Advanced Research Methods Project.

Project Title.
Exploring Islamic Financial Literacy: A Study on the Factors Influencing
Financial Decision-making Among Muslims.

Abstract
Islamic financial literacy refers to an individual's knowledge and understanding of
financial concepts and products that are consistent with Islamic principles. but most of
the Muslims lack IFL. there is a dire need for Islamic Financial Literacy among Muslims.
Islamic Financial literacy is a pertinent factor to have a perfect lifestyle in accordance
with shariah Principles with proper knowledge of permissible (halal) and
Forbidden(haram) practices. The Research project aims to investigate the factors
influencing financial decision making among Muslims in the context of Islamic finance.
The Study will adopt a Qualitative data Survey through Questionnaire that will be
administered online that will gather data on Religiosity, knowledge and subjective
norms Through demographic and IFL data (Primary). By Analysing these factors this
project aims identify key drivers that promote or hinder Islamic financial literacy in
Muslim population in the region. And its ultimate impact on their financial decision
making.
The Findings of this study are expected to contribute significantly for the existing body
of knowledge on Islamic financial literacy. Policymakers, financial institutions, and
educational organisations working to improve financial literacy efforts aimed at Muslim
communities will find the research findings useful. Finally, the initiative hopes to
encourage a better understanding of Islamic finance and the creation of effective
techniques to improve financial decision-making among Muslims.

Introduction.
According to the Organization for Economic Co-operation and Development (OECD),

financial literacy is “a combination of awareness, knowledge, skills, attitude and behaviour

necessary to make sound financial decisions and ultimately achieve individual financial well-
being” (OECD INFE, 2011. While Islamic financial literacy refers to an individual's knowledge
and understanding of financial concepts and products that are consistent with Islamic
principles. Islamic Finance is rapidly growing industry, and There is a growing need for
Individuals to be financially literate in Islamic principles especially Muslims. IFL is essential
For Muslims because conventional financial literacy encompasses Interest (Riba) Which is
prohibited in Islam and other Societies. For that reason, Muslims should acquire Islamic
financial literacy (IFL); they should have enough financial knowledge within the attitudinal
framework that one should ideally behave for the good of humankind. Indeed, this kind of
financial literacy may enable people (particularly Muslims) to understand Sharīʿah non-
compliant practices in Islamic financial Institutions and manage Sharīʿah non-compliant risk,
i.e. The possibility of Sharīʿah Noncompliance in Islamic financial transactions ((Bhatti, 2019)
However, there is a lack of research on the current state of Islamic financial literacy and
effective strategies for enhancing it. This research proposal aims to investigate the current
state of Islamic financial literacy and to identify potential strategies for enhancing it.
 Literature Review
Alfarisi (2020) analysed the impact of courses relating to Islamic economics and finance on
the level of IFL among university students; the study showed a significant impact of
specifically introduced courses on the level of Islamic financial knowledge or literacy. Some
studies have identified factors that influence the level of students’ IFL. For instance,
Abdullah et al. (2017) suggested three factors: gender, education level and attitude to
financial management. On the other hand, Rahim et al. (2016) listed the factors that
influence IFL among university students, identifying them to be religiosity, financial
satisfaction and hopelessness. a study focusing on the IFL level of a sample group of
enrolled students in Islamic economics and business faculty revealed that “age” isthe only
factor that affects the level of literacy (Hisan, 2019). There is a void in the literature
regarding the other possible antecedents of the IFL concept. Another important
consideration in literature of IFL are the factors affecting IFL. Precisely, knowledge was
found to be the factor that has a partial influence on people’s preference for considering
Islamic financial services. Fraczek and Klimontowicz (2015) in a similar study found that
basic knowledge of finance influences the decision of young customers in terms of financial
and banking products preference. Ahmed et al. (2020) investigated the determinants of IFL
and extracted two factors: “subjective knowledge of Sharīʿah compliance”; and “knowledge
of riba and profit-sharing concept.” Widityani et al. (2020) proposed three variables that
develop college students’ IFL: attitude, perception and knowledge and behaviour. They also
claimed that the IFL index differs based on the level of education and gender and that the
IFL index is higher for the students who have taken Islamic finance-related courses.
 1. Religiosity
Religiosity is the belief in God followed by a commitment to carry out the principles that are
believed to come from God (McDaniel & Burnett, 1990). Religiosity measures the influence
of religion on a person’s behaviour and actions.(Kaawaase & Nalukwago, 2017). A person
will start to develop emotional feelings to some divine thoughts that are contrary to their
religious beliefs especially when a person has been practicing their religion for a long time.
((Kaawaase & Nalukwago, 2017) (Bananuka, Kaawaase, Kasera, & Nalukenge, 2019)
Religious beliefs and practices may also play a role in Islamic financial literacy. Individuals
who are more devout and follow Islamic teachings closely may have a better understanding
of the principles of Islamic finance.

H1. Religiosity has a positive impact on intention to Practice Islamic Financial Literacy.

2. Knowledge
Islamic finance is a fast-growing industry that adheres to Islamic law's (Shariah) principles
and standards. It acts on ethical and moral grounds, encouraging risk-sharing and asset
backing while forbidding interest (Riba) and some sorts of speculative trading. Knowledge
variables have a key role in describing decision-making processes, product creation, and
overall industry growth in Islamic finance. The purpose of this literature study is to
investigate the importance of knowledge variables in Islamic finance and how they
contribute to the sector's performance. (Alam, Alam, & Mushtaq, 2017) emphasize the
importance of knowledge management (KM) practices in Islamic financial institutions. They
argue that effective KM systems aid in creating an environment conducive to innovation,
fostering a culture of learning, and maintaining competitive advantage. The study highlights
that Islamic finance institutions need to focus on capturing, sharing, and utilizing knowledge
efficiently to enhance their offerings and remain relevant in the market.

