CHAPTER 1
INTRODUCTION
1.0
Mindanao State University-Iligan Institute of Technology (MSU-IIT) is an
external unit and one of the ten campuses of the Mindanao State University System. It
was established on July 12, 1968 as per Republic Act (RA) 5363. This institute is the first
autonomous unit of the MSU System.
In MSU-IIT, solid integration exists between different local religions and culture.
This specifically embraces a wide diversity among the 646 faculty including lecturers,
and 407 staff employed in this institution. This diversity makes MSU-IIT suitable for this
study since its varied faculty and staffs are part of the working group in Iligan City which
is more likely to take interest on Islamic banking. With the mix of Muslims and nonMuslims, it will be difficult to foresee if Islamic Banking would be widely accepted by
the faculty and staff of MSU-IIT. This misconception plays a major role in the
understanding of the Islamic Banking system.
Islamic Banking, despite its name, is also available for non-Muslims. As much as
the Muslim population is vital to the survival of Islamic banks, non-Muslims are also
significantly important. The existence of conventional banks around the city of Iligan and
the on-going competition between them may make it quite hard for Islamic banks to
compete. However, with proper information provided about the Islamic banking system,
it might be easier to attract potential investors.
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With the advent of Islam, Islamic banking emerged as an alternative banking
system in the global landscape. In general, Islamic banking, by definition of the
International Association of Islamic Banks (IAIB), is a banking system which was
established to utilize funds in accordance with Islamic Shariah principles. Shariah is the
body of Islamic religious law. According to Ajaz Ahmed Khan (2008), the methodologies
that underlie Islamic Banking are founded on the core belief that “Money is not an
earning asset in and of itself”, thus the manifestation of an interest-free banking system
that has developed over a long period of time with the introduction of new products in the
industry. Over the years, Islamic Banking has won a positive global image in the modern
world due to its attempt to achieve a predetermined Islamically acceptable social and
financial objectives in compliance with the Islamic principles and teaching.
The Islamic banking industry has gained prominence since its emergence into the
financial scene in the 1970’s, supplementing the plea by pious Muslims to manage their
finances in a way that avoids interest and complies with Islamic law (Wilson, 2006). This
emerging discipline of banking has reached a climax where it has become an integral part
of the global banking business hence receiving wide acceptance from Muslims and even
non-Muslims.
Currently, the Al-Amanah Investment Bank, which was established in 1973, is the
only bank in the Philippines that has offered Islamic Banking products and services. The
bank is currently owned by state-run Development Bank of the Philippines (DBP),
operating in nine (9) branches throughout the Philippines, eight (8) of which are located
in strategic cities in Mindanao. With regard to Al-Amanah Investment Bank’s operations,
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Isnaji (2003) states that it operates in a “two-window system” in which it offers both
Islamic and conventional banking products and services.
Although the institution faced no competition from other Islamic banks
throughout the Philippines, it faced rigid competition from the country’s conventional
financial institutions, as the latter has been the traditionally patronized banking system.
While Islamic banks around the globe enjoy growth rates and bumper profits (Reuters,
2014), the Philippine’s Al-Amanah unfortunately projected losses for years, and was
ultimately forced to offer solely conventional banking products to sustain its survival.
According to Ala (2014), among the major challenges of Islamic Banking’s growth in the
Philippines are: (1) the lack of a clear legal and regulatory framework for Islamic banking
and finance; (2) the lack or scarcity of experts on Islamic banking¬ regulators and
industry alike; (3) the lack or very low investor awareness and acceptance of Islamic
banking; and (4) the lack of clear information on demand for Islamic banking products.
While direct and indirect efforts have been made to rehabilitate the growth of Islamic
Banking in the Philippines; such as the establishment of a proposed law that is expected
to usher in a new era of Islamic finance in the Philippines, attention must also be given to
the people’s perception on Islamic Banking (their opinion, observation, assessment or
experience), extent of awareness of the existence of Islamic Banking (consciousness,
recognition or familiarity) and understanding of the Islamic Banking system (their
comprehension, grasp or appreciation), and willingness to invest in Islamic Banking
itself, together with its products and services being offered, as potential customers hold a
key role in every bank’s development.
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1.1
STATEMENT OF THE PROBLEM
Islamic banking is all about sharing risks between financial institutions and the
individuals that avail of the principles of Shariah. It prohibits Riba and financing of
antisocial and unethical services. With growth rate ranging from 15% to 20%, it is the
fastest growing component of financial services industry. As of today, there are 275
Islamic financial institutions operating in more than 75 countries.
The products and services of Islamic banking are availed not only by Muslim but
also by non-Muslim customers. It is open for anyone who wants to heed its principles.
Although it can also meet the banking needs of non-Muslim depositors, banks must also
look at the market needs and opportunities in the millions of Muslims in the country.
Since 1974, Al Amanah Islamic Investment Bank has been the only lender in the
country offering financial products that obey religious principles such as a ban on interest
and gambling (Vizcaino, 2014). The bank offered deposits and investments like savings,
current and general investments under the Wadiahprinciple for safekeeping. They offer
financing under Ijarah, Murabahah, and Bai’ BithamanAjil. But while Islamic banks
around the globe enjoy rapid growth rates and bumper profits, Al Amanah Islamic
Investment Bank has failed to post a profit for years, and was ultimately forced to offer
conventional banking products just to keep afloat. This case highlighted the challenges
that Muslim minorities face in accessing interest-free banking services outside of Islamic
banking’s core centers in the Middle East and Southeast Asia.
Al Amanah has struggled despite a five-year rehabilitation plan started in 2009 by
its parent, the Development Bank of the Philippines (DBP). In 2012, it posted a loss of
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30.6 million pesos ($706,400), although it was an improvement from 2008 when it posted
a loss of 124.3 million pesos (Vizcaino, 2014).
The growth of Islamic Banking and Finance in the Philippines is quite slow.
There were a lot of challenges that the Islamic bank officials have seen in its operations.
However, Islamic banking has started to gain its worldwide acceptance by 2003. During
that period, there were at least 176 Islamic banks around the world, and the deposits
exceeded $147 billion. Even though Islamic bank deposits are increasing over the years,
these deposits are not big enough to catch up with the conventional banks or to reduce the
gap between them. This also suggests that a majority of banking users still have not
adopted or might not even be aware of the Islamic Banking system (Rammal and
Zurbruegg, 2006).
Islamic banking is a bit of a mystery to many, particularly in the Philippines.
While a good number of Filipinos may already have an appreciation that Islamic Banking
and Finance is not limited to those who are of the Muslim faith, not many have a clear
understanding of Islamic finance being founded on the principles of Shariah or Islamic
Law (Tetangco, 2014).
1.2
OBJECTIVES
This study aims to assess the level of awareness and understanding of Muslim and
non-Muslim employees of MSU-IIT on Islamic Banking and their perceptions on this
banking system and willingness to patronize the products and services offered. This study
5
also investigates if any demographic factors could influence their perception and
understanding of the banking system.
1.2.1
Specific Objectives:
a. To examine the level of awareness and understanding of Muslim and nonMuslim employees of MSU-IIT on Islamic banking principles and its products
and services;
b. To determine the perceptions of Muslim and non-Muslim employees of MSUIIT on Islamic banking;
c. To investigate if any demographic factors (age, gender, religion, position,
educational attainment, and income) influence the awareness, understanding and
perceptions of Islamic banking products and services among Muslim and nonMuslim employees of MSU-IIT;
d. To determine the demand for Islamic banking services among Muslim and nonMuslim employees of MSU-IIT.
1.3
SIGNIFICANCE OF THE STUDY
This paper concentrates on the evaluation and assessment of the awareness,
understanding and perception, and willingness of Muslim and non-Muslim employees of
MSU-IIT on Islamic Banking. This will also determine the factors that influence them to
avail of its products and services.
6
By assessing the level of awareness of Muslim and non-Muslim employees of
MSU-IIT on Islamic banking, Islamic bankers can decide the appropriate marketing
design campaign to encourage and raise consumer awareness and participation. Also, the
level of understanding that non-Muslims have about Islamic banking will help bankers
approach potential customers especially those who don't understand Islamic banking
terminologies.
Muslims and non-Muslims’ understanding of the Islamic banking system
contributes a lot to their decisions on whether to avail of Islamic banking services or not.
Gray areas that are usually not understood by investors outside Islam, non-Muslim
investors, will then be given enough attention for thorough discussion.
This information is all together pertinent in order for academic institutions and
experts of Islamic banking to come up with an effective way to educate the Muslims and
non-Muslims about Islamic banking. The results of this study will help them identify
what level of orientation is suitable for both Muslims and non-Muslims in order to
provide them the information they need.
1.4
SCOPE AND LIMITATION
This study is conducted particularly to determine the level of awareness,
perception, and understanding of the features of Islamic banking to prospect Muslim and
non-Muslim investors in Mindanao State University-Iligan Institute of Technology as
well as their willingness to avail of the product and services offered by Islamic banks.
7
The researchers shall obtain information on the features of Islamic banking from
the people who are involved in the field, particularly from those who are working in Al
Amanah Islamic Investment Bank in Iligan City. They will be interviewed concerning
their products and services as well as their operational issues, prospects and challenges in
Iligan City. The information obtained from the results of the study shall be communicated
to Al-Amanah Islamic Investment Bank in Iligan City in order for them to make
appropriate actions.
This study is delimited in terms of demographic factors such as age, gender,
religion, position, educational attainment and level of income. From the given population,
the researchers randomly selected a significant number of respondents within the
specified demographical coverage. The sample population comprises of Muslim and
non-Muslim faculty of the nine (9) colleges and staff of the thirty (30) administrative
offices of MSU-IIT.
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1.5
CONCEPTUAL FRAMEWORK
Figure 1. Conceptual Framework
1.5.1
Research Variables
The respondents’ awareness and understanding, perception, and their willingness
to avail of the Islamic banking products and services are the dependent variables, while
the independent variables include the demographic factors identified like age, religion,
income, and occupation.
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1.5.1.1 Dependent Variables
A. Awareness
In marketing terms, consumer awareness means that customers are aware of
the products and services, characteristics and other marketing P’s. According to
Rogers (2003), consumers go through a process of knowledge, persuasion, decision
and confirmation before they are ready to adopt a product or service. Knowledge
occurs when an individual or other decision-making unit is exposed to an
innovation’s existence and gains an understanding of how it functions (Rogers,
2003).
In a study conducted in Malaysia and Middle-east countries, they emphasized
the need for the public to be more than aware and fully understand the banking
system’s concept and practices in order to support new developments and its
products and services offered.
B. Understanding
Understanding, according to Bereiter (n.d.), means knowledge about a subject
or situation and apprehend about how it actually works.
Since Islamic banking has been gaining popularity among Muslim and NonMuslims across the globe due to its wide product coverage, it is important to
determine to what extent these people really understand the banking system.
A study in Indonesia shows that awareness of Islamic banking is quite high
but understanding about the banking system is low (Karim and Affif, 2005). Not
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being aware of the profit and loss happening, their understanding proves to be
insufficient since they are not properly informed on how this banking system works.
C. Perception
Perception is widely understood as the knowledge about a certain idea. It is
the interpretation of available information to represent or understand an idea or
environment.
Islamic banking is already widely used in different places around the globe.
