Question

Section B Read and answer ALL questions that follow
Perceptions of Malaysian corporate customers towards Islamic banking products and
services
Norafifah Ahmad & Sudin Haron
International Journal of Islamic Financial Services, Volume 3, Number 4, 2003
Islamic banking system was established in Malaysia since 1983. To date, Islamic banking
products are available at two full pledged Islamic banks and at all commercial and merchant
banks in Malaysia. However, these products are still not fully accepted by customers. At the end
of 2000, total deposit at conventional banks was RM381 billion while total deposit in Islamic
system was RM31 billion. In the case of loans, RM416 billion was extended by conventional
system, and RM21 billion was given by Islamic system. Since corporate customers are the key
players in the economy, it is imperative that the reasons for them to choose or not to choose
Islamic system be studied.
This study highlights the perceptions of corporate customers towards Islamic banking system in
Malaysia. Aspects studied were the existing usage of Islamic banking facilities, level of
understanding of Islamic banking features among corporate financial controllers, their roles in
switching and using banking products, and their personal opinions towards Islamic banking
products. While the government can use these findings in formulating additional strategies and
policies, where appropriate, the Islamic bankers will be able to understand the needs of corporate
customers, by providing the necessary services to fulfill these needs.
The respondents participating in this exploratory study were the persons responsible for the
financial affairs of the companies listed in the Kuala Lumpur Stock Exchange. A total of 100
respondents were identified and willing to participate in this study. These respondents were
financial directors, financial managers, general managers of finance, and accountants. Out of the
100 questionnaires sent to all agreed participants, 45 were returned. No further attempt was made
to increase the samples.
The study shows that all respondents used current account for their daily transactions, while 75
per cent had fixed deposit facility in the conventional system. Overdraft, followed by bank
guarantee, was the most used facility for financing and trade facilities. Bond and note insurance
facilities were unpopular among the respondents. Based on the findings it seems that Islamic
banking products were not popular among Malaysian corporate customers. Only 11 respondents
maintained banking relationship under the Islamic banking system. Despite of the Islamic
banking having been established in Malaysia more than 15 years ago, most of the respondents
started patronizing Islamic banks less than five years ago.

Additionally, the respondents indicated that they had knowledge in Islamic banking system.
However, more than 65 per cent indicated that their knowledge in this system was limited.
Although the majority of the respondents were non-Muslims, they knew that Muslims were not
allowed from patronizing conventional banks due to the interest that was prohibited in Islam.
The study indicated that there was misconception among the respondents about the objective and
philosophy of the establishment of Islamic banks. About 65 per cent of the respondents believed
that Islamic banks must adopt profit maximization principle in order to survive in the
competitive business environment. This perception however is contradictory with the objective
of Islamic banks, i.e. combination of moral and profit motives. The lack of knowledge among the
respondents in Islamic banking system was further confirmed when questions about the
principles used in Islamic banking system were posed. While 38.1 per cent of the respondents
were unsure of the nature of profit-sharing principle in Islamic banking system, about 50 per cent
believed that this principle was the only principle used by Islamic banks in replacement of
interest. The general inadequate knowledge among the respondents is to be expected since 80
percent of them were non-Muslims.
The study shows that few respondents believed that religious were the only reason for customers
selecting Islamic banks. More than 55 per cent perceived that both religion and economics were
the patronage factors in this system. About 50 percent of the respondents believed that Islamic
banking products and services had a good potential to be accepted by customers. About 75 per
cent of the respondents indicated that Islamic banks in Malaysia however have not done enough
marketing in promoting their products and services to corporate customers. The study uncovers
the factors perceived as important in selection of bank. The most important one was cost and
benefit to the company, followed by service delivery (fast and efficient), size and reputation of
the bank, convenience (location and ample parking), and friendliness of bank personnel. This
finding was inconsistent with previous research whereby size of bank is considered the most
important criterion perceived by corporate customers in bank selection.
1. Explain briefly in a diagram the stages that are involved in identifying the research
questions for this study (do not ignore research focus above)
2. What are the dependent and independent variables for this study (1 Mark)
3. How did the researchers manage ethical issues in this study?
4. The researchers used qualitative research to achieve the objectives of the study, but they
employed a questionnaire as a data collection tool, why?
5. The researchers indicated that: "Out of the 100 questionnaires sent to all agreed
participants, 45 were returned" Discuss this situation.

Answer 1

2) Dependent variables 'Reasons of less store and advance of islamic bank.

independent variables return of questionairie from chose key people.

3) All the questionairie were sent to non-muslims generally and no endeavor for expanding test size.These were endeavor to oversee Ethical issue.

4) Although subjective research yet questionairie give a superior considering participants,their approach toward Islamic bank.Knowledge about banks,sufficient time to answer analyscally.questionairie additionally give a writtten archive for additional investigation of circumstances and logical results situation.

5) 100 questionairie to clients who were wiling to contribute or take an interest however just 45 returns show their ignorance about Islamic bank.They were not thinking about elements of these banks ,henceforth incapable to respond to the inquiries.