Attitudes and Perceptions Towards Islamic Banking Among Muslims and Non-Muslims in Malaysia: Implications For Marketing To Baby Boomers and X-Generation

International Journal of Arts and Sciences
3(13): 453-485 (2010)

CD-ROM. ISSN: 1944-6934
© InternationalJournal.org
Attitudes and Perceptions towards Islamic Banking among Muslims

and Non-Muslims in Malaysia: Implications for Marketing to Baby
Boomers and X-Generation
Mark Loo, Concordia University College of Alberta, Canada
Abstract: The financial crisis that started in the West in 2008 has prompted Islamic Banking
proponents to renew their claim that Islamic Banking is superior to conventional banking.
While Islamic Banking is a lesser known banking system in the West, its potential cannot be
under-estimated in view of the fast expanding Muslim population in many developed European
cities. For a viable worldwide Islamic Banking system, marketers need to measure acceptance
among non-Muslims. This paper explores the differences in attitude and perception towards
Islamic Banking between Muslims and non-Muslims. Malaysia is an ideal case study where the
population is 60% Muslim but the nation’s wealth lies disproportionately with the non-Muslims.
A total of 200 Malaysians comprising 100 Muslims and 100 non-Muslims were interviewed,
each with an equal number of Baby Boomers and X-Generation. The results show Muslims as
supportive of Islamic Banking while non-Muslims view Islamic Banking as relevant primarily to
Muslims. However, among non-Muslims, the X-Generation has a more favourable perception
towards Islamic Banking than Baby Boomers. This study provides implications for marketing to
non-Muslims and recommendations for future research in Islamic Banking.
Keywords: Islamic Banking, Malaysia, Non-Muslims, Generations
INTRODUCTION
Political and business leaders at the Fifth World Islamic Economic Forum in Jakarta in March
2009 praised the Islamic financial institutions’ resilience against recession citing their refrain
from investing in “toxic assets” (Synovitz, 2009). The interest in Islamic banking reached a
new height when the Turkish media reported that the Daily Vatican newspaper, ‘L’ Osservatore
Romano encouraged banks to study the ethical rules of Islamic finance to restore confidence
amongst their clients (World Bulletin, March 2009).
One of the strongest proponents of Islamic banking is Malaysia, a multiracial country ruled by
Malays who are Muslims by birth. Five years after gaining independence, the Malaysian
government initiated the Lembaga Tabung Haji or Pilgrimage Fund Board to help Muslims save
for pilgrimage to Mecca. By 1983, the first Islamic bank was established and by 1993,
commercial banks, merchant banks and finance companies were allowed to offer Islamic
banking products under the Islamic banking Scheme. In June 2005, Dow Jones of New York
and RHB Securities of Kuala Lumpur united to launch a new “Islamic Malaysia Index,” a
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collection of 45 stocks representing Malaysian companies that comply with a variety of Sharia or
Islamic laws based criteria (Islamic Banking in Malaysia, March 2009).
Malaysia has been serious in promoting itself as a leading centre of Islamic studies and research.
The International Centre for Education in Islamic Finance (INCEIF) was established in 2006 and
boasts an international faculty and student body from over 40 countries pursuing Islamic finance
studies from certificate to PhD. The International Shariah Research Academy was established in
2008 to conduct applied Islamic legal research on financial issues (Aziz, 2008).
The growth of Islamic banking in Malaysia can be attributed to the rise of Islamic consciousness.
Affluence has enabled more pilgrimages to Mecca and financed Muslim youth to study Islam in
the Arab countries. Back from the founding cities of Islam, these Muslims desire to implement
all aspects of Islamic lifestyle, including Islamic banking. Forming 60% of the population,
Muslims are a significant market for Islamic banking products.
Islamic banking prohibits riba or interest. It pays the investor profit-sharing dividends and
offers borrowers fixed repayment rates. Conventional interest rates are deemed not “halal” or
legitimate by Islamic laws (Kamus Perwira, 1998:451).
The Islamic Banking Act came into effect on April 7, 1983. However, promotion of Islamic
banking had been slow until the mid-90s. Banking on the fear of imminent rise in interest rate
with the economy recovering, Islamic banks began aggressive promotion on their fixed
repayment rates for mortgages.
With the aim to transform Malaysia into a leading Islamic banking centre (The Star, May 04
2002), Islamic banks have stepped up marketing campaigns to include non-Muslim market
segments. Speaking at the Fifth World Islamic Economic Forum in 2009, the then Prime
Minister Abdullah Badawi announced that Malaysia aims for 30% of banking assets under
Islamic management from the current 12% (Islamic Finance in a Changing World, 2009).
Owing to the highly competitive environment, Islamic banks need to study customer perceptions
to help them market their products effectively (Haron, Ahmad and Planisek, 1994; Dusuki and
Abdullah, 2006; Thambiah, Nathan and Eze, 2008). This study aims to investigate the
perceptions of Muslims and non-Muslims towards Islamic banking, and specifically, the
differences between the X-Generation (X-Gen hereafter) and Baby Boomers, both being market
segments of higher value in terms of loans, savings and investments compared with other
generation categories.
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LITERATURE REVIEW
There has been considerable development in Islamic banking research in the last decade. This
development seems to heed Dar and Presley’s (1999) suggestion that Islamic banking writers
would gain from adopting the empirical approach of Western economic literature. In their article
“Islamic Finance: A Western Perspective,” Dar and Presley (1999) argued that (1) Islamic
writers have implicitly assumed that prohibition of interest is unique to Islamic literature, (2)
Islamic scholars should exploit the wealth of supportive argument in Western literature rather
than develop their literature in isolation, and (3) Islamic writers need an empirical approach like
their western counterparts.
Interest free loans were practised pre-Islam among Jews and Christians, and later advocated by
socialists and economists. The Old Testament, in Deuteronomy, teaches interest free loans to the
poor (Stein, 1956) and the Judeo-Christian thought views loans with interest as doing little for
economic brotherhood (Maloney, 1971). The Old Testament was the key influence on Jewish
and Christian opposition to interest, and may have been the original reason for the Koran’s
dismissal of usury since the three religions share the same belief in the God of Abraham (Dar &
Presley, 1999). Apart from religion, socialists condemned interest as encouraging a “parasitical
existence” (Brunner, 1937).
There is a wealth of supportive argument in Western literature for Islamic scholars to exploit as
western economists have identified linkages between interest rates and macroeconomic
instabilities which afflict most capitalist economies, such as, inflation, unemployment and
negative growth (Mill, 1826; Smith, 1904; Keynes, 1931; Fisher, 1933; Wicksell, 1935; Hayek,
1933, 1939; Minsky, 1977; Greenwald and Stiglitz, 1988; Bernante and Gertler, 1990).
The abundant western literature that supports interest free loans should encourage Islamic
scholars to take an empirical approach. Western economies have their foundation in classical
economics based on a perfect world but they have progressed by accepting uncertainty and