However, not too many countries are adopting it. Though it is an emerging issue
today and many have heard about it, there are varying perceptions about Islamic
banking. These varying perceptions are due to the different information that are
available and different demographic factors.
Perceptions about Islamic banking may be about the relative advantage which
is the degree of being better than the idea the innovation supersedes (Rogers, 1999).
In simple language, this is how respondents view Islamic banking as being better
than the existing banking systems.
Perceptions can be about compatibility of Islamic banking with the values and
beliefs of the respondents. It is the measure of the ideas consumers have adopted in
the past and its ability to meet their needs (Gerard, 2003). The respondents’
perception about Islamic banking will be defined whether it is being consistent with
their existing values and past experiences of other banking systems.
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D. Willingness
Willingness is the readiness of customer to do a particular action which he
thinks is beneficial. The financial sector presently is dominated by commercial
banks offering products and services to attract customers and benefit the economy
as a whole. Aside from conventional banking, Islamic banking is now competing
with other banks as to their products and services offered. A banking system which
prohibits paying and receiving interest, avoiding uncertainty, sharing risk and
rewards of economic activities could attract investors who are willing to invest in
their products.
Presently a study shows that in Britain, there is a lack of willingness among
the Muslim community and many still pursue conventional banking because there
appears to be insufficient clarity on Shariah compliance and what Islamic banking
and finance really means (Karbhari et al., 2004).
1.5.1.2 Independent Variables
A.
Occupation
Occupation is a person’s work or an activity in which he or she engages. A
study conducted in India, showed that the objective of investment like returns, is
influenced by the occupation variable. This means that different occupations have
different objectives of investment in mind while choosing investment avenues (Das,
Jain 2014). Based on these studies, occupation could have an impact on customer’s
awareness and willingness to avail Islamic banking products and services. Thus,
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executives and professionals might be some of the people who would be willing to
invest and avail of Islamic banking products and services.
B.
Income
Investopedia defines income as the money that an individual or business
received in exchange for providing a good or service or through investing capital. In
economic theory, the so called ‘income effect’ is the change in individual’s income
and how that change impacts the quantity demanded of a product or service. Thus
as one's income increase or decrease there is also a change in the demand for a
certain product or services. But perception and willingness on Islamic banking
products and services might differ depending on one’s income level. Recent studies
have showed that most Islamic bank customers are from the middle income level.
C.
Age
The age of a respondent is vital in the determination of the respondents’
awareness and perception about Islamic banking. This study will determine the
significance of age especially in understanding the concepts of Islamic banking
system. Different age brackets suggests difference in the respondent's’ capacity to
understand and level of awareness of Islamic banking system. Studies in different
countries show majority of the customers that are aware of Islamic banking are
between the ages of 21 to 40. However, a study conducted in Borneo suggested that
Islamic bank managers assume that consumers are homogeneous in terms of their
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“awareness and usage” as corroborated by age. Age is a relevant factor in
understanding the variations and differences of the respondents’ responses.
D.
Religion
Religion is an important factor in understanding Islamic banking. The saturation
of respondents is focused on the Muslims and non-Muslims of IIT. Since it is based
in Shariah, many of the Muslim respondents might already be aware of it and only
a few from the non-Muslim group. According to Haque et al. (2009), perception
about Islamic banking is also being influenced significantly by religious
perspective. However, it cannot be certainly determined if Muslims understand
more of it than the non-Muslims. This study will determine if the differences in
Religion among the respondents will yield a relevant difference in their awareness
and understanding, perception, and willingness about Islamic banking.
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CHAPTER 2
REVIEW OF RELATED LITERATURE
2.0
PHILOSOPHY OF ISLAMIC BANKING
Islamic banking is based on risk-sharing, owning and handling of physical goods,
involvement in the process of trading, leasing and contracts using various Islamic modes
of finance. As such, Islamic banks deal with asset management for the purpose of income
generation. They will have to prudently handle the unique risk involved in management
of assets by adherence to best practices of corporate governance. Once banks have stable
stream of Halal income, investors will also receive stable and Halal returns (Khattak and
Kashif-Ur-Rehman, 2010).
The forms of businesses allowed by Islam at the time the Holy Quran was
revealed included joint ventures based on sharing of risks and profits and provision of
services through trading, both cash and credit, and leasing activities. In the Verse 2:275,
Allah did not deny the apparent similarity between trade profit in credit sales and Riba in
loaning, but boldly stated that He permits trade and prohibits Riba.
Riba is best translated today as the charging of interest or earning money on
lending out of money itself. The prohibition on paying or receiving fixed interest is based
on the Islamic tenet that money is only a medium of exchange, a way of defining the
value of a thing but it has no value in itself, and therefore should not be allowed to give
rise to more money, via fixed interest payments, simply by being placed in a bank or
15
being lent to someone else. The human effort, initiative, and risk involved in a productive
venture are more important than the money used to finance it (IBBI, 2009).
2.1
ISLAMIC BANKING PRACTICES
The principles of Islamic Finance are established in the Qur'an, which Muslims
believe are the exact Words of God as revealed to the Prophet Mohammad (Peace be
upon him). According to Islamic Relief Worldwide by Khan (2008), the Islamic general
principles of finance include the following:
2.1.1 There must be some risk, whether funds are used in a commercial or
productive venture.
2.1.2 A financial transaction needs to have a “material finality”, that is, it should
be directly or indirectly linked to a real, tangible economic activity as opposed to
financial speculation.
2.1.3 The product or service that is bought or sold must be clear to both parties.
2.1.4 There should be no funding of haram or sinful activities such as the
production of alcoholic beverages or gambling, and funds should preferably
finance socially productive activity. In broad terms, Islam forbids all forms of
economic activity which are morally or socially harmful.
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2.1.5 Financial risk must lie solely with the lenders of the capital and not with the
manager or agents who work with the capital. Furthermore, a financial transaction
should not lead to the exploitation of any party in the transaction.
2.1.6 Interest is forbidden in that it is a predetermined, fixed sum owed to the
lender irrespective of the outcome of the business venture in which the fund is
used. This does not imply in any way that capital is free of charge or that it should
be made available without any cost or that there should be absolutely no return on
capital. Rather, a return on capital is allowed, provided that capital participates in
the productive process and is exposed to business risk.
2.1.7 It is not permitted to sell what one does not own- therefore “short-selling”
(selling something that one does not own in the hope that it can be bought cheaper
at a later date) is impermissible.
A general objective common to all Islamic finance should be to develop the
economy within and according to Islamic principles. Furthermore, honesty and moral
responsibility in Islamic finance contracts are indispensable ingredients of Islamic
behavior.
2.2
ISLAMIC FINANCIAL PRODUCTS
Islamic banks around the world have devised many creative financial products
based on the risk and profit-sharing principles of Islamic banking. For day-to-day
17
banking activities, a number of financial instruments have been developed that satisfy the
Islamic doctrine and provide acceptable financial returns to investors.
2.2.1
Al Bai BithamanAjil/BBA (Deferred Payment Financing)
This involves the credit sale of goods on a deferred payment basis. As requested
by the customer the Islamic bank will purchase certain assets on and then sell the
goods back to the customer at an agreed price at a margin or profit. The customer
will make payment by installments. In layman term, it is a purchase of good on
credit. A fixed rate BBA is a powerful hedging tool against interest rates (Rosly,
1999).
2.2.2
Al Ijarah
Ijarah is an Arabic term which means to give something on a rental basis. This is
more in accordance with the Shariah concept of leasing where the bank acquires
ownership based on the promise and leases back to the client for a given period.
The customer pays the rental but the ownership still remains with the bank or
lender. As the ownership remains with the lessor (bank), who is responsible for its
maintenance, it continues to give the service for which it was rented. Under this
contract, the lessor has the right to renegotiate the amount of the lease payment at
every agreed interval to ensure rental remains in line with the market rates (Hume,
2004).
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2.2.3
Istisna
Istisna is a new concept that offers future structuring possibilities for trading and
finance. It is generally a long-term contract whereby a party undertakes to
manufacture, build or construct assets, with an obligation from the manufacturer
or producer to deliver them to the customer upon completion (Haque, 1993).
2.2.4
Mudharabah
The underlying principle in Mudharabah is profit and loss, where instead of
lending money at a fixed rate return, the banker forms a partnership with the
borrower, thereby sharing in a venture’s profit and loss. It is an agreement
between the lender and entrepreneur, whereby the lender agrees to finance the
project on a profit sharing basis according to a predetermined ratio agreed by both
parties concerned. If there are any losses the lender will bear all the losses. It is
one form of partnership in which one partner (rab-ul-amal) provides the capital
required for a project, while the other party (mudarib) manages the investment
using its expertise. The capital provider carries the loss in a Mudharabah contract
unless it was due to the mudarib’s negligence or misconduct (Kettel, 2006).
2.2.5
Murabahah
Murabahah is a contract of sale. The financial institution acts as a middle man
and purchases the goods requested by the customer. The bank will later sell the
goods to the customer in a sale and purchase agreement, whereby the lender resales to the borrower at a higher price agreed on by both parties. These are more
19
for short term financing. This type of sale is a form of 'trust sale' since the buyer
must trust that the seller is disclosing his true costs (Haque, 1993).
2.2.6
Musyarakah
Musyarakah means partnership whereby the Islamic institution provides the
capital needed by the customer with the understanding that they both share to the
profit and loss according to a formula agreed before the business is transacted. In
Musyarakah all partners are entitled to participate in the management of the
investment but it is not compulsory. Musyarakah provides financing for large
investments in modern economic activities but is unfortunately not actively
practiced in Malaysia (Kettel, 2006).
2.2.7
Salam
Salamis a sale whereby the seller undertakes to supply some specific goods to the
buyer at a future date in exchange of an advanced price fully paid at spot. The
contract of Salam creates a moral obligation on the Salam seller to deliver the
goods. The contract cannot be cancelled once signed (Hasan, 2007).
2.3
RELATED STUDIES
The researchers have gathered relevant articles, journals and studies related to
awareness and understanding, perception and willingness of Muslim and non-Muslim
consumers on Islamic banking products and services from other countries. These studies
will enable the researchers to compare the results of their study to that of the other studies
conducted from other countries.
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2.3.1 Perception of Muslim and Non-Muslim Customers towards Islamic Banks
in Malaysia and Saudi Arabia
Abdullah, et al (2012), in a study limiting to non-Muslim subjects only,
examined the non-Muslim customer’s perception of Islamic Banking products and
services in Malaysia. The analysis of the research involved 152 respondents, all of
whom are based in Kuala Lumpur, Malaysia. The result of the study showed that
Islamic banking services are making headway among non-Muslims in Kuala
Lumpur. The degree of perception reveals that the link between religion and
education could not be established with the perception that the establishment of
Islamic banking will improve the overall banking facilities since most of the
respondents were unsure of Islamic banking products and services are gaining
popularity among non-Muslim. Most respondents strongly thought that Islamic
banking would dominate conventional banking in Malaysia, in the near future.
