Brand Preference in Islamic Banking by University Students

in Pakistan

Bakht Jamal Khan (4671)

Business Graduate Iqra University Karachi

Jmlkhn88@yahoo.com

Abstract

The purpose of this study is to investigate the brand preference in Islamic banking among the

university students in Pakistan. Students need bank account for different purposes and Islamic

banking is growing rapidly so the knowledge regarding Islamic banks and selection criteria of

Islamic banks by university students is analysed. A questionnaire survey was used to explore

different factors like due to which students select or prefer an Islamic bank including

convenience and location, charges for transactions, technological and physical facilities and

brand choice. Details of each of these areas were asked from the respondents. Respondents were

also asked about their satisfaction and trust on Islamic banks and also either they were interested

in knowing more about Islamic banking. 200 questionnaires were distributed among the students

of different universities in karachi. Exploratory factor analysis is used as a statistical technique or

tool.

Keywords: Brand preference, Islamic banking, University students, Pakistan

1.1 Introduction:

Brand preference is the indicator of the strength of a brand in the minds of the customers, it

shows that which brand a customer prefer on other if the price and quality are equal. Islamic

banking is the banking activity which is performed according to the Islamic law. University

students have several needs for having a bank account as they have to pay their fees and other

expenses. Islamic banks must focus on the needs of the customers as what they think of

importance while selecting an Islamic Bank. Scholars so far have suggested that the main factors

which influence the university students to prefer an Islamic bank are the reputation and better

financial and banking services.

Islamic banking is still in its infancy, it has not yet attracted the attention of the customers

and investors. But if we examine the Islamic banking sector, it has the potential to attract new

customers. This study aims to examine the criteria of selecting an Islamic bank adopted by

university students in Pakistan. As these students are young between 19 to 25 years, they will

reflect the future of Islamic banking industry. As Islamic banking has the solution to several

finance related issues and is alternative to conventional banking containing interest that is haram

in Islam, it can be attractive for many Muslims and even non-Muslim customers. This study will

help the Islamic banks to understand how they can improve relationship with existing customers

as well as how they can attract new customers. The factors which determine the choice of

customer in selecting an Islamic Bank will be examined in this study.

1.2 Problem Statement:

Banking Industry (in particular Islamic Banking) is growing day by day in Pakistan and the

competition is getting tougher. In this scenario the banks must target the young customers and

must know what they prefer in selecting an Islamic Bank. The bank must know what these young

customers want from the bank and must target them according to their needs so that the bank

attract these young customers and start growing. The main problem is to identify the elements

that are given value by these young customers.

1.3 Research Question:

RQ1. What are the factors that affect the brand preferences in Islamic Banking among the

university students?

1.4 Objectives:

The objective of this study is to find the elements that influence university students in selecting

an Islamic bank. Brand awareness regarding Islamic banking will be studied and the level of

customer satisfaction of young customers will be measured in this research.

2. Literature Review:

AlMossawi (2001) investigated the bank selection criteria adopted by college students in

Bahrain. Students from the University of Bahrain were asked questions and the sample size of

1000 students which contained 45 percent male and 55 percent female were selected. It was a

quantitative research in which factor analysis was applied. It was found that this market segment

prefer convenience and technology for bank selection decisions.

Kaynak and Harcar (2005) investigated American consumer’s attitude towards

commercial banks. Data was collected through self-administered questionnaires. Two sets of

variables were used to in this research. A number of 425 Bank customers were selected living in

Beaver, Allegheny, Lawrence and Butler counties. It was a quantitative research in which t-test

was performed to test for the statistical significance of patronage factors between local and

national bank customers. A mean score was calculated for the importance of each patronage

factor. Factor analysis was further used as the statistical technique. Authors find out that National

bank customers give more importance to service charges while commercial bank customers

prefer convenience.

Al-Ajmi et al. (2009) studied the attitude of bank customers in Bahrain that which bank

they choose between conventional and Islamic. Three types of bank clients were selected those

who used commercial banking, Islamic banking and those who use both. 1000 copies of the

questionnaire were distributed in Bahrain out of which 664 copies were got back. It was a

quantitative research in which Descriptive statistics and non-parametric statistics (Mann-

Whitney and Kruskal-Wallis tests) were applied and factor analysis was used to analyze the

responses.

Awan and Bukhari (2011) investigated the customer criteria of selecting an Islamic bank.

A sample of 250 respondents was taken from different cities of Pakistan. It was a quantitative

research in which ANOVA was used as statistical technique. It was find out that the customers

value quality of service and product features while selecting an Islamic bank.

Blankson et al. (2007) investigated the bank selection criteria and different cultural and

economic scenarios. A sample of 600 students from USA, 500 from Taiwan and 300 from Ghana

were selected. In this quantitative research exploratory and confirmatory factor analysis was

applied in order to assess the reliability of the results. It was concluded in this paper that

liberalized and open climate explains consumers’ decisions.

Mansour et al. (2010) investigated the selection criteria of Islamic banking adopted by

customers in UK. A sample of 156 customers from UK were selected which contained both

Muslims and non-Muslim customers. The methodology is borrowed from Masood et al, (2009).