imperfection, and testing empirically economic theories. Islamic theory describes “how people,
groups or governments should act in a perfect Islamic community” and the reality is that people
do not act in this manner, and empirical testing is needed to understand how Muslims behave in
the real world towards Islamic Banking.
Islamic banking studies are largely conducted among Muslims and to a smaller extent among
non-Muslims. Erol and El-Bdour (1989) and Erol, Kaynak and El-Bdour (1990) are among the
earliest known researchers who identified three key selection criteria for Islamic banks: fast and
efficient services, reputation and confidentiality. Religious motivation was not a primary
criterion.
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However, Metawa and Almossawi (1998) and Naser, Jamal and Al-Khatib (1999) found
adherence to Islamic tenets the primary criterion for selecting Islamic banks in Bahrain and
Jordan. Likewise Kader (1993, 1995) and Osman et al. (2009), Othman and Owen (2001, 2002),
and Wakhid and Efrita (2007) share the same findings in their studies in Malaysia, Kuwait and
Indonesia respectively.
Dusuki and Abdullah (2006) explained that Islamic bankers can no longer depend on promoting
the Islamic factor but also service quality. Their survey among 750 respondents found the three
most important factors were competence, friendliness and customer service quality.
Comparative Islamic Banking Studies among Muslims and Non-Muslims
Haron, Ahmad and Planisek (1994) compared Muslim and non-Muslim commercial bank
customers in Malaysia and found no significant differences in patronage factors. Both ranked
fast and efficient service, speed of transactions and friendliness of bank personnel as the three
most important factors.
Gerrard and Cunningham (1997) studied Islamic banking in Singapore with a sample of 29
Muslims and 161 non-Muslims. If no profit were distributed, 21% Muslim and 67% non-
Muslim respondents would withdraw their deposits.
Ahmad and Haron (2002) criticized that Gerrard and Cunningham’s (1997) study lacked
measurement of intention to use Islamic banking. They conducted a study on perceptions of
Malaysian corporate customers towards Islamic Banking. Their survey among 45 respondents
comprising 20% Muslims and 80% non-Muslims showed Islamic banking products were not
popular among corporate customers.
Bley and Kuehn (2004) studied 667 business graduate and undergraduate students’ knowledge
and perception of conventional and Islamic finance in the United Arab Emirates (UAE). Non-
Muslim students viewed Islamic finance as inherently appealing to Muslims, and did not
perceive Islamic finance as provider of superior products.
Overall, studies related to Islamic banking in Malaysia have largely focused on patronage factors
(Thambiah et al., 2008). Recent studies indicate a deeper need to investigate the importance of
marketing Islamic banking, reinforcing Al-Haran’s (1995) proposition for market research to
determine a viable Islamic economic system. Islam banking should no longer be regarded as a
business entity striving to fulfil the religious obligations but as a viable business that can win
over customers (Dusuki & Abdullah, 2006)
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Ahasanul, Jamil and Ahmad (2007) found a significant relationship between race and perception
towards Islamic banking, signalling a need to understand non-Muslim ethnic groups. Fazlan and
Mohammad’s (2007) study reinforces this need when their study showed that adoption of Islamic
banking is influenced by two major factors: perceived innovation attributes and consumer
characteristics.
There are three other studies related to perceived innovation attributes and consumer
characteristics. Yusof (1999) found profit motivation and social desirability as key factors
impacting consumer adoption of Islamic banking in Singapore where non-Muslims form 85% of
the population and Muslims 15%.
Bley and Kuehn’s (2004) study in UAE showed although Muslim students indicated better
knowledge and deeper interest in Islamic banking, they preferred conventional banking
concurring with Omer’s (1992) study among Muslims in UK.
Gerrard and Cunningham’s (1997) study in Singapore found 41.4% of Muslim respondents
would deposit an unexpectedly acquired substantial sum of money in Islamic banks, but half of
them would withdraw and transfer all deposits to another bank if no profit is announced, much
like non-Muslims who deposit with banks that guarantee a return.
Gerrard and Cunningham’s (1997) study stressed the significance of customer awareness,
product knowledge and informative advertising campaigns. The need to create awareness,
enhance product knowledge and improve promotional campaigns is supported by Haron et al.
(1994), Bley and Kuehn (2004), Dusuki and Abdullah (2006) and Thambiah et al. (2007) to
combat growing competition from both Islamic and conventional banking products.
While the literature is still developing, existing literature show most of the Islamic banking
studies in dominantly Muslim countries have focused on patronage factors, while studies in
countries with a large non-Muslim population, such as Malaysia and Singapore, considered the
banking needs of non-Muslims, especially when non-Muslims hold the lion’s share of economic
wealth.
This study seeks to add to the rare literature related to Islamic banking in the South East Asia. It
examines the differences in attitudes and perceptions of Muslims and non-Muslims in multi-
racial and multi-religion Malaysia where Muslims represent 60% and non-Muslims 40% of the
population. With the non-Muslims, primarily the Chinese, forming the economic backbone, it is
important that Islamic banks assess their level of success in attracting non-Muslims.
The most unique contribution of this study is that it investigates the attitudes and perceptions
between Baby Boomers and X-Gen among Muslims and non-Muslims. This study rectifies the
weaknesses of earlier studies:
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1. It examines the intention to do business with Islamic banking that Gerrard and Cunningham’s
(1997) study failed to include.
2. It provides a Muslim sample size of over 30 respondents for empirical testing that the earlier
studies by Gerrard and Cunningham (1997), and Ahmad and Haron (2002) lacked.
3. It ensures sample respondents who are well exposed to Islamic banking unlike the
“customers (who) did not have any banking relationship with the Islamic bank” in Haron et
al.’s (1994) study.
HYPOTHESES
From the above literature, comparative studies between Muslims and non-Muslims can be
categorised as related to bank selection criteria (Bley and Kuehn, 2004; Ahmad and Haron, 2002;
Gerrard and Cunningham, 1997; Haron et al., 1994), knowledge dimensions (Ahmad and Haron,
2002; Gerrard and Cunningham, 1997; Haron et al., 1994), attitudes (Gerrard and Cunningham,
1997), personal opinions (Ahmad and Haron, 2002) and preferences (Bley and Kuehn, 2004).
These dimensions of knowledge, attitudes, opinions and preferences reflect the attitudinal
components of cognitive (knowledge), affective (feeling or perception) and conative (intention to
use) dimensions (Schiffman and Kanuk, 2004).
In this study, the cognitive or knowledge dimensions are the “attractive factors of Islamic
banking” and “understanding of Islamic banking” as shown in Table 1. The affective or feeling
dimensions are the perceived “disadvantage of Islamic banking,” “promotional influence on
attitude change,” “conflict with religious belief” and “future prospect of Islamic banking.” The
conative or intention to use dimension is reflected in “willingness to do business with Islamic
banks.”
Table 1: Components and Dimensions of Study

