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The adoption of Islamic banking services in Malaysia

Nurul Shahnaz Mahdzan (Department of Finance and Banking, Faculty of Business and Accountancy, University of Malaya, Kuala Lumpur, Malaysia)
Rozaimah Zainudin (Department of Finance and Banking, Faculty of Business and Accountancy, University of Malaya, Kuala Lumpur, Malaysia)
Sook Fong Au (Agrobank, Kuala Lumpur, Malaysia)

Journal of Islamic Marketing

ISSN: 1759-0833

Article publication date: 11 September 2017

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Abstract

Purpose

The purpose of this paper is to examine the level of understanding of Islamic banking concepts and the factors that influence Islamic banking adoption in Malaysia, based on Rogers’ (1983; 2003) Diffusion of Innovation. Specifically, the impact of perceived attributes and other variables (understanding, consumer innovativeness and bank personnel’s professionalism) on Islamic banking adoption is examined.

Design/methodology/approach

A quantitative approach using a sample of 200 working MBA students in a leading public university in Malaysia was used. The instrument used was a self-administered questionnaire survey.

Findings

The level of understanding of various Islamic banking concepts is below average. A logistic regression reveals that the understanding of Islamic banking concepts and perceived advantage significantly influences the adoption of Islamic banking services.

Research limitations/implications

The small sample size of 200 individuals may render the findings ungeneralizable. Future studies may use a larger sample from across Malaysia and incorporate other independent variables, such as religiosity and Islamic financial literacy.

Practical implications

The Malaysian government can provide tax incentives and conduct educational roadshows on Islamic banking. Educating prospective consumers on the advantages of Islamic banking as opposed to conventional banking would provide more objective benefits that would boost the adoption of Islamic banking.

Originality/value

The results of this paper will be useful for Islamic financial institutions to increase their marketing and promotional efforts to keep pace with stiff competition within the industry.

Keywords

Acknowledgements

The authors would like to acknowledge the financial support provided by University of Malaya under the Equitable Society Research Cluster (ESRC) research grant RP015D-13SBS.

Citation

Mahdzan, N.S., Zainudin, R. and Au, S.F. (2017), "The adoption of Islamic banking services in Malaysia", Journal of Islamic Marketing, Vol. 8 No. 3, pp. 496-512. https://doi.org/10.1108/JIMA-08-2015-0064

Publisher

:

Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

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