Saudi Arabia, on the other hand, is home to millions of expatriate workers,
and a significant proportion of the expatriates are non-Muslims. In the
increasingly competitive Saudi banking sector, both local and multinational banks
are trying to widen their customer base by marketing their Islamic banking
products to these non-Muslim customers. In a study by Hidayat and Al-Bawardi
(2012) a survey was conducted to evaluate the perceptions of non-Muslim
expatriates in Saudi Arabia toward Islamic banking products and services. Data
gathered through self-administered questionnaires from 103 non-Muslim
expatriate bank customers in Saudi Arabia was used for the study. Results of the
study indicate that all the respondents are aware of and have or had prior Islamic
21
banking exposures. The study also reveals that cheaper transaction costs and
better service delivery are the main reasons that attract them to use Islamic
banking services. Though majority of the respondents are convinced of the social
benefits that can accrue from the interest-free Islamic banking principles, they are
however not the primary reasons for their utilization of Islamic banking services
in Saudi Arabia. Furthermore, the findings indicate that majority of non-Muslim
customers in Saudi Arabia perceive current Islamic banking services as diverse
and suitable in satisfying their banking needs. This positive image has to be seen
as an opportunity for Islamic banks to expand their businesses into this market
segment. Therefore, Islamic banks in Saudi Arabia should tailor their non-Muslim
customer acquisition strategies accordingly and intensive product awareness
campaigns should be made if the Islamic banks want to capture a larger share of
non-Muslim customers market in Saudi Arabia.
2.3.2 Awareness and Understanding of Muslim and Non-Muslim Customers
towards Islamic Banks in Kazakhstan, Malaysia and Nigeria
In Kazakhstan, it has been only three years since the first Islamic bank
made its debut. Islamic banks have to compete with their rival, conventional
banks, which have far longer history than Islamic banks. This competition urges
Islamic banks to know the awareness and willingness of Muslim in Kazakhstan
upon them. The study conducted by Abduh and Omarov (2013) examined the
level of awareness and willingness of Muslims to patronize Islamic banking in
Kazakhstan. A total number of 300 respondents from different cities of
Kazakhstan were collected and descriptive analysis methods were adopted. The
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results show that more than half of the respondents are aware of Islamic banking
in Kazakhstan, but they are not aware of most of the products and services offered
by Islamic banks. In Malaysia, 40% of the population is non-Muslims and hence
non-Muslims market is equally important to Islamic banks. The conducted
research by Ling, et al (2012) aims to investigate the influence of the
demographic factors on the awareness, understanding and perceptions of Islamic
Banking products and services among non-Muslims in Malaysia. A total of 280
respondents from different cities in Malaysia were selected for the purpose of the
study. The results of their analysis show that although more than half of the
respondents are aware of the Islamic banking in Malaysia, they are not aware of
most of the products and services offered by Islamic banks. Non-Muslims
understanding level towards Islamic bank concepts are at average level but they
do not understand most of the Arabic terms.
Ramili (2013) also conducted a study which revealed awareness and
present understanding on Islamic banking of Muslims and non-Muslims towards
Islamic banking in Miri and Limbang, Malaysia. Of the 50 questionnaires
distributed, only 36 were returned and utilized for this study. The results of the
research depicted that there are differences in the level of awareness and
understanding towards Islamic banking between population in Miri and Limbang.
It also showed that not only non-Muslim have lower level of understanding of the
Shariah principles and profit-loss sharing concept (PLS) but the same issue also
needs to be addressed to Muslims.
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The outcome of a study conducted by Ringim (2012) provides vital
information on the impact of awareness and understanding of Muslim account
holders in conventional bank on decision toward patronage of Islamic banking
products. The managerial implication of the study is for the Islamic banking
industry to focus on the people’s understanding of Shariah position on business
transactions, concept of profit and loss sharing practice, benefit of Islamic
banking products, good understanding of Islamic banking theory and practice that
would have impact on customer decision. The study showed that the majority of
the respondents are aware of the existence of the Islamic Banking and Finance but
do not have full knowledge of the principles that drive its operations, and the
products and services being offered by the institution. Despite the lack of
knowledge, most of the respondents find it relevant to learn more about its
products and services.
2.3.3 Willingness of Muslim and Non-Muslim Customers towards Islamic
Banks in Malaysia and Nigeria
According to the study by Abdullah, et al (2012), despite showing the
positive trend of Islamic Baking in Kuala Lumpur, Malaysia, more efforts need to
be energized to enhance the level of understanding for non-Muslim customers on
the Islamic banking concepts. Similarly, a more comprehensive research is
required to be undertaken to uncover various reasons of Islamic banking selection
by non-Muslim customers, thus their willingness to avail of Islamic banking
products and services.
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However, despite the moderate level of Muslim Kazakhs’ understanding
towards Islamic banking concepts as revealed in the study by Abduh and Omarov
(2013), the willingness level of using Islamic banking products and services is
high.
2.3.4 Demographic Factors
A.
Age
In a study conducted in Malaysia by Lee Ling, et al (2012), wherein the
background of the respondents is based on age, among other demographic
factors, it shows that age do not have significant relationship with the level of
awareness of the respondents. These results are consistent with Amin (2007)
from a study based in Borneo which expressed that Islamic bank managers
may assume that consumers are homogeneous in terms of their awareness and
usage as corroborated by age. Age and awareness and usage are not
statistically significant. However, a study conducted in Pakistan by Khattak
and Rehman (2010) suggested a different result. It shows that awareness of
the Islamic banking products are varied among different age group people.
Majority of the consumers that are aware of Islamic banking are between the
ages 21 to 40 years old.
The Malaysian based study however shows that age in relation to
consumers’ understanding and perception are in contrast to the results as to
the awareness. Age has a significant relationship with understanding at 10%
significant level and perception at 1% significant level. This result is similar
25
to Loo (2010), where she found that non-Muslim X-Gen (between the ages of
34 and 54 years old) and Baby Boomers (between the ages of 51 and 70 years
old) have significant differences in their perceptions. Baby Boomers was
perceived a disadvantage with Islamic banking significantly higher than XGen.
B.
Religion
In many studies, it was found that religion affects the awareness and
understanding for Islamic banking products and services (Run and Yeo, n.d.).
Perhaps Muslims, having been exposed to Islam teachings, are more aware
and could understand Islamic banking easier compared to non-Muslims.
According to Haque et al. (2009), perception about Islamic banking is also
being influenced significantly by religious perspective. This means that
religious factors will be influencing the awareness, understanding and
perceptions of Malaysians towards Islamic banking products and services.
This result was supported by Loo (2010). According to Loo (2010), in
Malaysia, around one-thirds of non-Muslims agreed that Islamic banking is in
conflict with their religious beliefs. Thus, having a significant relationship
between religions in the perception of disadvantage.
Conversely, the study by Lee Ling, et al (2012) which only considered
non-Muslim respondents reveals that religion does not have a significant
relationship with awareness and understanding. However, since non-Muslims
26
comprise of different races, perception has a significant relationship with
religion at 10% significant level.
C.
Income
According to Amin (2007), income will affect the awareness and usage
of Islamic financing in Borneo. According to Khattak and Rehman (2010),
perception or reasons behind dealing with Islamic banking are varied among
the different income group people as there is significant difference in almost
all reasons accepted services charges and confidentiality. Most of the Islamic
bank customers are of the middle income level.
In a study conducted in Malaysia, it seems that those with a RM3000Rm3999 monthly income have a significantly different level of understanding
of Islamic Financing (Run and Yeo, n.d.). Although income will affect the
understanding of Malaysian towards Islamic banking, but it did not show
significant relationship with overall perception towards Islamic bank. This
means that perceptions towards Islamic Bank are not affected by the monthly
income (Haque et al., 2009).
D.
Occupation
According to Khattak and Rehman (2010), occupation and reasons of
dealing with Islamic banking has a significant relationship. In Bangladesh,
most of the Islamic banks customers are executives and professionals both in
the private and public sector (Khan et al., 2008).
27
In Malaysia, a study also revealed that there is no significant relationship
with overall perception towards Islamic bank (Haque et al., 2009). This shows
that occupation will be influencing the awareness and usage of Islamic
banking products and services but it will not affect the perceptions of
Malaysians with different occupation towards the Islamic Banks. In Malaysia,
it was found that an employment in the government have a significantly
different level of understanding of Islamic Financing. However, these results
are contradicted by the study done by Amin (2007) in Borneo, which shows
that occupation has no significant relationship with awareness and usage.
28
CHAPTER 3
METHODOLOGY
3.0
INTRODUCTION
This chapter discusses the research methodologies employed to achieve the
research objectives of this study which is to examine the awareness, understanding,
perception of the Islamic Banking System and the willingness of Muslim and nonMuslim employees of Mindanao State University-Iligan Institute of Technology to avail
of the products and services thereof and to determine how these correlate to the
demographic profile of the respondents. It also shows the statistical techniques used to
analyze and interpret the data gathered.
3.1
RESEARCH DESIGN
Quantitative research is deemed to be appropriate for this study as this type of
research collects numerical data to explain a phenomenon and analyze them by using
mathematical methods.
This is also considered a descriptive research since descriptive data has been
collected through detailed questionnaires which emphasize on studying accurate profile
of the respondents to explain the relationship of demographic factors to the awareness,
understanding, perception or their willingness of Muslim and non-Muslim employees of
MSU-IIT to patronize its products and services.
29
3. 2
LOCALE OF THE STUDY
The locale of the study is in MSU-Iligan Institute of Technology, Andres
Bonifacio Avenue, Tibanga, Iligan City. Currently, it has 11,574 undergraduate
students and 771 graduate students. In MSU-IIT, solid integration exists between
different local religions and culture. This specifically embraces a wide diversity
among faculty including lecturers and staff employed in this institution. This diversity
makes MSU-IIT suitable for this study since its varied faculty and staffs are part of
the working group in Iligan City which is more likely to take interest on Islamic
banking.
3. 3
SUBJECT OF THE STUDY
Out of a total population of 1,053 MSU-IIT employees consisting of 646 faculty
and 407 staff, 178 faculties including lecturers and 112 staff were randomly selected
to participate in this research study. The random selection made it certain that the 290
total respondents (178 faculty and 112 staff) are a mix of Muslims and non-Muslims,
given that MSU-IIT employees as a whole is basically diverse. The respondents
received a survey questionnaire and were given their most convenient time in
answering it completely.
30
3.4
SAMPLING DESIGN
3.4.1 Sample Size
In this study, the Slovin’s formula is used to calculate the appropriate sample size
from the entire population. Using the formula, the researchers came up with a reliable
sample size of the study that represents the given population without having to study
the entire population individually using the following Slovin’s formula.
where:
n = Number of samples
N = Total population
e = Error tolerance
Thus, using the formula, we determined that 290 is the optimal sample size for this
study.
𝑛=
1053
1 + (1053 𝑥 0.052 )
𝑛 = 290
3.4.2 Sampling Technique
In selecting the samples, a two-stage stratified random sampling with proportional
allocation was obtained by selecting cluster samples in the first stage and then
selecting samples of elements from every sampled cluster.
31
The researchers used the two-staged stratified random sampling technique since
the selection of the sample is randomly selected in a two stage approach. In the first
stage, a sample size was taken using the Slovin’s formula from the population of
MSU-IIT classified as faculty and staff.
Table 3.1 Allocation of respondents per position
POSITION
Faculty
Staff
TOTAL
POPULATION
646
407
1053
NO. OF RESPONDENTS
178
112
290
As a result of the computation, we determined that out of the 290 respondents,
178 must be from faculty and 112 from staff. Now within the strata of faculty and staff, it
was divided again to different strata using the stratified random sampling with
proportional allocation. In the second stage, the number of respondents for the staffs was
allocated proportionally by department and the faculty was selected proportionally by
college.