Attitudinal Component Dimension Hypotheses (H)
Cognitive ( Knowledge) 1. Attractive factors of Islamic Banking (IB) H1
2. Understanding of IB H2
Affective (Feeling) 3. Disadvantage in IB H3a, H3b
4. Promotional influence on Attitude H4
Change
5. Conflict with religious belief H5
6. Prospect of IB H6a, H6b
Conative (Intention to Use) 7. Willingness to do business with IB H7a, H7b
The hypotheses for each of the seven areas are listed below.
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Cognitive or Knowledge Dimensions
1. Attractive Factors of Islamic Banking

Research studies have indicated Islamic principle as the key factor among Muslims for selecting
Islamic banking (Metawa and Almossawi, 1998; Naser et al., 1999; Osman et al., 2009). The
Malaysian government’s efforts in the last two decades to achieve an Islamic state have
intensified the Muslims’ fervour to practise Islamic tenets and Islamic banking allows them to
bank the halal way. As for non-Muslims, products and services which yield a profitable return is
the main motivator (Gerrard & Cunningham, 1997; Bley & Kuehn, 2004). Hence:
H1. The most attractive factor that draws Muslims to Islamic banking is Religion while the
most attractive factor that draws non-Muslims is Product and Services.
2. Understanding of Islamic Banking

Since independence, the Malaysian government has continuously defined Muslim and non-
Muslim activities and privileges. For example, halal (similar to kosher) or non-halal signage
segregates Muslims from non-Muslims. The Malay, synonymously Muslim, is accorded special
privileges such as discounts for home purchase, university placements and employment in
government sectors. The government’s protest in January 2010 that Allah is exclusively the
Muslim’s reference to God (although this reference pre-dates Islam among Jews, Christians and
other faiths in many countries) has further entrenched the perception that Islamic related
activities are exclusively Muslim. This protest has sparked off the burning of about 10 churches
and a Sikh temple. Non-Muslims are advised to refrain from involving in Islamic matters as they
are viewed as abusing that which is sacred to Muslims. Hence, non-Muslims are expected to
have a weak understanding on the concept of Islamic banking than Muslims.
H2. Muslims have a strong understanding and non-Muslims a weak understanding of the
concept of Islamic banking.
Affective (Feeling)
3. Disadvantage in Islamic Banking

Past studies have shown that non-Muslims view conventional banking superior to Islamic
banking (Bley & Kuehn, 2004; Ahamad & Haron, 2002). Although Islamic banks may offer
lower fixed repayment rates for loans to compete with conventional banks, there is a fear that
they may not sustain their business. As for savings, conventional banks assure a fixed interest
rate while Islamic banks’ dividends depend on profitability, casting an uncertainty on return.
This uncertainty may be viewed as a disadvantage by non-Muslims.
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H3a. Non-Muslims would perceive a disadvantage with Islamic banking while Muslims would
not perceive a disadvantage.
Perceptual differences among non-Muslims are expected. While most Baby-Boomers received
education in English and less taught about Islam in school, X-Gen started school when Malay
became the official medium of education and Islam a compulsory course in university. Hence,
more Baby Boomers are expected to perceive a disadvantage with Islamic banking compared to
X-Gen among the non-Muslims.
H3b. Among non-Muslims, Baby Boomers will perceive a disadvantage with Islamic banking
more than the X-Gen.
4. Promotional influence on attitudinal change

Past studies in dominantly Muslim countries where Islamic banking is prevalent showed that
non-Muslims view conventional banking as superior (Bley and Kuehn, 2004). Despite
aggressive campaigns in the last decade that Islamic banking is for everyone, non-Muslims
generally view Islamic banking as for Muslims resulting from the government’s regulations to
segregate space, activities and employment for Muslims. Informal interviews with non-Muslims
indicate a vague idea in how Islamic banking operates and a disinterest to understand it. Further,
assured return on savings is the main goal of non-Muslims and non-guaranteed returns in Islamic
banking is viewed as unattractive. Hence, little change is expected in attitude of non-Muslims
towards Islamic banking despite a decade of promotional efforts.
H4. There will be little change in attitude of non-Muslims towards Islamic banking despite
promotional campaigns.
5. Conflict with religious beliefs

The Chinese and Indians are largely Taoist-Buddhist and Hindus respectively, and being multi-
god worshippers, they are open to other faiths, including Islam. Thus, conflict with religious
beliefs is not expected to be a significant hindrance. When it comes to banking, profitable
returns on investment is the key motivator for non-Muslims, not religion (Gerrard and
Cunningham, 1997; Ahmad and Haron, 2002).
H5. Islamic banking will not conflict with religious beliefs of non-Muslims.
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6. Prospect of Islamic Banking

