The Determinants of Customer Patronage in the Case of ...

ISSN: 2289-4519

International Journal of Accounting & Business Management

www.ftms.edu.my/journals/index.php/journals/ijabm

Vol. 7(No.1), April, 2019

ISSN: 2289-4519 DOI: 10. 24924/ijabm/2019.04/v7.iss1/1.32

This work is licensed under a Creative Commons Attribution 4.0 International License.

The Determinants of Customer Patronage in the

Case of Islamic Finance Products in the Maldives

Aishath Imthisal Ahmed MBA Alumni,

FTMS Global Malaysia [email protected]

Ismail Nizam, Ph.D

MBA Academic Head, FTMS Global Malaysia [email protected]

Abstract

This thesis identifies and analyses the determinants of customer patronage in the case of

Islamic finance products in the Maldives. The independent variables used for this study are

religiosity, subjective norm, level of knowledge and relative advantage. The dependent

variable is customer patronage of Islamic finance products. The supporting theories used for

this study are theory of reasoned action (TRA), theory of planned behaviour (TPB) and

Diffusion of Innovation (DOI). This study uses primary data collection method of computer-

administered questionnaires based on 5-point Likert scale with 263 responses received and

analysed. The collected gather was recorded and coded and analysed by SPSS and AMOS. The

finding of the study indicates that religiosity, subjective norm and relative advantage have a

positive significant impact on Islamic finance customer patronage, with religiosity having the

biggest impact. However it was revealed that level of knowledge has no impact on Islamic

finance customer patronage. The results of this study will contribute to further grow and

expand the Islamic finance industry of the Maldives.

Keywords: Customer patronage, Islamic finance, Religiosity, Subjective Norm, Relative

advantage, Level of Knowledge, Theory of reasoned action (TRA), Theory of planned

behaviour (TPB), Diffusion of Innovation (DOI)

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mailto:[email protected]

mailto:[email protected]

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1.0 Introduction 1.1 Research Background A country’s economic success greatly depends on the performance of their financial sector. It acts as an intermediary to different parties such as individuals, businesses and the government to conduct

their financial activities such as borrowing and deposits (Mariadas and Murthy, 2017).

Apart from the conventional financial products, Islamic finance is establishing their presence and

gaining popularity around the world for various reasons. Islamic finance promotes financial

inclusion for those who, for cultural and religious reasons are excluded from the traditional

financial system (Theworldfolio, 2017). Therefore, more and more Islamic financial institutions are

been established in Muslim countries around the world. Moreover, after the global financial

meltdown, people are seeking alternative forms of financing which is more ethical, discourages

speculation and are less crisis-prone, and Islamic finance meets these criteria and because of this

Islamic finance has gotten recognition even among non-Muslims and countries such as United

Kingdom and Germany offers Islamic finance products (MoneyGulf, 2016). It is reported that there

are 1407 Islamic financial institutions globally and in 2016 Islamic finance industry was worth at

$2.2tn of assets and it is forecasted to grow to $3.7tn of assets by 2022 (Murray, 2018).

Similar to global growth of Islamic finance, this industry in the Maldives has also been developing.

Maldives is a 100% Muslim country located in the Indian Ocean, with 1192 coral islands with an

estimated population of 350,000. The countries first conventional bank, Bank of Maldives (BML)

was inaugurated in 1982 while Islamic finance was introduced in 2003 with Amana Takaful

Maldives, which is an Islamic Insurance company. Following this the first Islamic bank Maldives

Islamic Bank (MIB) was opened in March 2011 and Bank of Maldives (BML) opened their Shari’ah

compliant window, four years after the launch of MIB (Amlôt, 2015). Currently variety of Islamic

finance products is available in the Maldives.

This research attempts to identify the main reasons people choose Islamic finance products over

conventional financial products, therefore recognising the main determinants of customer

patronage in the case of Islamic Finance products in the Maldives.

1.2 Research Rationale As the Islamic finance sector grows it is prudent to compare it with the conventional finance

products currently offered in the Maldives. The Maldives Islamic Bank (MIB) is the largest provider

of Islamic finance products currently in the Maldives. They have a reported net profit after tax in

2017 of 40 million Maldivian rufiyaa (MIB, 2017) while the biggest commercial bank in the country

Bank of Maldives (BML) reported net profit is MVR 1,416 billion (BML, 2017). Therefore, it is evident that the growth of Islamic finance sector is significantly lower than conventional financing.

Maldives being a Muslim country it is logical to expect inherent demand for Islamic finance

products. But with the slow growth in the Islamic finance products certain questions are risen such

as if the public is aware of Islamic finance products available to them, why are they facing difficulty

adopting these products or are they reluctant to adopt due to lack of knowledge or awareness

regarding Islamic finance products and principles.

