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The curious case of riba's muted role in bank selection criteria among Muslims in Klang Valley, Malaysia
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2023
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Abstract
Arguably, the most significant difference between conventional and Islamic banking is the prohibition of riba (interest) - besides gharar (uncertainty) and maysir (speculation). Naturally, it is questioned whether rib? is the make-or-break selection criterion for Islamic banking customers in Malaysia. Consequently, this study examined the moderating effect of riba knowledge on the nexus between the already widely researched bank selection criteria (i.e., service quality, corporate reputation, cost and benefits, and technology) and bank selection among Malaysian Muslims. This research is quantitative, cross-sectional and non-experimental. It uses structured questionnaires to acquire and understand bank selection criteria and the moderation effect of riba among Malaysian Muslims. The sample comprised 244 Muslim customers with loan/financing accounts in banks in Klang Valley, Malaysia. This study uses exploratory factor analysis and structural model analysis for data analysis. The findings reveal three criteria - notably, corporate reputation, cost and benefits, and technology - that exhibit a significant correlation with bank selection. Despite the strong injunctions against rib?, it failed to moderate the relationship between bank selection criteria and bank selection. Additionally, the subsequent importance-performance test indicates that riba knowledge holds lower significance compared to the three significant criteria. Therefore, the authors believe there is a strong possibility that Malaysian Muslims, specifically in Klang Valley, may not factor the prohibition of rib? into their banking selection decisions. The items measured for knowledge of riba have not been widely tested and are not designed to assess the level of religiosity of the respondents nor the awareness of Islamic law behind the prohibition of riba. Nevertheless, this paper provides insight into the level of knowledge about riba among Muslims in Klang Valley, Malaysia and its possible moderating effect on bank selection. Future research could extend this work and examine the knowledge of rib? with respect to the level of respondents' religiosity and/or the awareness of Islamic law behind the prohibition of riba. Religious authorities, non-government organisations and Islamic banks could leverage these insights by uplifting and broadening public education, especially for the Muslim community, on the actual meaning of rib? and its implications in their lives and the hereafter. The lack of studies focusing on the subject of riba, its practice in conventional banking, and its prohibition in Islamic banking has often been overshadowed by research studies on adoptions and perceptions of Islamic banking and finance, which may have led to the negligence of its importance in choosing Islamic banking over conventional banking among Muslims in Malaysia.
Keywords
Banking selection criteria , Conventional banking , Islamic banking , Riba
Citation
Ahmad, N., & Md Zabri, M. Z. (2023). The curious case of riba's muted role in bank selection criteria among Muslims in Klang Valley, Malaysia. ISRA International Journal of Islamic Finance, 15(2), 136-158. https://doi.org/10.55188/ijif.v15i2.546
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