Muslims are naturally pro-Islam in all aspects of practices including banking (Metawa &
Almossawi 1998; Naser et al., 1999; Bley & Kuehn, 2004: Thambiah et al., 2008; Osman et al.,
2009), while non-Muslims do not concern themselves with whether Islamic banking will succeed
or not. They are unlikely patrons but may use Islamic banks when the benefits are rewarding.
At the moment, Islamic banking has not yielded consistently higher returns than conventional
banks. Further, the poor performance of Malay-owned financial institutions affects non-Muslims
who associate Malays with Islam. Muslims are expected to see stronger prospect of Islamic
banking compared to non-Muslims.
H6a. Muslims see a stronger prospect of Islamic banking than non-Muslims.
Among non-Muslims, the X-Gen is expected to adopt a more open mind towards Islamic
banking being more exposed to Islamic studies, culture and practices. Hence, they will view
Islamic banking as having stronger prospect compared to Baby Boomers.
H6b. Among non-Muslims, the X-Gen sees a stronger prospect of Islamic banking than Baby
Boomers.
Co native (Intention to use)

7. Willingness to do business with Islamic Banking.
Since independence, the Malaysian government has been broadcasting Islam prayer several times
a day, hosting the annual international Koran reading competition and initiating the Islamic
Financial Services Board to promote Islamic banking worldwide. With the constant drive to
make Malaysia an Islamic country, Muslims are expected to support and use Islamic banking.
However, non-Muslims are expected to view Islamic banking as only relevant to the Muslims’
obligation. Hence:
H7a. Muslims are more willing to do business with Islamic banking than non-Muslims.
The Baby Boomers were schooled when English was a preferred medium and Islam was rarely
taught. On the other hand, the X-Gen are educated in the Malay medium and more exposed to
the Islamic faith. Baby Boomers generally own homes and they are more likely to invest than
borrow loans, and a bank that guarantees interest is preferred. The X-Gen has a greater need to
borrow loans for car and home purchase and thus, they are deemed more willing to do business
with Islamic banking than Baby Boomers.
H7b. X-Gen is more willing than Baby Boomers to do business with Islamic banking.
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METHODOLOGY
This study is probably the first known attempt to compare attitudinal and perceptual differences
between Baby Boomers and X-Gen towards the concept of Islamic banking among Muslims and
non-Muslims.
Sample:
A total of 200 people were surveyed via personal interviews in the Klang Valley, the financial
hub of Malaysia where they are exposed to the heavy and aggressive promotion of Islamic
banking, finance and insurance by the government and commercial banks. The sample of 200
comprised 100 Muslims and 100 Non-Muslims with 50 X-Gen and 50 Baby Boomers in each
group.
Baby Boomers were born between 1946 and 1964 and X-Gen between 1965 and 1980 (Hawkins
et al., 2004). Baby Boomers are generally in the higher income categories that make them prime
banking targets. The X-Gen are active income earners and they have higher financial needs such
as a larger house and education savings for their growing children. The sample size is shown in
the table below.
Table 2: Sample based on Age Group and Religion

Age Group and Religion X-Gen Baby Boomers Total
Muslims 50 50 100
Non-Muslims 50 50 100
Total 100 100 200
Place of Interview:
A formal structured survey was carried out at the premises of conventional banks that offered
Islamic banking products and two Islamic banks - Bank Islam and Bank Muamalat.
Instrument:
An initial questionnaire was developed through informal interviews with Muslims, non-Muslims
and bank officers. It was pre-tested and refined to seven quantitative questions covering the
cognitive (knowledge), affective (feeling) and conative (intention to use) dimensions discussed
earlier. The measurements include close-ended “yes” and “no” answers as well as factor and
scaled categories. The seven questions are listed as following:
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Cognitive (Knowledge) Measurements
Q1. What factors would attract you to Islamic banking? Religion, Products and Services,
Availability of Outlets, Reliability and Other Factors (please specify).
Q2. “I understand the concept of Islamic banking.” Please tick one of the following: Strongly
Agree, Agree, Disagree, Strongly Disagree.
Affective (Feeling) Measurements
Q3. Is there any disadvantage with Islamic banking? Yes, No

Q4. Have the Islamic Banks been effective in changing the attitude of non-Muslims towards
Islamic banking? Yes, No.
Q5. “Investing with Islamic banking conflicts with my religious beliefs.” Please tick one
of the following: Strongly Agree, Agree, Neutral, Disagree, Strongly Disagree.
Q6. What do you see as the prospect of Islamic banking in Malaysia? Please tick the
following: Strong, Average, Weak.
Conative (Intention to Use) Measurement
Q7. Are you willing to do business with Islamic banking? Yes, No.
FINDINGS
The detailed results of this survey are shown in Appendices 1 to 3. Appendix 1 shows the
responses between Muslims and non-Muslims, Appendix 2 shows the differences in percentages
and Appendix 3 compares the responses by generation.
The key findings related to the hypotheses are presented in the following.
Cognitive (Knowledge) Measurements
1. Attractive Factors of Islamic Banking
Q.1. What factors would attract you to Islamic banking: Religion, Products and Services,
Availability of Outlets and Reliability.
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Table 3: Factors that attract Muslims and Non-Muslims to Islamic Banking

Rank Muslim Non-Muslim
1. 85% Religion 64% Products and Services
2 73% Products and services 62% Other Factors
3 69% Reliability 15% Reliability
4 58% Other Factors 14% Availability of Outlets
5. 53% Availability of Outlets 2% Religion
The table above shows that Muslim respondents ranked Religion (85%) as the most important
factor, followed by Products and Services (73%), Reliability (69%), Other Factors (4) and
Availability of Outlets (53%) throughout the country. Non-Muslims ranked Products and
Services (64%) as the most important, followed by Other Factors (62%), Reliability (15%),
Availability of Outlets (14%) and Religion (2%). Other Factors that non-Muslims cited include
word-of-mouth recommendation, automated teller machines, electronic fund transfer, electronic
data interchange and e-business, the latest offerings in the banking industry. The findings
support hypothesis H1 that the most attractive factor that draws Muslims is Religion while the
most attractive factor for non-Muslims is Product and Services.
2. Understanding Concept of Islamic Banking
Q.2. “I understand the concept of Islamic banking?” Please tick the following boxes: Strongly
Agree, Agree, Disagree, Strongly Disagree.
Table 4: Understanding Concept of Islamic Banking

