Factors affecting intention to use Islamic personal financing in Pakistan: Evidence from the modified TRA model.

Ali, Muhammad and Syed ali, Raza and Chin-Hong, Puah (2015): Factors affecting intention to use Islamic personal financing in Pakistan: Evidence from the modified TRA model.

Abstract

The present study is the first attempt in Pakistan to examine the determinants of Islamic personal financing by using a modified theory of reasoned action (TRA) model. This study uses the two major construct of TRA model, namely, subjective norm and attitude. Additionally, we modified this model by introducing three relevant factors: pricing of Islamic personal financing, a religious obligation and government support to predict the intention of Islamic bank customers about Islamic personal financing. Sample data were conveniently drawn from the Islamic bank customers with the help of self administered survey based questionnaire. The study sample comprised on 484 responses of full-fledge Islamic bank customers located in the biggest city of Pakistan. Out of 484 responses, we considered 471 responses and ignored 13 responses due to incomplete information provided by the customers. This data was statistically analyzed by employing Structural equation modeling (SEM). Overall, the results of the study suggest that pricing of Islamic personal financing and religious obligation have a negative and significant impact on the intention to use Islamic personal financing. Attitude and social influence were found to be positive, but insignificant predictors. In addition, government support is positive and significantly associated with the intention to use Islamic personal financing. This study has some practical implications for Islamic bank managers and the government of Pakistan. Furthermore, Islamic banks should capture the need of Islamic personal financing while government support may help in promoting this service for Islamic banks in Pakistan. This paper makes a unique contribution in the existing body of Islamic banking literature.The empirical findings of this study provide some future directions and is considered to be a pioneer study, which has laid a foundation in the context of Islamic personal financing in Pakistan.

• Item Type: MPRA Paper
• Language: English
• Keywords: Key words: Personal financing, Islamic banks, customer’s intention, Pakistan
• Subjects: E - Macroeconomics and Monetary Economics > E0 - General > E03 - Behavioral Macroeconomics; G - Financial Economics > G1 - General Financial Markets; G - Financial Economics > G1 - General Financial Markets > G10 - General

References

Abduh, M., & Abdul Razak, D. (2012). Customers’ attitude towards diminishing partnership home financing in Islamic banking. American Journal of Applied Science, 9(4), 593-599.

Abdullah, N. I., &Dusuki, A. W. (2006). Customers’ perception of Islamic hire purchase (AITAB) in Malysian financial instiutions: Empirical evidence. INCEIF Islamic banking.

Abdullah, N.I. and Dusuki, A.W. (2006), “Customers’ perceptions of Islamic hire-purchase facilityin Malaysia: an empirical analysis”, IIUM Journal of Economics and Management, 14(2), 177-204.

Ali, M., & Raza, S. A. (2015). Factors affecting to select Islamic Credit Cards in Pakistan: The TRA Model.

Ali, M., & Raza, S. A. (2015). Measurement of Service Quality Perception and Customer Satisfaction in Islamic Banks of Pakistan: Evidence from Modified SERVQUAL Model.

Almossawi, M. (2001). Bank selection criteria employed by college students in Bahrain: an empirical analysis. International Journal of Bank Marketing, 19(3), 115-125.

Amin, H. (2009). An analysis of online banking usage intentions: an extension of the technology acceptance model. International Journal of Business and Society, 10(1), 27.

Amin, H., Muhammad, M. Z., Lada, S., Amran, A., & Hamid, M. R. A. (2006). Islamic Banking Development in Bimpeaga Countries: Issues and Potential Cooperation.

Amin, H., Rahim Abdul Rahman, A., LaisonSondoh Jr, S., & Magdalene ChooiHwa, A. (2011). Determinants of customers' intention to use Islamic personal financing: The case of Malaysian Islamic banks. Journal of Islamic Accounting and Business Research, 2(1), 22-42.

Amin, M., & Isa, Z. (2008). An examination of the relationship between service quality perception and customer satisfaction: A SEM approach towards Malaysian Islamic banking. International Journal of Islamic and Middle Eastern Finance and Management, 1(3), 191-209.

