Students’ Preferences in Banking Selection – Islamic Perspective

Luna S. AlYafi AlZuhrilalyafi@ksu.edu.sa

King Saud UniversityCollege of Business AdministrationMarketing Department

Introduction

• The idea of Islamic banking system

• Definition of Islamic Banking

• Saudi Arabia Culture

• Banks of Kingdom of Saudi Arabia (KSA)

Problem Statement

• The aim of this research is to identify factors that student customers may consider when selecting a bank, and the relative importance they place on these factors.

Importance of the Study

• Size of the global Islamic banking industry

• Islamic banking in the Middle East

• The Islamic banking growth story continues to be positive, growing 50% faster than the overall banking sector

• “More than 75 countries and 430 Islamic institutes provide Islamic products”

• Selection criteria of Islamic banking among college students.

Literature Review

•Why Islamic banking.

• “Islamic banking is a form of modern banking based on Islamic legal concepts”

• Aim of Islamic Banking

• Based on According to

• Rational Choice Theory

• Schiffman & Kanuk (2009), identified four models of how and why the individual behave in a specific way

• The economic view

• The passive view

• The cognitive view

• The emotional view

Literature Review (Cont.)Factors customers may consider in selecting bank and their relative importance in different parts of the world Countries

FactorsNorth America Europe Middle East & Far East

More important factors

• Convenient location

• Reputation• Quick and efficient

• Service quality• Efficiency of service

delivery• Perceived

confidentiality

• Number of ATM• Convenient location of

ATM• Efficient service• Speed of transactions

Moderately important factor

• Length of bank• Customer relation• Service quality• Service charge

• Promotional activities• Reputation• Friendliness of

personnel 

• Friendliness of personnel

• Confidentiality• Bank’s reputation and

imageLess important factors

• Interest offered on deposits

• Favorable experience

• Promotional activities

• Recommendation of friends

• Availability of parking spaces

• Lower service charge• Convenient location

• Recommendation of friends / relatives

• Opportunity of online banking

Source: Jahiruddin & Haque (2009)

Theoretical FrameworkCriteria in banking selection

Criteria    Literature

 Religious factors

Cost / benefit

(e.g. return on deposits, investments

, etc.)

Service delivery

(provision of fast & efficient service)

Size & Reputation

Staff factors

(competence &

courtesy of bank staff)

Convenience (location,

ample parking space, interior

comfort)

Confidentiality

 Friends’ & relatives’ Influence

Mass media

advertising

Erol and El-Bdour (1969)

- + + + + + + + +

Erol et al. (1990) - + + + + + + + +

Haron et al. (1994) - + + + + + + + +

Kader (1993) + - + + n/a + n/a + +Kader (1995) + - + + n/a + n/a + +Gerrard & Cunningham (1997)

± + + + + + + + +

Metawa & Almossawi (1998)

+ + n/a n/a n/a + n/a + n/a

Naser et al (1999) + + + + + + + + n/a

Othman & Owen (2001)

- n/a n/a n/a n/a n/a n/a n/a -

Othman & Owen (2002)

+ + + + n/a + + n/a +

Ahmad and Haron (2002)

- + + + + + n/a n/a n/a

Omer (1992) + + n/a n/a n/a n/a n/a + n/aAbbas et al. (2003) ± + + n/a + + + + n/a

Note: + indicates a positive and important result, ± indicates an equivocal result, - indicates negative or no significant result and n/a indicates variable was not investigated / examined in the studySource: Marimuthu, Wai Jing, Phei Gie, Pey Mun, & Yew Ping, (2010)

Theoretical Framework (Cont.)

•Theory of Buyer Behavior

•Consumer and risk reduction

•Evaluation of brands

Personality Factors: Market Maven Other Factors

Personality Factors: Market Maven Other Factors

Criteria of Islamic Bank Selection

Criteria of Islamic Bank Selection

Social Factors: Family Social groups Reference groups Word of mouth Religiosity

Social Factors: Family Social groups Reference groups Word of mouth Religiosity

Theoretical Framework (Cont.)

• Social Factors• Influences of society, family and

reference group.

• Family,

• Social groups,

• Reference groups,

• Word of mouth

• Religiosity

• Personality Factors• Market Mavens: "Consumers who

collect information about the market, concerning products, places to shop, etc.., and in turn influence others”

• Other personal factors influences are the consumer internal preferences whether to engage; or not; in the relationship with the banks

Research Questions

• Is there a relationship between customers’ personality and Islamic bank selection?

• Do social factors influence the relationship between personality and Islamic bank selection?

Research Methodology

• Definition and Operationalization of Variables

• Personality Factors

• Social Factors

• Data Collection Method

• Sampling

• Data Collection Instrument

• Statistical Analysis Techniques

Research Methodology (Cont.)

• Data Collection Method• Survey, for both gender

• Sampling• KSU, CBA students

• Data Collection Instrument• Survey is divided into two parts

• Five-points Likert scales is used

• Statistical Analysis Techniques• Statistical Package for the Social Sciences version 19.0

(SPSS 19)

• Pilot study (n=66):

• Internal consistency was tested using the Cronbach’s alpha coefficient Cronbach's alpha was measured for all items

• Cronbach’s alpha = 0.93.

Limitations of the Study

• Surveying KSU, CBA students

• Students may change their answers, influenced by other students “Life is not what it's supposed to be. It's what it is”