Responses Muslims Non-Muslims
Strongly Agree 79% 5%
Agree 21% 9%
Disagree 0% 81%
Strongly Disagree 0% 5%
Total 100% 100%
The table above shows in total 100% of Muslims agree they understand the concept of Islamic
banking, with 79% Strongly Agree and 21% Agree. As for non-Muslims, only 14% agree with
5% Strongly Agree and 9% Agree. However, 86% non-Muslims disagree, with 81% Disagree
and 5% Strongly Disagree. This means, despite heavy advertising campaigns targeted at non-
Muslims, the non-Muslims still do not understand the concept of Islamic banking. The findings
support hypothesis H2 that Muslims have a strong understanding while non-Muslims have a
weak understanding of the concept of Islamic banking.
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Affective (Feeling) Measurements
3. Perception on Disadvantage of Islamic Banking
Q.3. Is there any disadvantage with Islamic banking?
Table 5a: Is there any disadvantage with Islamic Banking?

Perception of Disadvantage
Muslim/non-Muslim M M NM NM
Generation XG BB XG BB
Yes 4% 6% 48% 72%
No 96% 94% 52% 28%
Total 100% 100% 100% 100%
Among Muslims, an average 5% perceive a disadvantage while 95% do not see any
disadvantage. Among non-Muslims, an average 60% perceive a disadvantage while 40%
perceive no disadvantage. While there is an insignificant difference in perception Yes or No
between Muslim X-Gen and Baby Boomers, there is a distinct difference between the two
generation categories among non-Muslims: 48% X-Gen versus 72% Baby Boomers in the Yes
category, and 52% X-Gen versus 28% Baby Boomer in the No category. The difference
between X-Gen and Baby Boomer in the No category is worth further examination as the
number of X-Gen respondents is nearly twice that of Baby Boomer.
The graphs below show the difference between Muslim and non-Muslim Baby Boomers and X-
Generation.
Perception of the Disadvantage of Islamic Banking Among Baby-Boomers
Disadvantage
50
No
Yes
40
30
Count
20
10
0
Muslim Non-Muslim
Religion
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Perception of Disadvantage of Islamic Banking Among X-Gen
Disadvantage
50
No
Yes
40
30
Count
20
10
0
Muslim Non-Muslim
Religion
A chi-square test was conducted and the results show a significant relationship between religion
and perception of disadvantage of Islamic banking. Non-Muslim Baby Boomers and X-Gen
perceive a disadvantage in Islamic banking more significantly than Muslim Baby Boomers and
X-Gen.
.
Table 5b: Chi-Square Tests on Perception of Disadvantage
Generation Exact Sig (2-sided)
Baby Boomer Fisher’s Exact Test .000
X-Gen Fisher’s Exact Test .000
a Computed only for a 2x2 table
b 0 cells (.0%) have expected count less than 5. The minimum expected count is 19.50.
c 0 cells (.0%) have expected count less than 5. The minimum expected count is 13.00
The findings support hypothesis H3a that non-Muslims perceive a disadvantage with Islamic
banking more significantly than Muslims in both Baby Boomer and X-Gen age categories.
The graphs below compare the responses of Baby Boomers and X-Gen between Muslim and
non-Muslim groups. The difference in perception between X-Gen and Baby Boomers among
Muslims is almost non-existent.
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Those That Perceive No Disadvantage with Islamic Banking
Generation
100
Baby-Boomer
X-Gen
80
60
Count
40
20
0
Muslim Non-Muslim
Religion
Those That Perceive A Disadvantage With Islamic Banking
Generation
80
Baby-Boomer
X-Gen
60
Count
40
20
0
Muslim Non-Muslim
Religion
and perceived disadvantage. There is a significant difference between non-Muslim Baby
Boomers and X-Gen in No Disadvantage. However, there is no significant difference between
non-Muslim Baby Boomers and X-Gen in Yes Disadvantage. The lack of significant difference
could be attributed to an insufficient number of respondents among the Muslims as can be seen
in the footnote of the chi-square table that the expected count was less than 5.
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Table 5b: Chi-Square Tests on Perception of Disadvantage

Disadvantage Exact Sig (2-sided)
No Fisher’s Exact Test 0.032
Yes Fisher’s Exact Test 0.726
c 1 cells (25.0%) have expected count less than 5. The minimum expected count is 4.45.
The findings support hypothesis H3b that among non-Muslims, Baby Boomers will perceive a
disadvantage with Islamic Banking more than X-Gen.
4. Attitudinal Change as a result of aggressive promotion
Q4. Have the Islamic Banks been effective in changing the attitude of non-Muslims towards
usage of Islamic banking?
Table 6a: Effectiveness of Islamic Banks in Changing Attitude

of non-Muslims towards Usage of Islamic Banking
Yes 46% 8%
No 54% 92%
Total 100% 100%
While non-Muslims responded with an overwhelming “No” (92%) over “Yes” (8%), it is
interesting to note that slightly more than half of the Muslim respondents said “No” (54%).
The results suggest that even Muslims feel that the Islamic banking promotion has been
ineffective. Appendices 2 and 3 show no indication of significant differences between X-Gen
and Baby Boomer within both Muslim and non-Muslim groups.
The diagram below compares graphically the responses between Muslims and non-Muslims, and
it would seem to suggest a significant difference between Muslims and non-Muslims.
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Effectiveness of Changing Attitudes of Non-Muslims to the Usage of Islamic

Banks
Effectiveness
100
No
Yes
80
60
Count
40
20
0
Muslim Non-Muslim
Religion
and perceived effectiveness. There is a significant difference between Muslims and non-
Muslims in their perception towards the effectiveness of Islamic banks in changing the attitude
of non-Muslims. Overall, nearly all the non-Muslims (92%) feel the advertising campaigns have
been ineffective and half the Muslim respondents (52%) agreed.
Table 6b: Chi-Square Tests on Promotional Effectiveness of Islam Banking in

