Factors influencing in Islamic banking selection in Indonesia using partial least square-structural equation modelling

• Main Author: Syamsudin, Reni
• Format: Thesis
• Language: English; English
• Published: 2016
• Subjects: HG Finance
• Online Access: https://etd.uum.edu.my/6189/1/s91085_01.pdf; https://etd.uum.edu.my/6189/2/s91085_02.pdf; https://etd.uum.edu.my/6189/
• Institution: Universiti Utara Malaysia

Although being populated by the largest number of Muslims in the world, the market share of Islamic Banking in Indonesia is only five percent of its total banking system. Hence, the quest to attract more Islamic banking customers is a major challenge to Indonesian banks. Few studies have used Theory of Reasoned Action (TRA), and Theory of Planned Behaviour (TPB) to identify factors influencing customers‟ intention and bank selection. This study aims to fulfil this gap by investigating the constructs of TRA, and TPB (attitude, subjective norm) with additional five new variables; pricing of product and services, religion, knowledge, technology support and government support on customers‟ intention and Islamic bank selection. Questionnaires were sent to 375 respondents of bank customers in West, Centre, and East regions of Indonesia. Using Partial Least Square Structural Equation Modelling, the extended model explains 48.8 percent of the total variance in intention. Attitude, subject norm, religion, knowledge and government support are found to have significant and positive influence on intention except for pricing. Using intention as a mediator, the model explains fifty one percent of the variation in bank selection. The result shows that intention positively and significantly mediates the relationship between attitude, subjective norm, religion, and knowledge with Islamic bank selection. Government support is found insignificant but positively related. Under the mediation effect, pricing becomes significant but negatively related to selection. The results imply that Indonesian Islamic banks should offer products at competitive prices to attract more customers. More importantly, Indonesian Islamic banks need to create strong intention by developing positive customers‟ attitude towards Islamic banking through greater dissemination of knowledge, peer and family reference and Syariah compliance. In conclusion, the results of PLS-SEM support the application of TRA and TPB theories to enhance Islamic banking selection in Indonesia.