The findings of this paper show that irrespective of the demographic factors the low service

charges are preferred by the customers.

Babakus et al. (2004) investigated consumer choice behavior in banking. Data for this

study was collected from the residents of southeastern city in USA. 400 questionnaires were

distributed out of which 262 were usable. It was a quantitative research and exploratory factor

analysis was used as a statistical technique in this paper. The findings show that customers prefer

managerial capability and technological advancement of the bank, as well as its trustworthiness

in terms of keeping consumer information confidential in selecting a retail bank.

Gerrard and Cunningham (2001) investigated the bank selection by Singapore

undergraduates. 186 questionnaires were distributed among the undergraduate students of the

Nanyang Technological University Singapore out of which all were returned. Factor analysis

was used as a statistical technique in this quantitative research. The findings show that the banks

must ensure these things like making the customers “fell secure”, provide high quality service

and electronic services.

Akdag and Zneldin (2011) investigated and defined the competitive positioning of banks

including state-owned banks, foreign banks and domestic banks. This research included 30 banks

in which 1530 questionnaires were distributed for the collection of data in Istanbul, Turkey.

Frequency analysis and reliability tests were used to analyze the data. Finding shows those

customers prefer the banking services and functional quality of the banks. The finding also

shows that the customers are not satisfied and are not getting what they want, especially

regarding quality of services.

Dusuki and Abdullah (2006) examined the factors which motivate the Malaysian

customers to prefer Islamic banks. Data was collected from four different regions in Malaysia in

which 750 respondents were selected. The Friedman test was used to analyze the Islamic

banking criteria ranking, exploratory factor analysis is employed to further investigate the

understanding of customers of Islamic banking. Findings show that both Islamic and financial

reputation of a bank influence the customers other factors like convenience, product price and

social responsibility were also perceived by customers.

3. Methodology:

The study is conducted on quantitative basis. Questionnaire was designed and the data was

collected from university students. 200 respondents from different universities were asked

questions. Exploratory Factor analysis is applied as statistical technique. The research design of

this article is exploratory research design. To achieve objective of research, data were collected

via a questionnaire. A Questionnaire is always very helpful in getting large amount of data in a

short period of time.

References:

Almossawi, M. (2001). Bank selection criteria employed by college students in Bahrain.

International Journal of Bank Marketing , 19 (3), 115 - 125.

Asyraf Wajdi Dusuki, N. I. (2007). Why do Malaysian customers patronise Islamic banks?

International Journal of Bank Marketing , 25 (3), 142 - 160.

Charles Blankson, J. M.-S. (2007). Determinants of banks selection in USA, Taiwan and Ghana.

International Journal of Bank Marketing , 25 (7), 469 - 489.

Emin Babakus, S. E. (2004). Modeling consumers' choice behavior: an application in banking.

Journal of Services Marketing , 18 (6), 462 - 470.

Erdener Kaynak, T. D. (2005). American consumers' attitudes towards commercial banks: A

comparison of local and international customers by use of geodemographic segmentation.

International Journal of Bank Marketing , Vol. 23 (1), pp. 73-89.

Hatice Camgöz Akdag, M. Z. (2011). Strategic positioning and quality determinants in banking

service. The TQM Journal , 23 (4), 446 - 457.

Hayat M. Awan, K. S. (2011). Customer's criteria for selecting an Islamic bank: evidence from

Pakistan. Journal of Islamic Marketing , 2 (1), 14 - 27.

Jasim Al-Ajmi, H. A.-S. (2009). Clients of conventional and Islamic banks in Bahrain: How.

International Journal of Social Economics , 36 (11), 1086 - 1112.

Philip Gerrard, J. B. (2001). Singapore's undergraduates: how they choose which bank to

patronize. International Journal of Bank Marketing , 19 (3), 104 - 114.

Walid Mansour, M. B. (2010). Islamic banking and customers' preferences: the case of.

Qualitative Research in Financial Markets , 2 (3), 185 - 199.

Appendix:

Questionnaire on Brand Preference in Islamic Banking

Gender: University: Date:

_____________ _____________________ __________

Instructions:

For each question, put an 'X' in the column that suits your answer. Put one 'X' only in each row.

Will you select an Islamic Bank due to following reasons?

S.

No

Questions 1 2 3 4 5

Strongly

Disagree

Disagree Neutral Agree Strongly

Agree

1 The location of Bank is

convenient for me.

2 There is a car parking near the

bank.

3 The bank has a large parking

area.

4 The head office is near my home

or university.

5. ATM machines are available on

a number of locations.

6 Bank has many branches.

7 Bank has good reputation.

8 Staff of the bank is friendly

9 I like the bank because it is an

Islamic Bank.

10 I like the bank because it offers

interest free products

11 I do not like to deposit my

money in conventional bank.

If you have bank account in Islamic Bank then:

1 I m satisfied with my Islamic

bank.

2 I want to know more about

Islamic banking.

3. The bank I use is really Islamic.