Factors influencing customers’ preferences for deposit products in Islamic banking / Keria Kontot

A nation’s financial and banking sectors are major contributors to its economic growth. To ensure this growth is sustainable, both these sectors have a responsibility to ensure an efficient allocation of resources towards a nation’s economic development. This allocation may at times be inefficient owing to a scarcity of resources. The banking sector in particular, relies heavily on external sources of funding i.e. customer deposits owing to its lower associated costs. A series of financial scandals and crises, whether nationally or on a global scale has however, called into question the integrity and security of conventional banking systems. With their integrity in question, banks are increasingly succumbing to customer bargaining power who now favour ethical practices besides return maximisation and risk avoidance when making investment decisions. Changing customer perception towards the banking system has opened up myriad opportunities for Islamic banking to flourish. A pertinent question to this observation is, what drives a customer’s choice of moving their funds to an Islamic bank? Prior studies in this regard have only explored the customer’s choice of bank but not the motivations behind making the move from conventional to Islamic banking. This study thus aims to explore the factors that influence customer preferences to deposit their funds in Islamic banks. Specifically, this study explores the role of religion or religious affiliation in influencing a customer’s preference in making this decision. Data was collected via paper and online surveys employing a non-probability convenient sampling technique.