H2. Knowledge has a positive impact on Islamic financial Literacy.

3. Subjective Norms.
Subjective norms refer to concept in social psychology that refers to an individual’s
perception of social pressure that he may experience by engaging in a particular behaviour.
It is a perceived influence that may be caused by others on an individual’s attitude and
behaviour. Subjective norms are formed from an individual’s belief that what other would
perceive for them to do in a given situation. And the motivation caused by them to comply
with those beliefs.

H3. Subjective Norms have a positive impact on Financial Decision making among Muslims.

Methods and Procedures

Sample
A purposive sample technique was applied in this study in order to select individuals who
are Muslims and have used shariah-compliant financial products and services. The sample
can include up to 200 people, varying in gender representation.

Methods (Data Collection)

Data is collected using a standardised questionnaire that was administered online. The
questionnaire will be divided into two sections: demographic information and financial
literacy questions. Demographic information will include age, gender, education level,
income, and employment position. The financial literacy questions will be changed from
prior surveys and will cover subjects such as financial planning, budgeting, saving, investing,
and risk management.

Data Analysis
SPSS (Statistical Package for the Social Sciences) is used to analyse the data. Participants'
demographic information and financial knowledge levels is analysed using descriptive
statistics. Inferential statistics, such as correlation and regression analysis, will be utilised to
determine the elements influencing Muslim financial decision-making.
 Research Model
Religiosity
H1

Islamic Financial
H2 Literacy
Knowledge
Islamic financial decision
making

H3

Subjective
Norms
Data Analysis.
Appendix. (Questionnaire)
https://forms.gle/64KgM4LTfQ4xBjDu9

References.
1. OECD INFE (2011), Measuring Financial Literacy: Core Questionnaire in Measuring
Financial Literacy:
2. Questionnaire and Guidance Notes for Conducting an Internationally Comparable
Survey of
3. Financial Literacy, OECD, Paris
4. Bhatti, M. (2020), “Managing Shari’ah non-compliance risk via Islamic dispute
resolution”, Journal of Risk and Financial Management, Vol. 13 No. 1, pp. 1-9.
5. Alfarisi 20), Islamic financial literacy f university students”, paper presented at The
3rd International Conference on Sustainability and Innovation.
6. Abdullah,M.A., Ab Wahab, S.N.A., Sabar, S. and Abu, F. (2017), “Factors determining
Islamic financial
7. literacy among undergraduates”, Journal of Emerging Economies and Islamic
Research, Vol. 5 No. 2, pp. 67-76.
8. Frączek, Bożena & Monika, Klimontowicz. (2015). Financial literacy and its influence
on young customers’ decision factors. Journal of Innovation Management. 3.
10.24840/2183-0606_003.001_0007.
9. Rahim, S.H.A., Rashid, R.A. and Hamed, A.B. (2016), determinants among university
students: an exploratory fact r analysis”, International Journal of Economics and
Financial Issues, Vol. 6 No. 7S, pp. 32-35.
10. Hisan, K. (2019), Islamic financial literacy among students attending faculty of
Islamic economics and business”, Ihtiyath: Jurnal Manajemen Keuangan Syariah,
Vol. 3 No. 2, pp. 113-122.
11. Klapper, L., Lusardi, A. and Van Oudheusden, P. (2015), Financial Literacy around
the World: Insights from the Standard and Poor s Ratings Services Global Financial
Literacy Survey, Global Financial Literacy Excellence Center, The George
Washington, DC University.
12. Ahmad, G., Widyastuti, U., Susanti, S. and Mukhibad, H. (2020), “Determinants of
the Islamic financial literacy”, Accounting, Vol. 6 No. 6, pp. 961-966.
13. Widityani, S.F., Faturohman, T., Rahadi, R.A. and Yulianti, Y. (2020), Do
sociographic characteristics and Islamic financial literacy matter for selecting Is amic
nancial products among college students in Indonesia? , Journal of Islamic Monetary
Economics and Finance,
14. J. Bananuka, T. K. Kaawaase, M. Kasera, and I. Nalukenge, “Determinants of
the intention to adopt Islamic banking in a non-Islamic developing country: The
case of Uganda,” ISRA International Journal of Islamic Finance, vol. 11, no. 2,
pp. 166–186, Dec. 2019, doi: 10.1108/IJIF-04-2018- 0040.
 15. S. W. McDaniel and J. J. Burnett, “Consumer religiosity and retail store evaluative criteria,”
Journal of the Academy of Marketing Science, vol. 18, no. 2, pp. 101–112, 1990, doi:
https://doi.org/10.1007/BF02726426.
16. T. K. Kaawaase and L. Nalukwago, “Religiosity and Islamic Banking in Uganda,” Makerere
Business Journal, vol. 13, pp. 70–93, 2017.

Alam, G. M., Alam, K., & Mushtaq, S. (2017). Climate change perceptions and local adaptation
strategies of hazard-prone rural households in Bangladesh. Climate risk management, 17, 52-
63.
Bananuka, J., Kaawaase, T. K., Kasera, M., & Nalukenge, I. (2019). Determinants of the intention to
adopt Islamic banking in a non-Islamic developing country: The case of Uganda. ISRA
International Journal of Islamic Finance, 11(2), 166-186.
Bhatti, M. (2019). Managing Shariah non-compliance risk via Islamic dispute resolution. Journal of Risk
and Financial Management, 13(1), 2.
Kaawaase, T. K., & Nalukwago, L. (2017). Religiosity and Islamic banking in Uganda.
McDaniel, S. W., & Burnett, J. J. (1990). Consumer religiosity and retail store evaluative criteria. Journal
of the Academy of marketing Science, 18, 101-112.