Changing Attitude of non-Muslims towards Usage of Islamic Banks
Effectiveness of Islamic banks in changing attitude of non-Muslims Exact Sig (2-sided)
Fisher’s Exact Test 0.000
The findings support hypothesis H4 that there was little change in attitude of non-Muslims
towards Islamic banking despite aggressive promotional campaigns.
4. Conflict with religious beliefs
Q.5. “Investing with Islamic banking does not conflict with my religious beliefs.” Please tick
the following: Strongly Agree, Agree, Neutral, Disagree, Strongly Disagree
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Table 7: Perception of Non-Muslims on Conflict in Religious Beliefs with Islamic Banking

Responses Non-Muslims
Strongly Agree 11%
Agree 61%
Neutral 23%
Disagree 3%
Strongly Disagree 2%
Total 100%
Appendix 2 shows 100% of Muslim respondents agree that Islamic banking does not conflict
with their religious belief. Thus, the relevant findings in this section are findings among non-
Muslims. The table above shows that 72% non-Muslims (11% Strongly Agree and 61% Agree)
feel that Islamic banking does not conflict with their religious beliefs, 23% Neutral, and 5% feel
it does (2% Strongly Disagree and 3% Disagree). Thus, over two-thirds of non-Muslims agreed
Islamic banking does not conflict with their religious belief.
The findings support hypothesis H5 that Islamic banking does not conflict with the religious
beliefs of non-Muslims.
6. Prospect of Islamic Banking

Q.6. What do you see as the prospect of Islamic banking in Malaysia? Please tick the
following: Strong, Average, Weak
Table 8: Perception of the Prospect of Islamic Banking in Malaysia

X-Gen Baby Boomer X-Gen Baby Boomer
No. % No. % No. % No. %
Strong 39 78 36 72 16 32 4 8
Average 8 16 10 20 22 44 30 60
Weak 3 6 4 8 12 24 16 32
Total 50 100 50 100 50 100 50 100
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An average 75% of Muslims, comprising 78% X-Gen and 72% Baby Boomers, see the prospect
of Islamic banking as Strong. An average 20% of non-Muslims view likewise comprising 32%
X-Gen and 8% Baby Boomers. However, the majority of responses among non-Muslims are in
the Average category with an average 52%, comprising 60% of Baby Boomers and 44% of X-
Gen. Overall, the non-Muslims are highest in the Average category with 52%, followed by 28%
Weak and 20% Strong. The findings support hypothesis H6a that Muslims see a stronger
prospect of Islamic banking than non-Muslims.
While one-third (32%) of the X-Gen see the prospect as Strong, only 8% of Baby Boomers view
it similarly. This means X-Gen is four times higher than Baby Boomer in their perception that
Islamic banking has a Strong future. The findings support hypothesis H6b that non-Muslim X-
Gen sees a stronger prospect of Islamic banking than non-Muslim Baby Boomers.
Conative (Intention to use) Measurement
7. Willingness to do business with Islamic Banking
Q.7. Are you willing to do business with Islamic banking?
Table 9: Willingness to Do Business with Islamic Banking

Religion X-Gen Baby Boomers
Yes No Yes No
Muslims 88% 12% 96% 4%
Non-Muslims 36% 64% 14% 86%
The table shows Muslims are more willing to do business with Islamic banking than non-
Muslims. With 88% of X-Gen and 96% of Baby Boomers indicating Yes, Muslims are
overwhelmingly supportive of Islamic banking. On the other hand, non-Muslims are less willing
to do business with Islamic banks with 64% of X-Gen and 86% of Baby Boomers indicating No.
The graphs below show the difference in responses between the religion and generation
categories.
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Willingness To Do Business With Islamic Banks Among Muslims
Willing
50
NO
YES
40
30
Count
20
10
0
Baby Boomer X-Gen
Generation
The diagram above suggests no potential significant difference between Muslim Baby Boomers
and X-Gen in their willingness to do business with Islamic banks.
Willingness To Do Business With Islamic Banks Among Non-Muslims
Willing
50
NO
YES
40
30
Count
20
10
0
Baby Boomer X-Gen
Generation
The diagram above suggests a potential significant difference between non-Muslim Baby
Boomers and X-Gen in their willingness to do business with Islamic banks.
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A chi-square test was conducted and the results show no significant difference between Muslim
Baby Boomers and X-Gen. However, there is a significant difference between non-Muslim
Baby Boomers and X-Gen in their willingness to do business with Islamic banks.
Table 12a: Chi-Square Tests on Willingness to do business with Islamic Banks

Religion Exact Sig (2-sided)
Muslim Fisher’s Exact Test 0.269
Non-Muslim Fisher’s Exact Test 0.020
b 2 cells (50.0%) have expected count less than 5. The minimum expected count is 4.00.
c 0 cells (.0%) have expected count less than 5. The minimum expected count is 12.50
The findings support hypothesis H7a that Muslims are significantly more willing to do business
with Islamic banking than non-Muslims, and H7b that X-Gen is significantly more willing than
Baby Boomers to do business with Islamic banking.
Summary
There is a significant relationship between religion and generation categories in the perception of
Disadvantage. There is a significant difference in perception of disadvantage between X-Gen
Muslims and X-Gen non-Muslims, and similarly between Baby Boomer Muslims and Baby
Boomer non-Muslims. In short, non-Muslims view Islamic banking with a disadvantage more
significantly than Muslims.
There is a significant relationship between religion and perception of promotional effectiveness

of Islamic banking in changing attitude of non-Muslims to the usage of Islamic banks. There is
a significant difference between Muslims and non-Muslims in their view towards promotional
effectiveness. Non-Muslims rate promotional effectiveness significantly higher in
ineffectiveness than Muslims.
There are two significant differences between non-Muslim X-Gen and Baby Boomers:
1. Baby Boomers perceived a disadvantage with Islamic banking significantly higher than X-
Gen.
2. X-Gen is significantly more willing than Baby Boomers to do business with Islamic banks.
DISCUSSION
In planning marketing strategies to Muslims, adherence to Islamic tenets remain the main
motivator for Muslims to use Islamic banking, thus supporting studies by Metawa and
Almossawi (1998), Naser et al. (1999), Bley and Kuehn (2004) and Osman et al. (2009). As for
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non-Muslims, marketers have to emphasize profitable products and services comparable or

superior to conventional banking (Anderson et. al, 1976; Tan & Chua, 1976; Javalgi et. al., 1989;
Laroche et. al, 1986). The key challenge would be designing strategies to attract non-Muslims to
Islamic banking especially when they hold the dominant share of the nation’s financial wealth.
If the Islamic banks aim to target non-Muslims, they need to exploit two key findings from this
survey:
1. Non-Muslims view Islamic banking as a disadvantage.
2. X-Gen is an easier market to win than Baby Boomers.
There are at least three areas for Islamic banks to improve as shown in Figure 1:
Figure 1:
3Ps Affecting Attitude and Perception of Islamic Banking
PRODUCT
PROMOTION ATTITUDE & PEOPLE