Bentler, P. M. (1990). Comparative fit indexes in structural models.Psychological bulletin, 107(2), 238. Byrne, B. M. (2013). Structural equation modeling with AMOS: Basic concepts, applications, and programming. Routledge.

Chau, P. Y., & Hu, P. J. H. (2001). Information technology acceptance by individual professionals: A model comparison approach*. Decision Sciences,32(4), 699-719.

Comrey, A. L., & Lee, H. B. (1992). A first course in factor analysis. Hillsdale, NJ: Erlbaum.

Ebert, R.J. and Griffin, R.W. (1998), Business Essentials, 2nd ed., Prentice-Hall, Upper Saddle.

Emory, C. W., & Cooper, D. R. (1991). Business Research Methods . Homewood IL: Richard D. Irwin.

Fishbein, M., & Ajzen, I. (1975). Belief, attitude, intention and behavior: An introduction to theory and research.

Gopi, M., & Ramayah, T. (2007). Applicability of theory of planned behavior in predicting intention to trade online: Some evidence from a developing country. International Journal of Emerging Markets, 2(4), 348-360.

Hair, J. F., Black, W. C., Babin, B. J., Anderson, R. E., &Tatham, R. L. (2006). Multivariate data analysis (Vol. 6). Upper Saddle River, NJ: Pearson Prentice Hall.

Hair, J. F., Anderson, R. E., Tatham, R. L., & William, C. (1998). Black (1998), Multivariate data analysis.

Hamid, S., Craig, R., & Clarke, F. (1993). Religion: a confounding cultural element in the international harmonization of accounting?. Abacus, 29(2), 131-148.

Haniffa, R., & Hudaib, M. (2007). Exploring the ethical identity of Islamic banks via communication in annual reports. Journal of Business Ethics, 76(1), 97-116.

Haron, S. (2005), SistemKewangandanPerbankan Islam, KLBS, Kuala Lumpur.

Haron, S. and Shanmugam, B. (2001), Islamic Banking System, Pelanduk, Subang Jaya.

Haron, S., Ahmad, N., &Planisek, S. L. (1992). Requirements and selection decision of customers in Islamic and conventional banking environment.Malaysian management journal, 1(1), 25-33.

Haron, S., Ahmad, N., &Planisek, S. L. (1994). Bank patronage factors of Muslim and non Muslim customers. International Journal of Bank Marketing,12(1), 32-40.

Kaiser, H. F. (1974). An index of factorial simplicity. Psychometrika, 39(1), 31-36.

Khir, K., Gupta, L., &Shanmugam, B. (2008). Islamic banking: A practical perspective. Pearson Malaysia.

Kleijnen, M., Wetzels, M., & de Ruyter, K. (2004). Consumer acceptance of wireless finance. Journal of Financial Services Marketing, 8(3), 206-217.

Koe, W. L., & Rahman, N. Z. A. (2014, January). The Use of Ar-Rahnu by Islamic BanCustomers in Malaysia. In Proceedings of the International Conference on Science, Technology and Social Sciences (ICSTSS) 2012 (pp. 11-18). Springer Singapore.

Kutner, N. (2004). Applied linear regression models, 4th edition, McGraw-Hill Irwin.

Lada, S., Harvey Tanakinjal, G., & Amin, H. (2009). Predicting intention to choose halal products using theory of reasoned action. International Journal of Islamic and Middle Eastern Finance and Management, 2(1), 66-76.

Lewis, W., Agarwal, R., &Sambamurthy, V. (2003). Sources of influence on beliefs about information technology use: an empirical study of knowledge workers. MIS quarterly, 657-678.

Mathieson, K., Peacock, E., & Chin, W. W. (2001). Extending the technology acceptance model:the influence of perceived user resources. ACM SigMIS Database, 32(3), 86-112.