Table 3.2 Allocation of respondents per college for faculty
COLLEGE
SET
COE
CSM
CBAA
CASS
CON
SCS
CED
IDS
TOTAL
POPULATION
59
69
151
41
137
32
49
67
41
646
32
NO. OF RESPONDENTS
16
19
42
11
38
9
14
18
11
178
Table 3.3 Allocation of respondents per office for staff
OFFICE
Schools and Colleges
Accounting Section
Admission Office
Budget Office
Cashiering Section
Cultural Development Office
Dept. of Student Affairs
DTAP
Guidance Office
Human Resources Mgt. Division
ICTC- FCSS
Institute Library
Institute Secretary
Internal Audit Services Unit
MILO
Medical Services
NSTP Unit
Office of Alumni Relations
Office of BAC Secretariat
Office of the Chancellor
OVC- Academic Affairs
OVC- Admin. and Finance
OVC- Planning and Development
OVC- Research and Extension
Physical Plant Division
Property and Supply Office
Purchasing Office
Registrar Office
Security Office
Sports Development Office
TOTAL
POPULATION
95
14
5
9
12
5
4
11
7
13
15
20
6
4
3
15
3
3
6
19
7
11
6
20
43
14
11
10
13
3
407
NO. OF RESPONDENTS
26
4
1
2
3
1
1
3
2
4
4
6
2
1
1
4
1
1
2
5
2
3
2
6
12
4
3
3
4
1
114(due to rounding)
To determine the respondents for the research study, the staffs were pre-numbered
by each department and the faculty by each college and a random generator using MS
Excel was utilized. The number of respondents per department and college was based on
the proportional allocation derived from the second stage.
33
3.5
DATA COLLECTION METHOD
In this research, primary data were used and the data we collected specifically for
a purpose to address the research objective.
A. Research Instrument
The use of self-administered questionnaire was the most ideal method used in
collecting the primary data in this study. A self-administered questionnaire refers to
the survey in which the respondent takes the responsibility for reading and answering
the questions. The data are gathered and assembled specifically for the result project
at hand (Zikmund, 2003). It is the first-hand data communication and interaction with
a representative sample of individuals.
The questionnaire consists of a cover page and its contents are divided into five
sections (refer to Appendix). The cover page contains the consent message
accompanied by a brief explanation of the aim of the research. The contents include
Section A which collects the demographic profile of the respondents. There will be
questions requesting for the respondent’s age, religion, gender, educational
attainment, occupation and income level as these demographic factors are related to
our study. In Section B, there are questions that aim to determine and examine the
level of awareness of Muslim and non-Muslim employees of MSU-IIT towards the
Islamic banking system and its products and services. In Section C, there are
questions that assess the level of understanding on Islamic banking system and
operations. Section D is on the respondent’s perception towards Islamic banking and
34
Section E is on his willingness to learn about the Islamic banking system and avail of
its products and services.
3.6
DATA PROCESSING
Once the survey questionnaire was completed, all raw data were edited and
recorded with errors filtered and data entered into MS Excel for processing. There are 4
steps in data processing: questionnaire checking, data editing, data coding and data
cleaning.
3.6.1 Questionnaire Checking
In data collection, the researchers ensure the completeness of the answers. The
questionnaire checking has a significant impact on the overall research objective. It
can help the researchers to detect problems and take corrective actions immediately.
3.6.2 Data Editing
If problems were detected from the answers of respondents, editing was necessary
depending on whether the data collected was accurate or useful. The researchers
rejected some responses such as those that are incomplete or have more than one
answers because this would render their answers invalid.
3.6.3 Data Coding
The researchers assign a code to represent a specific response to a specific
question. For instance, in gender, 0 was assigned for male and 1 for female, and in
35
religion, 0 was assigned for Islam and 1 for non-Islam. When answers are well
categorized, it will be easier to interpret and can achieve research objective easily.
3.6.4 Data Cleaning
After the data were transferred into the computer, data cleaning was conducted.
Data cleaning is the extensive check for consistency and treatment of missing
responses. After inputting the data, the researchers checked each column and row to
find any missing data. Any responses with missing items are considered invalid. The
consistency check was used to identify data that are out-of-range, logically
inconsistent or have extreme values.
3.7
DATA ANALYSIS
3.7.1 Descriptive Statistics
Descriptive statistics includes statistical procedures that we use to describe the
population we are studying. In this study, the researcher interacts with the
respondents through questionnaires to collect the necessary information for the
descriptive analysis. The study uses all of the data gathered from sections A, B, C, D
and E of the questionnaire. The results are explained in Chapter 4 using numerical
and graphical methods to analyze patterns and summarize the information revealed
through the survey.
36
A. Frequency
In statistics, frequency is the number of times a given quantity occurs in a
set of data. In this study, the responses are tallied based on the demographic
profile of the respondents to determine the frequency of the total respondents
based on each of the factors considered. In addition, frequency is used to
quantify the responses on the questions relating to the awareness of the
existence, understanding, perception of the Islamic Banking system and
willingness to avail on Islamic banking products and services. For instance,
the frequency distribution of a certain demographic factor included in the
study such as the monthly income level in a population would show how
many respondents have the income of a certain level.
B. Percentage
Percentage is calculated by taking the frequency in a specific factor
divided by the total number of respondents and multiplying it by 100%. In
analyzing the aggregate data taken from the respondents, a percentage is
determined to assess the respondents’ answer for a particular question. For
example, in a particular question that would yield to a 5-point scale choice
answer, a percentage is calculated on each choice based on the total responses.
(n/N) x 100 = %
where:
n – sample
N – total population
Frequency and percentages are also used in the presentation of the
demographic profile. Tabular and summary calculations were utilized to
present the data or information.
37
C. Weighted Mean
Weighted mean is an average computed by giving different weights to
some of the individual values.
Weighted mean was used to compute the mean response of the respondent
in their level of understanding, perceptions and willingness.
D. Arithmetic Mean
The mean of a set of data is found by taking the sum of the data, and then
dividing the sum by the total number of values in the set. The mean of a
variable in the study therefore would represent the expected value if the
distribution of measurements were random. Arithmetic mean was used to get
the overall average response of respondents in their level of understanding,
perceptions and willingness.
3.7.2 Statistical Tool- Correlation Analysis
For quantitative data analysis, statistical tools are used as keys in all the data
input. The data are then analyzed and the hypothesis tested. The statistical results are
then represented in graphical forms with detailed description.
A. Point Bi-serial Correlation Coefficient
When the point bi-serial correlation coefficient is of interest, we use 𝑌 to
designate the dichotomous variable and 𝑋 to designate the other variable. To
38
minimize the calculation burden, let one of the two possible values of 𝑌 be 1
and the other value be 0. We use the symbol 𝑟𝑝𝑏 to designate the point biserial
correlation
coefficient
computed
from
sample
data.
The
simplest
computational formula for 𝑟𝑝𝑏 is
𝑛1 𝑛0
𝑥̅1 − 𝑥̅0
(
)
𝑛 √∑(𝑥 − 𝑥̅ )2
𝑟𝑝𝑏 = √
where 𝑛1 is the number of 1’s and 𝑛0 is the number of 0’s observed in a
sample of 𝑛 subjects or objects (𝑛1 + 𝑛0 = 𝑛), 𝑥̅1 is the mean value of 𝑋 for
the 𝑛1 subjects and 𝑥̅0 is the mean value of 𝑋 for the 𝑛0 subjects,
and
∑(𝑥 − 𝑥̅ )2 is the numerator of the variance of the sample of all 𝑋
measurements. The range of values of 𝑟𝑝𝑏 is between -1 to +1, inclusive.
Point Bi-serial Correlation Coefficient is used to determine the
relationship between the demographic profiles such gender, position and
religion towards their level of understanding, perceptions, and willingness.
B. Spearman Rank Correlation Coefficient: rs
Of all the statistics based on ranks, the Spearman rank correlation
coefficient was the earliest to be developed and is perhaps the best known
today. This statistic, sometimes called rho, is here represented by rs . It is a
measure of association which requires that both variables be measured in at
least an ordinal scale so that the objects or individuals under study may be
ranked in two ordered series.
39
If x = X – ~X, where~X is the mean of the scores on theXvariable, and if y
= Y - Ỹ, then a general expression for a correlation coefficient is (Kendall,
1948a, chap.2).
r
xy

x y

2
2
Spearman Rank correlation coefficient was used to determine the
relationship between demographic profile such as age, educational attainment
and income towards their level of understanding, perceptions, and willingness.
40
CHAPTER 4
RESULTS AND DISCUSSIONS
4.0
INTRODUCTION
This chapter presents and discusses the findings of this research. Using all the
data that were collected from the respondents, the results were then generated using the
MS Excel and R Software. The Point Bi-serial Correlation Coefficient and Spearman
Rank Correlation Coefficient were also used to determine relationships between the
demographic profiles towards the respondents’ level of understanding, perception, and
willingness.
4.1
Descriptive Analysis
Descriptive analysis in this study consists of age, religion, educational level,
occupation and monthly income level.
4.1.1 Respondents’ Demographic Profile
Table 4.1 Gender of Respondents
Male
Female
Total
Frequency
81
103
184
41
Percentage
44.0
56.0
100.0
44%
Male
56%
Female
Figure 4.1 Gender of Respondents
There are 184 faculty and staff randomly selected respondents. They consist of 81
males (44% of the sample population) and 103 females (56%). This shows that majority
of the respondents are females.
Table 4.2 Religion of Respondents
Islam
Non-Islam
Total
Frequency
Percentage
40
144
184
21.7
78.3
100.0
22%
Islam
Non-Islam
78%
Figure 4.2 Religion of Respondents
42
Among the respondents are 40 Muslims and 144 non-Muslims. The Muslim group
is 21.7% of the 184 respondents. Non-Muslim group, which is a majority of 78.3%, are
composed of Roman Catholics, various nationalized Christians including Baptists,
Iglesia ni Cristo and Born Again Christians; and others such as Jehovah’s Witness and
Seventh Day Adventist. The analysis of the respondent’s religious groups provides
banks with profiles of other religions that are practiced in the Philippines hence help
them to understand the cultural background of non-Muslim customers.
Table 4.3 Position of Respondents
Faculty
Staff
Total
Frequency
Percentage
80
104
184
43.5
56.5
100.0
43%
Faculty
57%
Staff
Figure 4.3 Position of Respondents
The position of the respondents was analyzed as part of the demographic analysis
to profile the types of potential consumers of Islamic banking products and services.
The finding indicates that about 43.5% of the respondents are faculty, while 56.5% of
them are staff. The finding indicates that a majority of the respondents are doing
administrative functions.
43
Table 4.4 Age of Respondents
Frequency
Percentage
24
38
23
22
18
15
18
12
14
184
13.0
20.7
12.5
12.0
9.8
8.2
9.8
6.5
7.6
100.0
25 years old and below
26-30 years old
31-35 years old
36-40 years old
41-45 years old
46-50 years old
51-55 years old
56-60 years old
61 and above
Total
20,65%
13,04%
20-25 years old
26-30 years old
31-35 years old
36-40 years old
41-45 years old
46-50 years old
51-55 years old
56-60 years old
60 above
12,50% 11,96%
9,78%
9,78%
8,15%
6,50%
7,61%
Figure 4.4 Age of Respondents
The age profile of the respondents as shown in Table 4.4 indicates that a majority
of our respondents are in the age group of 26-30 years old (20.7%), followed by 13% of
the customers falling in the age group of 25 years old and below, 12.5% of the
customers are in the age group of 31-35 years old with the lowest number of
respondents from the 56-60 years old (6.5%) age group. The finding indicates that a
majority of the customers are in the middle age group and active working class.
