ confidence towards the products) at significant level below 0.05. there are two independent variable which religious perspectives and customers‟ perception are accepted as the factors of customers‟ confidence towards the products. The other independent variable which demographic factors are rejected as the factors of customers‟ confidence towards the products since the significant level above 0. 64 | P a g e .05 followed by religious perspectives.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 From the hypothesis testing.

Information Technology (IT) plays an important role in the advancement of Islamic banking. bankers should promote these products intensively via advertising and effective marketing strategies to increase the market share. there were a lot of problems.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 5. At the early stages. especially on the technical side where the current conventional system did not suit Islamic banking transactions. Due to the lack of public awareness of Islamic banking products.2.1 Islamic Banking in Malaysia Currently. Intelligent solutions for the challenges in the industry are essential to entail its prestigious position in the Islamic banking world. This in turn contributed to delays in coming up with certain products. Skilled and knowledgeable staffs are also necessary to assist customers in making the right choice of products as well as for the operation of the Islamic banking system. The bank needs to have the system before the products are offered to customers for the efficiency of the business. There is a need to provide more innovative products IT.2 RECOMMENDATIONS 2011 5. Islamic banking need to have a good system as it is the main criterion for efficiency. Product innovation is much needed to fulfill the customers‟ confidence to deal with Islamic banking products. Malaysia is one of the leading countries in Islamic banking. 65 | P a g e . Besides that.

5. There is a need to be more innovative and develop new products. 66 | P a g e . The central bank or BNM was very helpful in setting up Islamic banking. these Islamic banks do not have to grow from the foundation by building up branches.2. BNM and the government need to supports Islamic banking industry. Thus. Islamic banks need to develop appropriate products to meet the changing needs of customers. Islamic banks do not stand alone but they are using the conventional base to market all the products. Islamic banking managed to overcome the obstacles with the moral support and help from BNM and government. Islamic banking will gain customers‟ confidence to use their products offered.2 Government and BNM In terms of regulation and policy. The image of conventional banking is already an advantage for local Islamic banks. Islamic banking can grow like conventional banking because all the local banks and foreign based banks market conventional and Islamic banking together. Therefore.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 The good prospects for Islamic banking in Malaysia are due to the dual system where Islamic banks use the conventional base to market all their products. These Islamic banks do not have to grow from the roots by building up more branches. not just duplicate conventional based products. When government involved indirectly in giving support.

Although they are not familiar with Islamic banking products. 5. it is also suggested that future researchers take a long period of study in order to get more reliable result. researcher would like to suggest to other researchers who have interest to explore and go deeper into this domain to carefully design the questionnaire and add more questions so that it can be more reliable.3 Customers 2011 The individual customers must have knowledge and good perception towards Islamic banking system.2. researcher suggests that they should study more on the demographic factors as in this it is found that there is no significant relationship and they should come out with others several independent variables. Besides that. but the awareness from them are important in order to develop Islamic banking industry. Without support from customers itself. Besides. Islamic banking industry are not growing rapidly in this country.4 Future Researcher For future research. Customers also must give support to encourage Islamic banking provide better products that can compete with the conventional bank. which may lead to the customers‟ confidence towards the products. 67 | P a g e . for researchers who want to continue this research or have interest to do the same research.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 5.2.

Ahasanul. Department of Business Administration. Journal of Islamic Banking in Malaysia: A Study of Attitudinal Differences of Malaysian Customers. Journal of Bank Patronage Factors of Muslim and Non-Muslim Customers. 1 (1). 2848. O. A. Faculty of Economics and Management Sciences International Islamic University Malaysia. 7-18. 32-40. Norafifah. 6 (5). (1994). Jamil. Naziruddin. Sudin. Faculty of Business Management. (2010). Journal of Efficiency and competition of Islamic banking in Malaysia. Ahasanul. 24 (1). Journal of Factors Influence Selection of Islamic Banking: A Study on Malaysian Customer Preferences. Journal of Customer Satisfaction in Malaysian Islamic Banking. H.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS REFERENCES 2011 JOURNALS H. 197-202. International Journal of Bank Marketing. H. (2009). Ismah.Ahmad. O. Universiti Teknologi MARA. Faculty of Economics and Management Sciences. 12 (1). 68 | P a g e . A. AlHosn University. United Arab Emirates. Z. Abu Dhabi. (2009). (2008). 922-928.

27 (2). M. Journal of An Econometric Analysis of Conventional and Islamic Bank Deposits in Malaysia. Nurdianawati (2007). Hamim. W. Syed. S. A. Asyraf. (2010). A. Rodney. (2001). 30 (12). 28 (4). Malaysia. International Islamic University Malaysia. Naziruddin. Journal of Why Do Malaysian Customers Patronise Islamic Banks. 31-52. I. (2003). 1249-1265. Department of Economics. 69 | P a g e . International Association for Islamic Economics. University of Brunei Darussalam/National University of Singapore. 9 (1). M. 3 (4). 25 (3). W. Saiful. H. 314-337. Shahid. Department of Economics. Mohd. Journal of Islamic Banking in Brunei Darussalam. Remali. International Islamic University Malaysia. E.Kassim Salina. 37-70. Kuala Lumpur. Kulliyyah of Economics and Management Sciences.FACTORS THAT INFLUENCE CUSTOMERS’ CONFIDENCE TOWARDS ISLAMIC BANKING PRODUCTS 2011 A. (2006). Journal of Impact of Financial Shocks on Islamic Banks. Kuala Lumpur. Malaysia. 291-305. Y. 142-160. (2005). Journal of Performance of Islamic and Mainstream Banks in Malaysia. Journal of Efficiency of Islamic Banking in Malaysia: A Stochastic Frontier Approach.

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