Currently as Islamic financing institutes in Maldives are attempting to attract more customers to

improve their market share and gain competitive edge over their competitors the conventional

financial sector, this research will enable them to identify what customers want by understanding

the customer’s perception towards Islamic finance products.

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1.3 Research Aim and Objectives The aim of this study is to examine the determinants of customer patronage in the case of Islamic

finance products in the Maldives

Specific objectives of this study is as follows

1. To examine the impact of religiosity on Islamic finance products customer patronage

2. To examine the impact of subjective norm on Islamic finance products customer patronage

3. To examine the impact of level of knowledge/awareness on Islamic finance products

customer patronage

4. To examine the impact of relative advantage on Islamic finance products customer

patronage

1.3 Research Questions 1. What is the impact of religiosity on Islamic finance products customer patronage?

2. What is the impact of subjective norm on Islamic finance products customer patronage?

3. What is the impact of level of knowledge/awareness on Islamic finance products customer

patronage?

4. What is the impact of relative advantage on Islamic finance products customer patronage?

1.4 Research Scope The purpose of this research is to identify the factors that would influence people to adopt Islamic

finance products in the Maldives and carry out an analysis of these factors; this study will include

customers of financial sector in the Maldives.

1.5 Significance of Research Even though many researches have been conducted in this area in different countries around the

world, sufficient literature are not available in the context of the Maldives, therefore this research

would be an important theoretical contribution. As Islamic financing has only been introduced in

the Maldives quite recently compared to conventional financing and as the growth of the industry is

significantly slow the finding of this research would be useful for relevant institution in their future

business developments. It can also assist other scholars who are interested in carrying out further

research in this area.

2.0 Literature Review This chapter reviews the related literature on Islamic finance and customer patronage and

conceptual framework which provides the basis of this research. The chapter explores the relevant

theories of Islamic finance and the customer patronage. Furthermore, it analyses set of variables

extracted from reviewing various theories which are interrelated to provide detailed

understanding of this research’s conceptual framework.

2.1 Definition of Key Concepts

2.1.1 Islamic Finance Islam is a comprehensive system providing guidelines for human behaviour throughout their lives.

Finance is the money that makes it possible to acquire wealth either as consumption or input in a

production process. It can also be referred to as the flow of funds from those who have (surplus) to

those who need (deficit) it. If these financing activities is carried out within the Shariah (Islamic

Law) principles, it is known as Islamic finance (Marifa, 2014).

The main features of Islamic finance are, it is free from Riba, Gharar and avoidance of trading

unlawful goods and services. Further principles include justice and equity (Marifa, 2014). Due to

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these fundamental principles, Islamic finance differs from conventional financing and have certain

salient features, these features included;

Interest-free (Riba) All Islamic banking business and activities are free from all and any elements of interest, while mainstream banking is based on lending money for a premium-interest. Riba is prohibited because in its simplest sense it gives an advantage to one party at the expense of the other without appropriate consideration

Need for underlying assets It is required that all banking businesses based on sale or lease must have an underlying asset. Islamic bank acts as a seller, vendor or lessor, the asset is crucial.

The avoidance of uncertainty (Gharar) or gambling

Gharar can be defined as lack of knowledge of uncertainty which can result an unfavourable outcome to one party. All transaction in Islamic finance should refrain from any element of uncertainty (Gharar) and gambling (Maisir). As Gharar could lead to disagreements due to unjust terms arose because of misrepresentation or fraud. Gambling is an action that always benefits one party at the expense of the other.

Profit and loss sharing Profit and loss sharing is done in some Islamic banking activities. The bank shares profit made with its customers on a proportionate basis or on an agreed ratio. In case of loss, it is either borne by the bank or by both parties proportionately.

Rights and liabilities of banks and customers

A significant feature of Islamic banking is the new perspective it gives to the relationship between banks and their customers. Islamic bank is not a lender or a borrower, but can be a trader under banking law.

Shariah Compliance The main focus of Islamic finance is Shariah compliance, thus to ensure this one of the distinctive feature of Islamic finance is that a Shariah advisory or supervisory board is established to advice different products of Islamic finance

Unlawful goods and services All Islamic finance activities should only pertain lawful goods and services. Unlawful goods and services include non-halal foods, intoxicating drinks, entertainment and pornography, tobacco- products and weapons

Overriding principles of Islamic law

In addition to being Shariah compliant, Islamic finance products should not contradicts already established legal principles.

Table 1 - Salient features of Islamic finance products (CIMA, 2014)

2.1.2 Islamic finance products

Profit-sharing financial products Musharakah This is joint venture, where all partners contribute funds and have the right to

participate in managing the business. Profit sharing is by agreed ratio, and losses are shared in the ratio of capital invested.

Mudarabah Here one party provides all of the capital and another party manages the investment project. Profits are shared in an agreed ratio and losses are borne by the investor only.