44
Table 4.5 Educational Attainment of Respondents
Frequency
Percentage
0
1
1
2
4
12
80
67
17
184
0
0.5
0.5
1.1
2.2
6.5
43.5
36.4
19.2
100.0
Elementary Level
Elementary Graduate
High School Level
High School Graduate
Vocational / Technical School
College Level
Bachelor Degree
Master Degree
Doctoral Degree
Total
Elementary Level
Elementary Graduate
High school Level
High school Graduate
Vocational/Technical School
College Level
Bachelor Degree
Masters Degree
43,48%
36,41%
Doctoral Degree
6,52%
0,00%
0,54%
0,54%
9,24%
1,09% 2,17%
Figure 4.5 Educational Attainment of Respondents
The educational profile of the respondents was analyzed to identify the level of
ability to understand the principles of Islamic banking or the ability of the consumer to
search for the information related to Islamic banking. Table 4.5 shows the variations of
the respondents’ educational attainments. Since the target respondents are faculty and
staff, the results show that most of them or 43.5% of the sample have attained a
bachelor degree. This is followed by the master’s and doctoral degree holders who
45
compose 36.4 and 19.2 percentage of the samples respectively, which is also expected
since MSU-IIT is a tertiary educational institution.
Table 4.6 Monthly Income of Respondents
Less than P 10,000
P 10,000- P 19,999
P 20,000- P 29,999
P 30,000- P 39,999
P 40,000- P 49,999
P 50,000- P 59,999
P 60,000- P 69,999
P 70,000- P 79,999
P 80,000 and above
Total
Frequency
Percentage
8
83
31
39
10
4
1
1
7
184
4.3
45.1
16.8
21.2
5.4
2.2
0.5
0.5
3.8
100.0
50,00%
45,00%
40,00%
35,00%
30,00%
25,00%
20,00%
15,00%
10,00%
5,00%
0,00%
Figure 4.6 Monthly Income of Respondents
The monthly income of the respondents was analyzed to identify the possible
savings’ capabilities and the nature of banking services they usually prefer. Majority of
the respondents, who are composed of 83 employees or 45.1% of the 184 total, have a
46
monthly income of P10, 000 to P19, 999. This might be due to a higher number of staff
as respondents who normally earn income that fall into this category. A total of 39
(21.2%) respondents receive P30, 000 to P 39,999 monthly income. Thirty-one (16.8%)
respondents earn P20, 000 to P29, 999 monthly income. Ten (5.4%) respondents earn
P40,000 to P49,999 monthly income. Eight (4.3%) respondents receive a monthly
income of less than P10,000. Seven (3.8%) respondents receive a monthly income of P
80,000 and above. Four (2.2%) respondents earn P50, 000 to P59,999 monthly income.
Only 1 (.5%) respondent has a monthly income of P60, 000 to P69,999 and the
remaining 1 (.5%) respondent receives P70, 000 to P79,999 monthly income. The
finding indicates that a majority of the customers are capable of having a good bank
savings as well as the ability to invest in time deposits.
47
4.1.2 Respondents’ Level of Awareness towards Islamic Banking System and its
Products and Services
Table 4.7 Awareness of Islamic Banking System and its Products and Services
NO
YES
Total
1. Are you aware of Islamic Banking in the Philippines?
F
33
%
17.9
F
151
%
82.1
F
184
%
100
2. Are you aware of the principles of the Islamic banking
system?
158
85.9
26
14.1
184
100
3. Are you aware of the differences between Islamic banking
and conventional banking?
150
81.5
34
18.5
184
100
4. Are you aware that interest (riba) is prohibited in Quran?
117
63.6
67
36.4
184
100
a. Deposit Products (eg: saving account, current
account)
91
49.5
93
50.5
184
100
b. Investment Products (eg: general and special
investment account)
140
76.1
44
23.9
184
100
c. Financing Products – equity based (eg: Ijarah –
Leasing)
156
84.8
28
15.2
184
100
d. Financing Products – debt based (eg: credit cards,
home financing)
150
81.5
34
18.5
184
100
e. Trade Finance (eg: letter of credit, banker
acceptance)
158
85.9
26
14.1
184
100
f.
145
78.8
39
21.2
184
100
159
86.4
25
13.6
184
100
5. Are you aware of the following Islamic banking products
and services?
Money Market Instruments (eg: government
investment issues – Treasury Bills)
g. Insurance Products (eg: takaful)
48
YES
NO
Q1
Q2
Q3
Q4
Q5-A
Q5-B
Q5-C
Q5-D
Q5-E
Q5-F
Q5-G
0
10
20
30
40
50
60
70
80
90
Figure 4.7 Respondents' Level of Awareness
Table 4.7 shows the number of times respondents answered “Yes” or “No” to
every awareness question. It shows which of the questions the respondents are aware or
not.
By looking at the “Yes” column, it can be concluded that while 82.1% (151 of
184) of the respondents are aware of Islamic banking in the Philippines, not all 151,
with only 26 (14.1%), are aware of the Islamic banking system.
Among 184 respondents, 158 (85.9%) answered that they are not aware of the
Islamic banking system and 150 (81.5%) cannot distinguish Islamic banking from
conventional banking. It then follows that only an average of 22% of the respondents is
aware of the Islamic banking products and services.
49
In addition, of the many products and services offered by Islamic banks, most
respondents are only aware of the deposit products – savings account, current account
(50.5%)
Table 4.8 Overall Level of Awareness of Islamic Banking System and its Products and Services
Not Aware
Slightly Aware (1 – 3)
Moderately Aware (4 – 6)
Very Aware (7 – 9)
Very Much Aware (10 – 11)
Frequency
Percentage
20
103
34
23
4
10.9
56
18.5
12.5
2.2
The level of awareness of the respondents are measured based on the number of
times they affirm to questions in this section. Zero affirmative answers out of eleven
(11) means the respondent is not aware of the Islamic Banking system, its products, and
services; while ten (10) to eleven (11) positive answers mean that the respondent is
very much aware.
Out of 184, there are 20 who are not aware of the Islamic banking system. This
means that these respondents answered “No” to all of the awareness questions. The
results also show that a majority of 103 respondents (56%) are slightly aware of the
system, its products and services. These respondents answered “Yes” to 1-3 awareness
questions. Only four (4), about 2.2% of 184, are very much aware of the Islamic
Banking system, its products and services.
50
4.1.3 Respondents’ Level of Understanding towards Islamic Banking System and
Operations
Table 4.9 Understanding on Islamic Banking System and Operations
Neutral
Strongly
Disagree
Disagree
Agree
Strongly
Agree
F
%
F
%
F
%
F
%
F
%
1. Islamic banking is the conduct of
banking operations according to
Shariah Law. (Shariah is the
body of Islamic religious law)
83
45.1
4
2.2
4
2.2
62
33.7
31
16.8
2. Islamic banking is available for
Muslims as well as non-Muslims.
61
33.2
3
1.6
19
10.3
60
32.6
41
22.3
3. Islamic banking prohibits interest
in all forms of transactions.
92
50
14
7.6
28
15.2
29
15.8
21
11.4
4. Parties in Islamic banking cannot
predetermine a guaranteed profit.
113
61.4
4
2.2
42
22.8
16
8.7
9
4.9
5. Returns on Islamic banking are
based on gift and profit sharing
basis instead of interest.
119
64.7
7
3.8
31
16.8
18
9.8
9
4.9
6. Islamic banking prohibits major
uncertainty in all forms of
transactions
113
61.4
5
2.7
18
9.8
37
20.1
11
6
7. Islamic banks only invest in
businesses that are not prohibited
by Islam or halal businesses.
93
50.5
6
3.3
8
4.3
44
23.9
33
17.9
8. Each Islamic bank should have a
Shariah Supervisory Board to
ensure that all business activities
are in line with Shariah
requirements.
79
42.9
4
2.2
3
1.6
59
32.1
39
21.1
51
Strongly Agree
Agree
Disagree
Strongly Disagree
Neutral
S1
S2
S3
S4
S5
S6
S7
S8
0
10
20
30
40
50
60
Figure 4.8 Respondents' Level of Understanding
Based on Table 4.9, more than half of the respondents are unsure whether to
disagree or agree on the statements (except for statement 2). Thus, it can be concluded
that majority of the respondents have no idea on the system of Islamic banking
including its operations. However, it can be noted that 32.6% agrees and 22.7%
strongly agrees that Islamic banking is available not just for Muslims but also for nonMuslims. Most of the respondents also believe that Islamic banking is the conduct of
banking operations according to Shariah law.
52
70
Continuum
0.00 – 0.79
0.80 – 1.59
1.60 – 2.39
2.40 – 3.19
3.20 – 4.00
Descriptive Meaning
Neither Agree nor Disagree
Strongly Disagree
Disagree
Agree
Strongly Agree
Interpretation
No Understanding
Very Low Understanding
Low Understanding
High Understanding
Very High Understanding
Table 4.10 Overall Level of Understanding on Islamic Banking System and Operations
Statement
Weighted Mean
1.75
1.25
1.31
0.99
0.90
1.07
1.55
1.86
1.43
1
2
3
4
5
6
7
8
Overall
Descriptive Meaning
Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Disagree
Disagree
`
S1
S2
S3
S4
S5
S6
S7
S8
0
0,5
1
1,5
2
Figure 4.9 Overall Level of Understanding
Table above was derived using the statistical tool of weighted mean. With 1.43 as
the overall weighted mean, the respondents in general have a low understanding on
Islamic banking system and its operations. This may be due to the fact that majority of
53
the respondents are not aware of the Islamic banking system, its principles and its
products and services.
4.1.4 Respondents’ Level of Perception towards Islamic Banking
Table 4.11 Perception towards Islamic Banking
Neutral
Strongly
Disagree
Disagree
Agree
Strongly
Agree
F
%
F
%
F
%
F
%
F
%
1. There is a very high potential for
acceptability and success of
Islamic banking products in Iligan
City.
74
40.2
5
2.7
15
8.1
68
37
22
12
2. Islamic banks are able to compete
with conventional banks.
74
40.2
7
3.8
22
12
66
35.9
15
8.1
3. Islamic banking products are
similar to the products of
conventional banks except that the
banks use different names in
highlighting those products.
94
51.1
10
5.4
19
10.3
53
28.8
8
4.3
4. Islamic banks have done enough in
marketing their products to the
public.
87
47.3
14
7.6
44
23.9
33
17.9
6
3.3
5. Islamic banks could provide lower
cost products and services
compared to conventional
banking.
98
53.3
6
3.3
10
5.4
59
32
11
6
6. Returns on Islamic banks deposits
account are higher than returns on
conventional banks deposits
account
131
71.2
7
3.8
23
12.5
21
11.4
2
1.1
7. It is safe to deposit our money in
an Islamic bank.