Metawa, S.A. and Almossawi, M. (1998), “Banking behaviour of Islamic bank customers:perspectives and implications”, International Journal of Bank Marketing, 16(7), 299 313.

Metwally, M. (1996). Attitudes of Muslims towards Islamic banks in a dual-banking system. American Journal of Islamic Finance, 6(1), 11-17.

Naser, K., Jamal, A., & Al-Khatib, K. (1999). Islamic banking: a study of customer satisfaction and preferences in Jordan. International Journal of Bank Marketing, 17(3), 135-151.

Nunnally, J. (1978). C.(1978). Psychometric theory.

Olson, D., &Zoubi, T. A. (2008). Using accounting ratios to distinguish between Islamic and conventional banks in the GCC region. The International Journal of Accounting, 43(1),45-65.

Omer, H. (1992), “The implication of Islamic beliefs and practice on Islamic financial institutionsin the UK”, PhD dissertation, Loughborough University, Loughborough.

Othman, C., & Rahman, M. S. (2014). Investigation of the Relationship of Brand Personality, Subjective Norm and Perceived Control on Consumers’ Purchase Intention of Organic Fast Food. Modern Applied Science, 8(3), p-92.

Rahman, Z.A. (2005), Competitive Pricing of Islamic Banking, NST, Kuala Lumpur.

Ramayah, T., & Ignatius, J. (2005). Impact of perceived usefulness, perceived ease of use and perceived enjoyment on intention to shop online. ICFAI Journal of Systems Management (IJSM), 3(3), 36-51.

Ramayah, T., &Suki, N. M. (2006). Intention to use mobile PC among MBA students: implications for technology integration in the learning curriculum.UNITAR e-Journal, 1(2), 1-10.

Ramayah, T., Yusoff, Y. M., Jamaludin, N., & Ibrahim, A. (2009). Applying the theory of planned behavior (TPB) to predict internet tax filing intentions.International Journal of Management, 26(2), 272.

Raza, S. A., &Hanif, N. (2013). Factors affecting internet banking adoption among internal and external customers: a case of Pakistan. International Journal of Electronic Finance, 7(1),82-96.

Raza, S. A., Jawaid, S. T., & Hassan, A. (2015). Internet banking and customer satisfaction in Pakistan. Qualitative Research in Financial Markets,7(1), 24-36.

Rosly, S. A. (1999). Al‐Bay'Bithaman Ajil financing: impacts on Islamic banking performance. Thunderbird International Business Review, 41(4‐5), 461-480.

Rosly, S.A. (2005), Islamic Banking Windows Transforms to Subsidiaries, The Star, Kuala Lumpur.

Ryu, S., Ho, S. H., & Han, I. (2003). Knowledge sharing behavior of physicians in hospitals. Expert Systems with applications, 25(1), 113-122.

Sulaiman, M. (2003). The influence of riba and zakat on Islamic accounting. Indonesian Management and Accounting Review, 2(2), 149-167.

Taib, M. T., and Razak, DA (2008). Factors influencing intention to use diminishing partnership home financing. International Journal of Islamic and Middle Eastern Finance and Management, 1(3), 235-248.

Teo, T. S., &Pok, S. H. (2003). Adoption of WAP-enabled mobile phones among Internet users. Omega, 31(6), 483-498.

Venkatesh, V., & Davis, F. D. (2000). A theoretical extension of the technology acceptance model: Four longitudinal field studies. Management science, 46(2), 186-204.

WajdiDusuki, A. (2008). Understanding the objectives of Islamic banking: a survey of stakeholders' perspectives. International Journal of Islamic and Middle Eastern Finance and Management, 1(2), 132-148.

Yu, C. S. (2012). Factors affecting individuals to adopt mobile banking: Empirical evidence from the UTAUT model. Journal of Electronic Commerce Research, 13(2), 104-121.

Zainuddin, Y., Jahyd, N., & Ramayah, T. (2004). Perception of Islamic banking: does it differ among users and non users. JurnalManajemendanBisnis, 6(2), 135-149.