PERCEPTION
Let’s discuss each of the 3Ps with reference to Diagram 1.
1. Product
While the X-Gen is an easier target, it is the Baby Boomers who have money to invest and
Islamic banks need money from savers to lend to borrowers. Islamic bank officers revealed that
non-Muslims are more inclined towards financing (borrowing) than deposit (saving) products.
This means Islamic bank marketers need to devise attractive loan packages for X-Gen and
investment products for Baby Boomers.
The claim that Islamic banking assets are toxic free is subject to dispute. According to Professor
El Gamal, the Chair of Islamic Economic, Finance and Management at Rice University in
Houston, Texas, Islamic banks share equal responsibility in the financial crisis as they did not
provide true Islamic banking products but merely gave an Islamic name to products of
commercial banks to attract clients who did not want to deal in interest. These products go
through the same investment channels as commercial banks, such as securitisation, Sukouk or
bonds, and Murabaha or interest (Aziz, 2009).
2. Promotion
The Islamic banking concept needs a clear positioning. Islamic banking is positioned as “halal”
banking to the Muslim and as a better loan with “save more, pay less” to the “greedy non-
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Muslim.” In a multiracial and multi-religion country like Malaysia, the inconsistent positioning
is likened to a holy alliance with Muslims and an unholy alliance with greedy non-Muslims.
The proliferation and prolificacy of Islamic accounts with pious but alien-sounding names such
as Wadiah, Mudharabah, Ijraa, Umrah and Murabah can be quite confusing to the non-Muslim.
Muslims and banking staff are generally incapable of explaining the differences adequately to
the non-Muslims. Gerrard and Cunningham (1997) and Bley and Kuehn (2004) have
emphasized the need for better consumer education.
Islamic banking promotional materials need to speak customers’ language. Bank Islam uses
Jawi (ancient Malay script), in their brochures and application forms, which non-Muslims are
unable to read and understand.
3. People
The overwhelming number of Muslim staff in full-fledged Islamic banks reinforces the belief
that Islamic products are meant solely for Muslims. Islam is associated with Malays, and Malays
are associated with government service, where inefficiency and lack of motivation is well
known. The inefficiency and low productivity of Islamic banking staff are among the reasons
that turn even Muslims to conventional banking.
Islamic banks are perceived to lack professional business orientation. During the course of
interviewing at Islamic banks, many customers came in families. Islamic banking personnel
seem to treat customers as “buddies” who accept inefficiencies rather than customers who
demand fast, attentive services.
Segregation between genders may make non-Muslim women feel discriminated although Islamic
banking officials said the reason was to protect women from misbehaving men.
LIMITATIONS AND IMPLICATIONS
While this study uncovers the degree of favourableness towards Islamic banking, it does not
measure the accuracy of knowledge regarding Islamic banking. From the above research,
Muslims support Islamic banking primarily because of their religious faith. However, neither
the respondents nor the Islamic banking staffs were able to articulate the benefits of Islamic
banking or explain the differentiation among the many Islamic accounts.
Although the sample size for Muslim X-Gen and Baby Boomers at 50 is well above the 30 rule
compared to Gerrard and Cunningham (1997) and Ahmad and Haron’s (2002) studies, it was still
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not large enough to enable significant testing of differences. The tests indicated there were cells
of less than 5 respondents such as 2 X-Gen and 3 Baby Boomers for the Yes Disadvantage in
Islamic banking. A larger sample size of 100 for each generation category may help provide
more significant findings.
With regards to generational studies, research should be extended to the emerging workforce
among the Y-Generation to further investigate comparison studies of practical significance to
Islamic bank marketers. Would there be significant differences among Baby Boomers, X-Gen
and Y-Gen in their attitude towards Islamic banking?
With the national language being Malay and Malay synonymous with Islam, would there be a
difference between Malays and other races in attitude and perception towards Islamic banking.
Would there be a difference in attitude between graduates from private universities that use
English as medium of instruction and graduates from public universities that use Malay as the
instructional medium?
Finally, there should be research to examine the validity of Islamic products as truly halal or
simply given Islamic branding to products of commercial banks (Aziz, 2009). These studies will
do well to serve the nation of Malaysia that has “set standards for best banking practices…”
since 2002 to “…preserve the confidence and integrity of the (Islamic) system, and pave the way
for its global development.” (The Star, May 04, 2002).
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Appendix 1: Responses among Muslims and Non-Muslims
What factors would attract you to Islamic Banking

Religion M NM
Religion 85 2
Products & Services 73 64
Reliability 69 15
Other Factors 58 62
Availability of Outlets 53 28
Understanding Concept of Islamic Banking
Religion M NM
Strong 79 5
Average 21 9
Weak 0 81
Very Weak 0 5
100 100
Islamic Banking is a disadvantage
Religion M NM
Yes 5 60
No 95 40
100 100
Promotional Effectiveness in Changing Attitude of Non-Muslims
Religion M NM
Yes 46 8
No 54 92
100 100
No Culture Conflict with Religious Belief
Religion M NM
Strongly Agree 100 11
Agree 0 61
Neutral 0 23
Disagree 0 3
Strongly Disagree 0 2
100 100
Prospect of Islamic Banking in Malaysia
Religion M NM
Strong 75 20
Average 18 52
Weak 7 28
100 100
Willingness to do business with Islamic Banking
Religion M NM
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Yes 92 25
No 8 75
100 100
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Appendix 2: Responses among Muslims and Non-Muslims in Percentages (%)