81
44
4
2.2
14
7.6
64
34.8
21
11.4
54
Strongly Agree
Agree
Disagree
30
40
Strongly Disagree
Neutral
S1
S2
S3
S4
S5
S6
S7
0
10
20
50
60
70
80
Figure 4.10 Respondents' Level of Perception
Based on the table above, 74 (40.2%) of the respondents neither agree nor
disagree to the statement perceiving Islamic banking products and services as having a
high potential of acceptability and success in Iligan City. The same numbers of
respondents are still undecided on whether to agree or disagree on the statement that
Islamic banks are able to compete with conventional banks with 40%. And in the
following statements, a number of respondents or basically more than half of the
population stay neutral on the statements on whether Islamic banking products and
services are similar to those on conventional banking (51%), on whether Islamic banks
could provide lower cost product and services (53.3%) and also offer higher returns
(71.2). Eighty-one of the 184 respondents (44%) also neither agree nor disagree in
assessing as to whether it is safe to deposit their money on Islamic banks. With this
55
information, we can evaluate that most respondents have no perception on Islamic
banking products and services. This may be due to the low understanding and
awareness of the respondents on the banking system as assessed earlier.
Continuum
0.00 – 0.79
0.80 – 1.59
1.60 – 2.39
2.40 – 3.19
3.20 – 4.00
Descriptive Meaning
Neither Agree nor Disagree
Strongly Disagree
Disagree
Agree
Strongly Agree
Interpretation
No Perception
Very Low Perception
Low Perception
High Perception
Very High Perception
Table 4.12 Overall Level of Perception towards Islamic Banking
Statement
1
2
3
4
5
6
7
Overall
Weighted Mean
1.78
1.68
1.30
1.22
1.34
0.67
1.67
1.38
Descriptive Meaning
Disagree
Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Neither Agree nor Disagree
Disagree
Strongly Disagree
S1
S2
S3
S4
S5
S6
S7
0
0,2
0,4
0,6
0,8
1
1,2
Figure 4.11 Overall Level of Perception
56
1,4
1,6
1,8
Through this assessment, we can generalize that a weighted mean of 1.38 and
“strongly disagree” as its descriptive meaning, the respondents have a very low
perception on Islamic banking and its related products and services. This may be due to
poor marketing of products and services and less seminars of this emerging banking
system.
4.1.5 Respondents’ Level of Willingness to avail of Islamic banking Products and
Services
Table 4.13 Willingness to avail of Islamic Banking Products and Services
Neutral
Strongly
Disagree
Disagree
Agree
Strongly
Agree
F
%
F
%
F
%
F
%
F
%
1. I am willing to open an account if
an Islamic bank is established in my
area.
88
47.8
12
6.5
16
8.7
48
26.1
20
10.9
2. I will choose Islamic banks, because
they
follow
strict
Shariah
requirements.
101
54.9
15
8.1
18
9.8
37
20.1
13
7.1
3. I will choose Islamic banks because
I believe they will provide better
services to the customers.
110
59.8
11
6
15
8.1
36
19.6
12
6.5
4. For the Philippines to have an
Islamic bank for retail customers is
very important to me.
91
49.4
8
4.3
14
7.6
55
29.9
16
8.7
5. I am willing to learn more about the
Islamic Banking system, including
its principles, products and services.
41
22.3
9
4.9
4
2.2
77
41.8
53
28.8
6. I will open an account in an Islamic
bank only after I have learned more
about the Islamic Banking System.
66
35.9
8
4.3
5
2.7
68
37
37
20.1
57
Strongly Agree
Agree
Disagree
Strongly Disagree
Neutral
S1
S2
S3
S4
S5
S6
0
10
20
30
40
50
60
Figure 4.12 Respondents' Level of Willingness
Based on Table 4.13, only 68 (37%) of the respondents are willing to open an
account if an Islamic bank is established in their area, in this case, in Iligan City. Fifty
(27.2%) of the respondents are willing to choose Islamic banks because of its strict
Shariah compliance. Forty-eight (26.1%) of the respondents are willing to choose
Islamic banks because they believe Islamic banks will provide better services to the
customers. Seventy-one (38.6%) of the respondents agreed that is important to them to
have Islamic bank for retail customers in the Philippines while other respondents are
neutral about the above statements. One hundred thirty (70.6%) of the respondents are
willing to learn more about Islamic Banking system, including its principles, products
and services. And lastly, one hundred five (57.1%) of the respondents are willing to
open an account in an Islamic bank only after they have learned more about the Islamic
Banking System.
58
Continuum
0.00 – 0.79
0.80 – 1.59
1.60 – 2.39
2.40 – 3.19
3.20 – 4.00
Descriptive Meaning
Neither Agree nor Disagree
Strongly Disagree
Disagree
Agree
Strongly Agree
Descriptive Meaning
Not Willing
Slightly Willing
Moderately Willing
Very Willing
Very Much Willing
Table 4.14 Overall Level of Willingness to avail of Islamic Banking Products and Services
Statement
1
2
3
4
5
6
Overall
Weighted Mean
1.46
1.16
1.07
1.44
2.50
2.01
1.61
Descriptive Meaning
Strongly Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Disagree
Disagree
Disagree
S1
S2
S3
S4
S5
S6
0
0,5
1
1,5
2
2,5
Figure 4.13 Overall Level of Willingness
Based on the table above, the weighted means reveal that the respondents strongly
disagree with the statements 1 – 4. This means to say that they are slightly willing to
open an account if an Islamic bank is established in their area. They are also slightly
willing to choose Islamic banks because of its strict compliance with Shariah
59
requirements and because of the belief that Islamic banks will provide better services to
the customer. The respondents are also slightly willing to avail of the products and
services offered by Islamic banks because of the belief that having Islamic banks for
retail customers in the Philippines is important. With weighted means of 2.50 and 2.01,
statements 5 and 6, respectively, show that the respondents are moderately willing to
learn more about the Islamic Banking system, including its principles, products and
services and are also moderately willing to open an account in an Islamic bank only
after they have learned more about the Islamic Banking System. Thus, the overall
weighted mean of the respondents’ level of willingness shows that they are moderately
willing to avail of the Islamic banks’ products and services.
4.2
Correlation Analysis
4.2.1 Awareness
Table 4.15 Relationship between Demographic Profile such as age, educational attainment and income
towards Awareness.
Age
Educational attainment
Income
Spearman Rank
Correlation Coefficient
-0.059
0.047
0.093
P value
Remarks
0.423
0.530
0.210
Not Significant
Not Significant
Not Significant
Note: If p value is less than 0.05 level of significance, then there is a significant relationship otherwise not
significant.
As depicted in the table, at 0.05 level of significance there is no significant
relationship between age and level of awareness in Islamic Banking with p value of
0.423. Therefore, we do not have sufficient evidence to conclude that there is a
significant relationship between age and level of awareness in Islamic Banking. The
same can be said with educational attainment and income with p values of 0.53 and
0.210 respectively.
60
While this study resulted to no significant relationships between age, educational
level, and income, the study of Ling, et al (2002) in Malaysia and Khattak and Rehman
(2010) in Pakistan revealed that educational level affects awareness of the respondents.
According to these studies, higher educational level yields higher awareness.
Also, the study conducted by Haque, Osman and Ismail (2009) identified income
as a significant factor to the level of awareness of the respondents. While this study
showed a different result, other studies about Islamic banking like ones by Amin (2007)
and Run and Yeo (n.d.) supported Haque, Osman and Ismail’s results. This may be
because there are differences in the educational system across countries. Islamic
banking is new to many of the respondents of this study.
Table 4.16 Relationship between Demographic Profile such as gender, position and religion towards
Awareness.
Gender
Position
Religion
Point Bi-serial
Correlation Coefficient
0.047
0.006
-0.380
P value
Remarks
0.526
0.934
0.000
Not Significant
Not Significant
Significant
Note: If p value is less than 0.05 level of significance, then there is a significant relationship otherwise not
significant.
As depicted in the table, at 0.05 level of significance there is no significant
relationship between gender and level of awareness in Islamic Banking with p value of
0.526. Therefore, we do not have sufficient evidence to conclude that there is a
significant relationship between gender and level of awareness in Islamic Banking. The
same can be said with position with correlation value of 0.934.
On the other hand, there is a significant relationship between religion and level of
awareness in Islamic banking with p value of 0.000. Therefore, we have a sufficient
61
evidence to conclude that there is an inverse relationship between religion and level of
awareness - that is respondents who are Muslims have higher level of awareness
towards Islamic banking, while respondents who are non-Muslims have lower level of
awareness towards Islamic Banking.
A similar study in Malaysia by Ling, et al (2002) showed no significant
relationship between religion and awareness because respondents of this study are all
non-Muslims. This deviation due to the religion of respondents is supported by another
study by Loo (2010) which showed a significant relationship between religion and
awareness. Loo (2010) also has Muslim and non-Muslim respondents unlike Ling, et al
(2002).
4.2.2 Understanding
Table 4.17 Relationship between Demographic Profile such as age, educational attainment an income
towards Understanding.
Age
Educational attainment
Income
Spearman Rank
Correlation Coefficient
-0.001
0.000
0.060
P value
Remarks
0.988
0.992
0.419
Not Significant
Not Significant
Not Significant
Note: If p value is less than 0.05 level of significance, then there is a significant relationship otherwise not
significant.
As depicted in the table, at 0.05 level of significance there is no significant
relationship between age and level of understanding in Islamic Banking with p value of
0.988. Therefore, we do not have sufficient evidence to conclude that there is a
significant relationship between age and level of understanding in Islamic Banking. The
same can be said with educational attainment and income with p values of 0.992 and
0.419 respectively.
62
However, a study of Ling et al. (2002) in Malaysia shows that at 1% significant
level, there is a significant relationship between educational attainment and age and
understanding. Such result is also supported by a study conducted by Khattak and
Rehman, Amin (2007) and Run and Yeo (n.d.)
In the same study, monthly income level has significant relationship with
understanding at 10% significant level. This result was also supported by Run and Yeo
(n.d.) and Haque, Osman and Islamil (2009).
Table 4.18 Relationship between Demographic Profile such as gender, position and religion towards
Understanding.
Gender
Position
Religion
Point Bi-serial
Correlation Coefficient
-0.006
0.083
-0.420
P value
Remarks
0.936
0.265
0.000
Not Significant
Not Significant
Significant
Note: If p value is less than 0.05 level of significance, then there is a significant relationship otherwise not
significant.
As depicted in Table 4.18, at 0.05 level of significance there is no significant
relationship between gender and level of awareness in Islamic Banking with correlation
value of 0.936. Therefore, we do not have sufficient evidence to conclude that there is a
significant relationship between gender and level of understanding in Islamic Banking.
The same can be said with position with p value of 0.265.
On the other hand, there is a significant relationship between religion and level of
understanding in Islamic banking with p value of 0.000. Therefore, we have a sufficient
evidence to conclude that there is an inverse relationship between religion and level of
understanding - that is respondents who are Muslims have higher level of
63
understanding towards Islamic banking, while respondents who are non-Muslims have
lower level of understanding towards Islamic Banking.
However, in a study conducted by Ling et al. (2002) in Malaysia, it reveals that
religion does not have significant relationship with understanding. This might be
because the respondents of the study are all non-Muslims but the respondents of this
study comprised of Muslims and non-Muslims.
