Islamic-Bank Selection Criteria in Malaysia: An Ahp Approach
Islamic-Bank Selection Criteria in Malaysia: An Ahp Approach
Islamic-Bank Selection Criteria in Malaysia: An Ahp Approach
271
Muhamad Abduh
IIUM Institute of Islamic Banking and Finance, International Islamic University Malaysia
205A Jalan Damansara, Damansara Heights, 50480 Kuala Lumpur, Malaysia.
Email: abduh.iium@gmail.com
IIUM Institute of Islamic Banking and Finance, International Islamic University Malaysia
205A Jalan Damansara, Damansara Heights, 50480 Kuala Lumpur, Malaysia.
Abstract
The study of bank selection criteria has received attention from many bank marketing researchers. However, from its inception
in three decades ago, this kind of study is still scanty for Islamic banking industry. The purpose of this study was to investigate the
Islamic-bank selection criteria, particularly in Malaysia. To accomplish this purpose, information collected from 279 respondents within
the Klang-valley area was incorporated in the analysis. The Analytic Hierarchy Process was used to rank the criteria based on the
respondents preferences. The result has shown that shariah-compliant attribute is the highest priority before an individual decides to
patronize an Islamic bank. The next priorities are given to profitability, banks reputation, banks status, facilities and services, and
friendly personnel respectively. Thus, one of the implications of this study is that Islamic banks cannot be too liberal by following all
the footprints of conventional bank without giving attention to shariah principles and objectives of shariah. Key words: AHP, Islamic
Banking, Selection Criteria.
272
Author(s)
Non-parametric statistics
July
Method of analysis
Author(s)
Factor analysis
Cointegration methods
Logit model
Qualitative methods
2012
273
Conventional
Islamic
Exist?
R is +
/ -?
Exist?
R is +
/ -?
Yes
Yes
1. Banks reputation
2. Family / friends influences
Yes
Yes
3. Rate of return
Yes
Yes
4. Service quality
Yes
Yes
5. Cost of services
Yes
No
Yes
Yes
7. Accessibility
Yes
Yes
8. Convenience of location
Yes
Yes
9. Facilities provided
Yes
Yes
10. Advertisements
Yes
Yes
No
No
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
No
Yes
Yes
19. Confidentiality
Yes
Yes
No
Yes
=/+
Research Framework
Erol and El-Bdour (1989), Erol et al (1990), Kennington
et al (1996), Almossawi (2001), afakli (2007) and Dusuki
and Abdullah (2007) find that the dimension of banks
reputation, profitability, quality of services/facilities
offered and staff friendliness are the fundamental factors in
depositors bank selection criteria. Metawa and Almosawi
(1998), Haron and Wan Azmi (2008) and Al-Ajmi et al
(2009), however, confirm the existence of shariah/religious
factor in decision process of bank selection which consist
274
July
Banks
Reputat
i-on
Profitability
Banks
status
(full
fledge /
Window)
Islamic
bank
selection
criteria
Shariah
issues
Staff
friendliness
Facilities
provided
Data
The data used in this part of study are sourced from a
survey of Islamic bank depositors located in Klang Valley
area of Malaysia. The form of questions and commands for
this part were prepared carefully to fulfill the conditions
of using the AHP as tool of analysis. Table 3 below is the
form that should be filled up by respondents using pairwise
comparison scale e.g. 1 for equally preferred until 9 for
extremely preferred (see Table 4). For example, respondent
A is strongly preferring shariah compliant than profitability
per se, and then he put 5 inside the cell in row 1 column
2. Or, if he strongly prefers profitability instead of shariah
compliant, then he put 1/5 inside the corresponding cell.
2012
275
Banks
Reputation
Profitability
Friendly
Personnel
Shariah Compliant
Profitability
Banks Reputation
Banks Status (Full-fledged/
subsidiary)
Facilities & Services Provided
Friendly Personnel
Equally preferred
Moderately preferred
Strongly preferred
Extremely preferred
2, 4, 6, 8
Reciprocals
z 2 pq
n0 = 2
e
(1)
where:
n0 = Sample size
z = Z-value of ( in this study is 5%)
p = Variability (variability used in this study is 0.5)
q=1-p
e = Level of precision or sampling error (sampling error
tolerated in this study is 5%)
Therefore, sample size is equal to;
z 2 pq (1.96) 2 (0.5)(0.5)
= 385
n0 = 2 =
(0.05) 2
e
276
July
10
Random
consistency
0.58
0.9
1.12
1.24
1.32
1.41
1.45
1.49
CI =
max n
(2)
n 1
where,
max = largest eigenvalue
n = size of comparison matrix
After getting the value of consistency index, we need
to compare it with the appropriate value from random
consistency index (RI), as shown in table 5. The next
step is to get the value of consistency ratio (CR) from the
following formula,
CR =
CI
RI
(3)
2012