Q1. What factors would attract you to Islamic Banking?
Religion 84% 86% 2% 2%
Products & Services 80% 66% 68% 60%
Reliability 70% 68% 12% 18%
Other Factors 60% 56% 60% 64%
Availability of Outlets 54% 52% 28% 28%
Q2. Understanding Concept of Islamic Banking
Strongly Agree 78% 80% 8% 2%
Agree 22% 20% 12% 6%
Disagree 0% 0% 80% 82%
Strongly Disagree 0% 0% 0% 10%
Total 100% 100% 100% 100%
Q3. Perception of Disadvantage
Yes 4% 6% 48% 72%
No 96% 94% 52% 28%
Total 100% 100% 100% 100%
Q4. Promotional Effectiveness in Changing Attitude of Non-Muslims
Yes 40% 52% 12% 4%
No 60% 48% 88% 96%
Total 100% 100% 100% 100%
Q5. No Culture Conflict with Religious Belief
Agree 0% 0% 64% 58%
Neutral 0% 0% 18% 28%
Disagree 0% 0% 0% 6%
100% 100% 100% 100%
Q6. Prospect of Islamic Banking in Malaysia
Strong 78% 72% 32% 8%
Average 16% 20% 44% 60%
Weak 6% 8% 24% 32%
Total 100% 100% 100% 100%
Q7. Willingness to do business with Islamic Banking
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Yes 88% 96% 36% 14%

No 12% 4% 64% 86%
Total 50 50 50 50
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Appendix 3: Comparison by Generation Categories

Q1. What factors would attract you to Islamic Banking?
Muslim/non-Muslim M NM M NM
Generation XG XG BB BB
Religion 84% 2% 86% 2%
Products & Services 80% 68% 66% 60%
Reliability 70% 12% 68% 18%
Other Factors 60% 60% 56% 64%
Availability of Outlets 54% 28% 52% 28%
Q2. Understanding Concept of Islamic Banking
Agree 22% 12% 20% 6%
Disagree 0% 80% 0% 82%
Total 100% 100% 100% 100%
Q3. Perception of Disadvantage

Yes 4% 48% 6% 72%
No 2% 52% 94% 28%
Total 6% 100% 100% 100%
Q4. Promotional Effectiveness in Changing Attitude of Non-Muslims
Yes 40% 12% 52% 4%
No 60% 88% 48% 96%
Total 100% 100% 100% 100%
Q5. No Culture Conflict with Religious Belief
Agree 0% 64% 0% 58%
Neutral 0% 18% 0% 28%
Disagree 0% 0% 0% 6%
100% 100% 100% 100%
Q6. Prospect of Islamic Banking in Malaysia
Strong 78% 32% 72% 8%
Average 16% 44% 20% 60%
Weak 6% 24% 8% 32%
Total 100% 100% 100% 100%
Q7. Willingness to do business with Islamic Banking
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Yes 88% 36% 96% 14%

No 12% 64% 4% 86%
Total 100% 100% 100% 100%
485

Attitudes and Perceptions Towards Islamic Banking Among Muslims and Non-Muslims in Malaysia: Implications For Marketing To Baby Boomers and X-Generation

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International Journal of Arts and Sciences

3(13): 453-485 (2010)

Attitudes and Perceptions towards Islamic Banking among Muslims

Keywords: Islamic Banking, Malaysia, Non-Muslims, Generations

Comparative Islamic Banking Studies among Muslims and Non-Muslims

Table 1: Components and Dimensions of Study

Cognitive or Knowledge Dimensions

1. Attractive Factors of Islamic Banking

2. Understanding of Islamic Banking

3. Disadvantage in Islamic Banking

4. Promotional influence on attitudinal change

5. Conflict with religious beliefs

6. Prospect of Islamic Banking

H6a. Muslims see a stronger prospect of Islamic banking than non-Muslims.

Co native (Intention to use)

Table 2: Sample based on Age Group and Religion

Cognitive (Knowledge) Measurements

Affective (Feeling) Measurements

Q3. Is there any disadvantage with Islamic banking? Yes, No

Conative (Intention to Use) Measurement

Cognitive (Knowledge) Measurements

1. Attractive Factors of Islamic Banking

Table 3: Factors that attract Muslims and Non-Muslims to Islamic Banking

2. Understanding Concept of Islamic Banking

Table 4: Understanding Concept of Islamic Banking

Affective (Feeling) Measurements

3. Perception on Disadvantage of Islamic Banking

Q.3. Is there any disadvantage with Islamic banking?

Table 5a: Is there any disadvantage with Islamic Banking?

Perception of the Disadvantage of Islamic Banking Among Baby-Boomers

Perception of Disadvantage of Islamic Banking Among X-Gen

Those That Perceive No Disadvantage with Islamic Banking

Those That Perceive A Disadvantage With Islamic Banking

Table 5b: Chi-Square Tests on Perception of Disadvantage

4. Attitudinal Change as a result of aggressive promotion

Table 6a: Effectiveness of Islamic Banks in Changing Attitude

Effectiveness of Changing Attitudes of Non-Muslims to the Usage of Islamic

Table 6b: Chi-Square Tests on Promotional Effectiveness of Islam Banking in

4. Conflict with religious beliefs

Table 7: Perception of Non-Muslims on Conflict in Religious Beliefs with Islamic Banking

6. Prospect of Islamic Banking

Table 8: Perception of the Prospect of Islamic Banking in Malaysia

Conative (Intention to use) Measurement

7. Willingness to do business with Islamic Banking

Q.7. Are you willing to do business with Islamic banking?

Table 9: Willingness to Do Business with Islamic Banking

Willingness To Do Business With Islamic Banks Among Muslims

Willingness To Do Business With Islamic Banks Among Non-Muslims

Table 12a: Chi-Square Tests on Willingness to do business with Islamic Banks

There is a significant relationship between religion and perception of promotional effectiveness

non-Muslims, marketers have to emphasize profitable products and services comparable or

PROMOTION ATTITUDE & PEOPLE

Let’s discuss each of the 3Ps with reference to Diagram 1.

LIMITATIONS AND IMPLICATIONS

Appendix 1: Responses among Muslims and Non-Muslims

What factors would attract you to Islamic Banking

Appendix 2: Responses among Muslims and Non-Muslims in Percentages (%)

Yes 88% 96% 36% 14%

Appendix 3: Comparison by Generation Categories

Q3. Perception of Disadvantage

Yes 88% 36% 96% 14%

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