4.2.3 Perception
Table 4.19 Relationship between Demographic Profile such as age, educational attainment an income
towards Perceptions
Age
Educational attainment
Income
Spearman Rank
Correlation Coefficient
0.016
0.083
0.156
P value
Remarks
0.831
0.262
0.034
Not Significant
Not Significant
Significant
Note: If p value is less than 0.05 level of significance, then there is a significant relationship otherwise not
significant.
As depicted Table 4.19, at 0.05 level of significance there is no significant
relationship between age and perception in Islamic Banking with p value of 0.832.
Therefore, we do not have sufficient evidence to conclude that there is a significant
relationship between age and perception in Islamic Banking. The same can be said with
educational attainment with p value of 0.262. However in a study conducted in
Malaysia, there is a significant relationship with perception having 1% as significant
level.
The same can be said with educational attainment with correlation value of 0.083,
there is still no significant relationship. These results are inconsistent with Khattak and
64
Rehman (2007), which shows that most of the customers of Islamic banks have high
educational attainment.
On the other hand, there is a significant relationship between income and
perception in Islamic banking with p value of 0.034. Therefore, we have a sufficient
evidence to conclude that there is a direct relationship between income and perception that is respondents with higher income have higher perceptions towards Islamic
banking, while respondents with lower income have lower perception towards Islamic
Banking. This result is consistent with the study conducted in Malaysia on nonMuslims which shows a significant relationship between income and perception, having
10% significant level.
Table 4.20 Relationship between Demographic Profile such as age, educational attainment an income
towards Perception.
Gender
Position
Religion
Point Bi-serial
Correlation Coefficient
-0.048
-0.018
-0.265
P value
Remarks
0.514
0.813
0.000
Not Significant
Not Significant
Significant
Note: If p value is less than 0.05 level of significance, then there is a significant relationship otherwise not
significant.
As depicted in the table, at 0.05 level of significance there is no significant
relationship between gender and perception in Islamic Banking with p value of 0.514.
Therefore, we do not have sufficient evidence to conclude that there is a significant
relationship between gender and perception in Islamic Banking. The same can be said
with position with p value of 0.813.
On the other hand, there is a significant relationship between religion and
perception in Islamic banking with p value of 0.000. Therefore, we have a sufficient
65
evidence to conclude that there is an inverse relationship between religion and
perception - that is respondents who are Muslims have higher perceptions towards
Islamic banking, while respondents who are non-Muslims have lower perception
towards Islamic Banking. This result is in accordant to Haque, Osman and Ismail
(2009) and Loo (2010). Since most Muslims come from the same races, living up the
same culture, and growing up in similar environment, hence influences their perception
towards Islamic banking.
4.2.4 Willingness
Table 4.21 Relationship between Demographic Profile such as age, educational attainment an income
towards Willingness.
Age
Educational attainment
Income
Spearman Rank
Correlation Coefficient
-0.047
-0.066
-0.097
P value
Remarks
0.525
0.370
0.190
Not Significant
Not Significant
Not Significant
Note: If p value is less than 0.05 level of significance, then there is a significant relationship otherwise not
significant.
As depicted in the table, at 0.05 level of significance there is no significant
relationship between age and willingness in Islamic Banking with p value of 0.525.
Therefore, we do not have sufficient evidence to conclude that there is a significant
relationship between age and willingness in Islamic Banking. The same can be said
with educational attainment and income with p values of 0.37 and 0.19 respectively.
Table 4.22 Relationship between Demographic Profile such as age, educational attainment an income
towards Willingness.
Gender
Position
Religion
Point Bi-serial
Correlation Coefficient
0.002
0.141
-0.457
P value
Remarks
0.983
0.057
0.000
Not Significant
Not Significant
Significant
Note: If p value is less than 0.05 level of significance, then there is a significant relationship otherwise not
significant.
66
As depicted in the table, at 0.05 level of significance there is no significant
relationship between gender and willingness in Islamic Banking with p value of 0.983.
Therefore, we do not have sufficient evidence to conclude that there is a significant
relationship between gender and willingness in Islamic Banking. The same can be said
with position with p value of 0.057.
On the other hand, there is a significant relationship between religion and
willingness in Islamic banking with correlation value 0.000 Therefore, we have a
sufficient evidence to conclude that there is an inverse relationship between religion
and willingness - that is respondents who are Muslims have higher willingness towards
Islamic banking, while respondents who are non-Muslims have lower willingness
towards Islamic Banking.
67
CHAPTER 5
SUMMARY, CONCLUSION, AND RECOMMENDATION
5.1 SUMMARY
This study aims to determine the level of awareness, understanding, perception,
and willingness in Islamic banking among Muslim and non-Muslim employees. The
researchers used descriptive analysis to quantitatively describe the main features of the
information in Chapter 4. The researchers also conducted a semi-structured interview
with someone knowledgeable and directly involved in Islamic banking.
Majority of the respondents are aware of Islamic banks in the Philippines but only
26 out 151 who are aware knows about Islamic banking system. And most of them
cannot distinguish the difference between Islamic bank and Islamic banking system.
That makes an average of 22% of the respondents being aware of the Islamic banking
products and services. And among the many products and services of Islamic banks,
deposit products are known to roughly 50% of the total respondents. Considering that
there is only one bank in the country that practices both conventional and Islamic
banking, respondents can only be aware of the most common banking product and
services such as savings and current account.
The findings also indicate that majority of the respondents have no idea on the
Islamic banking system including its operations. This may be due to the fact that
majority of the respondents are not aware of the Islamic banking system, its principles
68
and its products and services. However, more than half of the respondents agree that
Islamic banking is not just available for Muslims but also to non-Muslims.
The assessment of the respondents’ perception towards Islamic banking products
and services showed that a large number have answered “neither agree nor disagree” on
the statements given. In general, this means that the respondents’ have a very low
perception on the banking system. This may be due to the low understanding and
awareness of the respondents on the banking system as assessed earlier. This may also
be due to poor marketing of products and services and less seminars of this emerging
banking system.
The level of awareness, understanding, and perception has an influence to the
willingness of the respondents to avail of the Islamic banking products and services.
The findings that show a moderate willingness to avail of the products and services of
this banking system among the respondents may be due to strict compliance to Shariah
requirements. Many of the respondents also doesn’t believe that better services will be
provided by Islamic banks compared to conventional banks especially that they are
only aware of the banking products that are present in both banking systems. They have
little understanding and low perception of Islamic banking which gives demographic
factors with no influence at all in their willingness to avail of Islamic products and
services.
In addition to these findings, the researchers wanted to determine the relationship
between demographic factors and the awareness, understanding, perception, and
willingness in Islamic banking products and services.
69
5.1.1
RELATIONSHIP
BETWEEN
AGE
AND
AWARENESS,
UNDERSTANDING, PERCEPTION, AND WILLINGNESS
In this study, there is no significant relationship between age and awareness.
However, while other studies resulted to significant relationships between
understanding and perception, this study showed no sufficient evidence to
conclude that significant relationship is present between age, and understanding
and perception. Same goes with willingness.
The result of a very low level of awareness of Islamic Banking among
Muslim and non-Muslim employees of MSU-IIT, regardless of age, justifies the
low level of understanding, perception and willingness in Islamic Banking.
5.1.2
RELATIONSHIP BETWEEN EDUCATIONAL ATTAINMENT
AND AWARENESS, UNDERSTANDING, PERCEPTION, AND
WILLINGNESS
Unlike the studies conducted in other parts of the world, educational
attainment do not have significant relationship with awareness with a correlation
value of only 0.047. It then follows that, regardless of the level of education
attained by the respondents, the level of understanding, perception and
willingness is very low to conclude that significant relationship exists.
70
5.1.3
RELATIONSHIP
BETWEEN
INCOME
AND
AWARENESS,
UNDERSTANDING, PERCEPTION, AND WILLINGNESS
Monthly income level has a significant relationship with perception. With
a correlation value of 0.156, respondents with higher income have higher
perceptions towards Islamic while those with lower income have lower
perceptions. This result coincides with the results of Ling, et al (2002). It can be
concluded that the monthly income level is directly related to perception towards
Islamic Banking.
Although significant relationship exists between income and perception,
there is no such relationship between income and awareness, understanding, and
willingness. This is because questions in this part are more about investment and
banking perceptions which are more likely participated by high-income earners
even in conventional banking.
Respondents with higher income, though has low level of awareness,
understanding, and willingness in Islamic Banking, has higher perception because
they are most likely to be part of banking transactions and has a broad
discernment of banking system whether Islamic or conventional.
5.1.4
RELATIONSHIP
BETWEEN
GENDER
AND
AWARENESS,
UNDERSTANDING, PERCEPTION, AND WILLINGNESS
Others studies about Islamic banking in different countries did not include
gender as a demographic factor affecting awareness, understanding, perception,
71
and willingness towards Islamic banking products and services. In this study, the
researchers included a gender as a factor that may influence the answers of the
respondents.
However, the results showed that gender does not have significant
relationship with awareness, understanding, perception, and willingness of the
respondents towards Islamic banking products and services. The reason may be
because both genders have equal level of participation in banking and investment
transactions.
5.1.5 RELATIONSHIP BETWEEN POSITION AND AWARENESS,
UNDERSTANDING, PERCEPTION, AND WILLINGNESS
Findings show that there is no significant relationship between position,
staff or faculty, and awareness, understanding, perception, and willingness
towards Islamic banking products and services. Both faculty and staff of MSU-IIT
have similar responses may be because in conventional banking in already
participated with many regardless of position. This points to the assumption that
the respondent’s position has no influence over his or her participation in banking
transactions, whether conventional or Islamic.
5.1.6 RELATIONSHIP BETWEEN RELIGION AND AWARENESS,
UNDERSTANDING, PERCEPTION, AND WILLINGNESS
In many studies religion is found to be affecting the awareness,
understanding, perception, and willingness in Islamic Banking. This study proves
72
the same. Religion of the respondents is consistently related to their level of
awareness, understanding, perception, and willingness in Islamic Banking.
There is sufficient evidence to conclude that religion has an inverse
relationship with the respondents’ level of awareness, understanding, perception,
and willingness in Islamic Banking. That is, Muslim respondents have higher
level of awareness, higher understanding, higher perception, and higher
willingness towards Islamic banking than non-Muslim respondents.
Muslim respondents who follow the Shariah Law are more aware and
have more understanding of the Islamic banking system. They are more likely to
have higher perceptions on Islamic Banking and are more willing to avail of the
Islamic banking products and services.
5.2
CONCLUSION
Islamic banking, as among the emerging issues in the field of business, has
recently attracted significant attention from the people around the world. However, the
Islamic banking system is a bit of mystery to many Filipinos in the Philippines, especially
to those who are not of the Muslim faith.
The main objective of this research is to determine the level of awareness,
perception, and understanding of the features of Islamic banking to prospect Muslim and
non-Muslim investors in Mindanao State University- Iligan Institute of Technology as
well as their willingness to avail of the products and services offered by Islamic banks.
73
The findings of this research managed to reveal that the level of awareness,
understanding and perception among Muslim and non-Muslim employees of MSU-IIT
towards Islamic banking is very low. However, the degree of their willingness to avail of
the Islamic banking products and services is at a moderate level. Among the demographic
factors such as age, educational attainment, religion, income, gender, and position, only
religion has the most significant relationship with the all the variables. Income, aside
from religion, has a significant relationship with the level of perception among Muslim
and non-Muslim employees on Islamic banking.