277
GM C p
GM
p =1
Cp
Geometric mean
Normalized score
C1
C2
1/ N
1/ N
NS C1 =
NS C2 =
(GM
(GM
GM C1
C1
+ GM C2 + ... + GM C N
GM C2
C1
+ GM C2 + ... + GM C N
CN
GM C N = (1 rN 1 rN 2 ... rNN )
1/ N
NS C N =
(GM
GM C N
C1
+ GM C2 + ... + GM C N
)
)
278
Gender
Age
Marital Status
Level of
Education
Professional
Qualification
Working status
Interaction
with patronized
bank
Level
Male
July
Frequency
Percentage
(%)
113
40.5
Female
166
59.5
< = 35 years
216
77.4
> 35 years
63
22.6
Married
135
48.4
Not Married
144
51.6
46
16.5
Undergraduate
63
22.6
Postgraduate
170
60.9
Have
51
18.3
Do not have
228
81.7
Working
159
56.9
SC
BR
BS
F&S
FP
3.884
3.796
3.029
3.679
3.564
1.981
1.941
2.177
2.078
2.814
2.772
2.696
2.131
2.003
Postgraduate students
120
43.1
84
30.1
BR
195
69.9
< RM1000
82
29.4
FP
145
52.0
n = 113 observations
36
12.9
10
3.60
2.20
RM1000 RM5000
Average income
RM5001 RM10,000
per month
RM10,001 RM20,000
> RM20,000
BS
F&S
2.418
Female Respondents
SC
SC
BR
BS
F&S
FP
4.382
4.264
3.934
4.015
3.996
1.962
2.111
2.323
2.23
2.731
2.854
2.580
2.393
2.171
BR
BS
F&S
2.474
FP
n = 166 observations
Overall Respondents
SC
SC
BR
BS
F&S
FP
4.305
4.156
3.857
3.997
4.154
1.964
2.078
2.273
2.199
2.805
2.870
2.721
2.255
2.164
P
BR
BS
F&S
2.480
FP
n = 279 observations
2012
Female
Overall
Shariah-compliant
0.401
0.433
0.431
Profitability
0.176
0.171
0.171
Banks Reputation
0.166
0.155
0.158
Banks Status
0.108
0.103
0.102
0.084
0.078
0.079
Friendly Personnel
0.064
0.059
0.059
Inconsistency Ratio
0.07
0.07
0.07
279
Conclusion
The topic of bank selection criteria is among the
interesting topics discussed by many bank marketing
researchers since few decades ago, including in Malaysia.
However, most of the studies are pertaining conventional
bank selection criteria. Studies on bank selection criteria
under the framework of Islamic banking are still scanty.
Moreover, most of the studies on Islamic banking
framework are exploratory studies in which the objective
is only to find the factors affecting Islamic bank selection.
This study tries to add on this literature by analyzing
further the multi-attribute decision making in Islamic bank
selection using analytic hierarchy process (AHP) as its
main tool of analysis. It summarizes the factors found to
affect Islamic bank selection criteria in many countries like
Malaysia, Indonesia, Jordan, Egypt, Iran and Bahrain and
select some factors which are common across those studies
to be included in the AHP matrix of pairwise comparison.
The objective is to find out the most important attribute for
individuals in Malaysia to patronize an Islamic bank.
The AHP result shows that shariah-compliant attribute
is the highest priority before an individual decides to
patronize an Islamic bank. The next priorities are given to
profitability, banks reputation, banks status, facilities and
services, and friendly personnel respectively. These results
are similar between male, female and overall. Thus, one of
the important implications is that Islamic banks cannot be
too liberal by following all the footprints of conventional
bank without giving attention to shariah principles and
objectives of shariah.
280
References
Abduh M, Omar, MA (2010). Who Patronises Islamic
Banks in Indonesia. Australian J. of Islamic Law,
Mgt and Fin. 1(1): 48-63.
Aczel L, Saaty TL (1983). Procedures for synthesizing
ratio judgments. J. of Math. Psyc. 27: 93-102.
Al-Ajmi J, Abo H, Hameeda, Al-Saleh N (2009).
Clients of conventional and Islamic banks in
Bahrain: How they choose which bank to patronize.
Intl. J. of Social Econ. 36(11): 1086-1112.
Almossawi M (2001). Bank selection criteria employed
by college students in Bahrain: An empirical
analysis. Intl. J. of Bank Marketing. 19(3): 115-125.
Al-Subhi Al-Harbi KM (2001). Application of the
AHP in project management. Intl. J. Project Mgt.
19: 19-27.
Ardic OP, Yuzereroglu U (2009). How do individuals
choose banks? An application to household level
data from Turkey. The B.E. J. of Econ. Analysis &
Policy. 9(1), Article No.22.
Babakus E, Eroglu S, Yavas U (2004). Modeling
consumers choice behavior: an application in
banking. J. of Services Marketing. 18(6): 462-470.
Bank Indonesia, IPB, (2000). Pemetaan Hasil Penelitian
Potensi, Preferensi, dan Perilaku Masyarakat
Terhadap Bank Syariah di Pulau Jawa [Potency,
Preference, and Peoples Behaviour Toward Islamic
Bank in Jawa Island: A Compilation]. Jakarta:
Author.
Blankson C, Cheng JMS, Spears N (2007).
Determinants of banks selection in USA, Taiwan,
and Ghana. Intl. J. of Bank Marketing. 25(7): 469489.
Dusuki AW, Abdullah NI (2007). Why do Malaysian
customers patronize Islamic banks? Intl. J. of Bank
Marketing. 25(3): 142-160.
July
2012
281