The summary of the statistical analysis is included in this chapter.
Recommendations for future research have been discussed in this chapter as well. Lastly,
this research has met its objective by knowing the level of awareness, understanding and
perception on Islamic banking among Muslim and non-Muslim faculty and staff of MSUIIT and their degree of willingness to avail of its products and services.
5.3
RECOMMENDATION
The scope of this study is limited to the awareness, understanding, perception and
willingness of Muslim and non-Muslim employees of MSU-IIT towards Islamic Banking
system and its products and services. The potential research area is on the satisfaction
towards Islamic banking. This is because satisfaction would lead to higher patronage and
by knowing the selection criteria Islamic bankers can put more effort in these criteria to
attract more customers.
74
Since this study is only concentrated in MSU-IIT with a limited number of
respondents, further research can be undertaken in a more comprehensive manner to
analyze the awareness, understanding, perception, and willingness of Muslim and nonMuslim towards Islamic banking system and its products and services. It would be ideal
to widen the scope of the study and consider employees from private and public sectors
in Iligan City to comprise the sample population. In this furtherance, a broader scope of
information about the overall inclination of Islamic Banking towards achieving a higher
level of patronization specifically in Iligan City could be gathered in addition to the
results of this study.
Future research work could also incorporate more demographic variables in order
to have a complete view of the profiles of the respondents like occupation, family size,
race or other factors aside from the demographic variables presented in this study which
is limited to only six variables.
As to date, the only Islamic bank in the Philippines, Al-Amanah Islamic
Investment Bank of the Philippines, has 9 branches nationwide; 8 from Mindanao and 1
from Luzon. Consequently, the bank should consider opening more branches especially
in Luzon and Visayas in order to cater more potential customers to avail of its products
and services, thereby increasing its profitability and raising awareness to the people on
this form of banking. Through this research and further research studies about the
awareness, understanding, perception, and willingness of potential clients throughout the
Philippines, the decision of expanding would somehow mitigate the risk as to whether
operating in more branches would be a success. It could also provide options for
centralizing business processes, upgrade service levels, and broaden control.
75
Al-Amanah Islamic bank should also add measures of publicity to promote its
system, and the features of its products and services. These shall include conducting
seminars, marketing its products and services through various forms of media such as TV
advertisements and radio broadcasts, and other publications. The subject should be made
publicly available in order to raise the level of awareness and understanding as well as to
enhance the level of knowledge regardless of age, gender, religion, position, income,
educational attainment amongst Muslims and non-Muslims on Islamic banking concepts
and operations. Islamic banks could also search the use of alternative ways such as online
banking or phone banking when competing against their conventional peers in terms of
market share. However, Al-Amanah Islamic bank should dedicate a portion of its funds
and accordingly take into account the benefits and the costs associated with implementing
such campaigns.
76
APPENDIX 1. Questionnaire Survey Form
COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY
MINDANAO STATE UNIVERSITY- ILIGAN INSTITUTE OF TECHNOLOGY
ILIGAN CITY
DEPARTMENT OF ACCOUNTANCY
Dear Respondents,
We are 5th year Bachelor of Science in Accountancy students of the Mindanao State
University- Iligan Institute of Technology (MSU-IIT). We are currently doing our final
year research project entitled “The Islamic Banking System and Employees’ Awareness,
Understanding, Perception and Willingness to avail of its Products and Services: The
Case of MSU-IIT”. Based on the random sampling procedure we have conducted, you
have been selected as one of the respondents for our research study. We hope that you
could give us a favor by filling up the attached questionnaire.
Rest assured, your answers will be kept PRIVATE AND CONFIDENTIAL. Thank you
for your participation.
Very respectfully yours,
Haroun D. Cabugatan
09168352936
Yasrima R. Dimaampao
09368895707
Iana Mae G. Cahoy
09055246658
Devonah Mae R. Dingal
09186602395
Nicole Jan D. Chu
09352542745
Noted by:
Prof. Milagros R. Narido
Research Adviser
77
This questionnaire is intended for the faculty, staff and academic personnel of MSU- Iligan
Institute of Technology, Iligan City.
Section A: Demographic Profile
The following questions refer to the demographic profile of the respondents. Please provide
the appropriate information by placing a (✓) in the bracket provided to represent your
answer.
1. Name (optional): _______________________
2. Office: ______________________
3. Gender:
 Male
 Female
4. Age: _______
5. Religion:
 Islam
 Non-Islam: (pls. specify) _____________
6. Educational Attainment:










Elementary Level
Elementary Graduate
High school Level
High school Graduate
Vocational / Technical School
College Level
Bachelor Degree
Master Degree
Doctoral Degree
Other: ____________
6. Position (pls. specify on the blank provided)
 Faculty : _____________
 Staff : _____________
7. Monthly Income Level:




Less than P 10,000
P 10,000- P 19,999
P 20,000- P 29,999
P 30,000- P 39,999
78





P 40,000- P 49,999
P 50,000- P 59,999
P 60,000- P 69,999
P 70,000- P 79,999
P 80,000 and above
Section B: Awareness of Islamic Banking System and its Products and Services
For the following questions, please answer by placing a (✓) in the box provided.
YES
1.
2.
3.
4.
5.
Are you aware of the existence of Islamic banks in the
Philippines?
Are you aware of the principles of the Islamic banking
system?
Are you aware of the differences between Islamic banking
and conventional banking?
Are you aware that interest (riba) is prohibited in Quran?
Are you aware of the following Islamic banking products and
services?
a) Deposit Products (eg: saving account, current
account)
b) Investment Products (eg: general and special
investment account)
c) Financing Products – equity based (eg: Ijarah –
Leasing)
d) Financing Products – debt based (eg: credit cards,
home financing)
e) Trade Finance (eg: letter of credit, banker
acceptance)
f) Money Market Instruments (eg: government
investment issues – Treasury Bills)
g) Insurance Products (eg: takaful)
79
NO
Section C: Understanding on Islamic Banking System and Operations
Please CHECK (✓) one number according to the following 5-point scale that best describe
your level of understanding of each of the following statements.
0= Neither Agree nor Disagree
1
1= Strongly Disagree 2= Disagree
3= Agree
STATEMENT
Islamic banking is the conduct of banking operations according to
Shariah Law. (Shariah is the body of Islamic religious law)
2
Islamic banking is available for Muslims only.
3
Islamic banking prohibits interest in all forms of transactions.
4
Parties in Islamic banking can predetermine a guaranteed profit.
5
6
7
8
Returns on Islamic banking are based on gift and profit sharing
basis and interest.
Islamic banking prohibits major uncertainty in all forms of
transactions
Islamic banks only invest in businesses that are not prohibited by
Islam or halal businesses.
Each Islamic bank should have a Shariah Supervisory Board to
ensure that all business activities are in line with Shariah
requirements.
80
4= Strongly Agree
0
1
2 3
4
Section D: Perceptions towards Islamic Banking
Please CHECK (✓) one number according to the following 5-point scale that best describe
your level of perception of each the following statements.
0= Neither Agree nor Disagree
1
2
3
4
5
6
7
1= Strongly Disagree 2= Disagree
3= Agree
STATEMENT
There is a very high potential for acceptability and success of
Islamic banking products in Iligan City.
4= Strongly Agree
0
1
2
3
4
Islamic banks are able to compete with conventional banks.
Islamic banking products are similar to the products of
conventional banks except that the banks use different names in
highlighting those products.
Islamic banks have done enough in marketing their products to
the public.
Islamic banks could provide lower cost products and services
compared to conventional banking.
Returns on Islamic banks deposits account are higher than
returns on conventional banks deposits account
It is safe to deposit our money in an Islamic bank.
Section E: Willingness to avail of Islamic Banking Products and Services
Please CHECK (✓) one number according to the following 5-point scale that best describe
your level of willingness of the following statements.
0= Neither Agree nor Disagree
1
2
3
4
5
6
1= Strongly Disagree 2= Disagree
3= Agree
STATEMENT
I am willing to open an account if an Islamic bank is established
in my area.
I will choose Islamic banks because they follow strict Shariah
requirements.
I will choose Islamic banks because I believe they will provide
better services to the customers.
For the Philippines to have an Islamic bank for retail customers
is very important to me.
I am willing to learn more about the Islamic Banking system,
including its principles, products and services.
I will open an account in an Islamic bank only after I have
learned more about the Islamic Banking System.
81
4= Strongly Agree
0
1
2
3
4
APPENDIX 2. Interview Questions
COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY
MINDANAO STATE UNIVERSITY- ILIGAN INSTITUTE OF TECHNOLOGY
ILIGAN CITY
DEPARTMENT OF ACCOUNTANCY
April 22, 2016
Ms. Sittie S. Usman
Branch Head
Al-Amanah Islamic Investment Bank of the Philippines
Dear Ma’am,
We are 5th year Bachelor of Science in Accountancy students of the Mindanao State University- Iligan
Institute of Technology (MSU-IIT). We are currently doing our final year research project entitled “The
Islamic Banking System and Employees’ Awareness, Understanding, Perception and Willingness to avail
of its Products and Services: The Case of MSU-IIT”.
We are writing this letter to request for an interview with you to obtain some relevant information
concerning the products and services as well as the operational issues, prospects, and challenges faced by
Al-Amanah Islamic Investment Bank of the Philippines in Iligan City. This interview shall help us acquire
further insights about Islamic Banking in connection with our on-going research. We rest assure you all
information obtained in the interview should be kept confidential and used solely for academic purposes.
Please contact us about your most convenient time in participating this interview. You can also reach us at
09168352936 or at haroun.cabugatan@g.msuiit.edu.ph.
Thank you very much for considering this request.
Very respectfully yours,
Haroun D. Cabugatan
09168352936
Yasrima R. Dimaampao
09368895707
Devonah Mae R. Dingal
09186602395
Iana Mae G. Cahoy
09055246658
Noted by:
Nicole Jan D. Chu
09352542745
Prof. Milagros R. Narido
Research Adviser
82
Interview Questions:
1. Do you think the Islamic banking system would be widely accepted/patronized if
ever implemented here in Iligan City? If not, what do you think are the reasons?
2. Based on the results of our survey, there is a significantly low level of awareness
of Islamic banking. What could be the appropriate way to raise the awareness of
the public especially the working and investing group?
3. What are the efforts that should be made to promote Islamic banking?
4. Do you think, if given proper orientation and education about Islamic banking,
low-income earners will also be attracted to invest?
5. Can we say religious factor is not conclusive enough to drive Muslims to use
Islamic banking facilities?
6. What is your opinion on profit sharing in Islamic banking?
7. Does Islamic banks need heavily involved in marketing?
8. How are risks viewed differently in Islamic banking? Are Islamic banking assets
more risky than conventional banking?
9. From your view, do you think a strong support from the government is needed for
Islamic banking?
10. What are the major problems that the bank faces?
11. How did the bank managed to overcome the major problems?
12. What do you think about Islamic banks prospects in the Philippines?
13. How will you compete in the future with conventional banks?
14. Your view about Islamic banks products for the future, are they as competitive as
conventional products.
15. Is there any clear advantage for Islamic banking towards conventional banking?
16. What are the possible challenges for Islamic banking in the future?
83
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