Qard Hasan Charitable loans with no interest and a profit sharing margins, repayments done by instalments and modest service charge is allowed

Wakalah Where a bank is authorized to conduct business on a customer’s behalf

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Hawalah An agreement between bank and customer to undertake some of customer’s liability for a service fee.

Advance Purchase financial products Murabahah This is asset based and cost plus financing. Bank purchases the commodity and

resells to the customer at a predetermined and disclosed profit margin. The customer pays in deferred payments over a period of time.

Istithna Bank takes on a production project which is made according to agreed specification at a specified price and a date of delivery. Bank makes a contract with a manufacturer and then charges the customer the manufacturer’s price plus a reasonable profit (monetary instalments) and takes the risk of manufacturing.

Bay Bithaman al Ajil This is a repurchase agreement used in hire purchase, where the bank buys the client’s asset and then resells to the customer with the purchase price plus a profit

Mu’ajjal Sales contract allowing purchase with deferred delivery Ijarah Ijarah can be categorised as asset based and leasing. Bank buys the assets and

leases it out for a fee which includes the purchase price and the profit margin. Ownership remains with the bank in case of operating lease and transferred on pre-determined terms in finance lease.

Tawarruq This is adopted by banks to lend cash to customers to buy commodity from the bank under Murabahah, then sold to a third party at a below purchase price.

Deposit Products Wadi’ah Deposit, such as current accounts Mudarabah Deposit products based on revenue-sharing between the customer and bank,

which includes saving products that customer, can withdraw any time. Qard-al-Hasanah Deposit products which are unremunerated, generally for charitable purpose Insurance products Takaful Takaful is a cooperative insurance where members contribute a specific

amount of money into the same pool, every policyholder pays his subscription and in turn help those in need of assistance. Losses are divided and liabilities are spread according to the pooling system

Islamic bond Sukuk Sukuk is similar to conventional bonds, but these are backed with assets and

represent proportionate beneficial ownership in the underlying asset.

Table 2- Islamic finance products (Seibel and Imady, 2006; Zaid et al., 2011)

2.1.3 Islamic finance in the Maldives Since the introduction of Islamic finance in 2003 by Amana Takaful, Islamic finance has been in

existence in Maldives in some form or another. Following Amana Takaful, Maldives Islamic Bank

was established in 2011 and recently the main conventional bank of Maldives Bank of Maldives

(BML), also opened an Islamic finance window. The current services offered by the Islamic banks

targeting individuals and businesses include current, savings and general investment accounts,

financing services for wide varieties goods and services falling under the concept of Murabaha

which includes financing for consumer goods, motorcycle and car. Based on the concept of Ijarat-ul-

Askhas education financing is also offered. Targeted to business profit-sharing finance product;

Musharaka is also available along with business Istisna project financing.

As Islamic finance grows, many other conventional financial institutions also started offering

Islamic finance products. Such as Housing Development Finance Corporation (HDFC) establishes

separate window “Amna” offering products which are fully Shari’ah compliant. Allied Insurance

Company offers Shariah complaint insurance under “Ayady Takaful”, further to this Maldives

recently established Islamic capital market by listing Shariah compliant equity, Sukuk.

The Islamic financing Institutes and Islamic finance products offered by conventional financing

institutes are overseen by Shariah Advisory Council established by Maldives Monetary Authority

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(MMA), validating all Islamic banking and finance operations to ensure their compatibility with

Shariah principles.

2.1.4 Customer Patronage Customer patronage means a person who buys goods and services for personal consumption or use

(Adiele, 2015). Patronage behaviour is the process of identifying factors customers look for in

selecting a product or service (Andrew et al., 2015). Furthermore, customer patronage precedes

loyalty. Patronage comes from the desire to be committed to a good/service either based on its

service quality or customer perception (Adiele, 2015).

2.1.5 Religiosity Religiosity is implicated by religious affiliation, activity and belief. Furthermore, expression of

religiosity is both personal (intrinsic or internal) and public (extrinsic or external) (Bjarnason,

2007). Islamic finance works on the principle of Islamic law (Rahman and Anwar, 2016), and due to

religious values Islamic consumers would prefer Islamic financing products rather than

conventional products (Roy, 2014).

2.1.6 Level of knowledge According to (Gerrard & Cunningham, 1997) Muslims are more aware of the principles of Islam;

however both Muslims and Non-Muslims have a limited knowledge regarding the culture and

concepts of Islamic banking and its products. However, customers have fundamental knowledge of

Islamic finance terms. It is further demonstrated through research by (Haron et al., 1994) that

higher level of knowledge and awareness about Islamic finance products encourages customers to

adapt Islamic finance products.

2.1.7 Relative Advantage Relative advantage is the extent to which the new product is better than the one it replaces (Yahya

and Junaina, 2017). Consumers wanting to buy a new product or service expect that the benefit

they receive from it to be greater than the cost of obtaining this new product or service. Customers

religious consideration will affect how customers perceives relative advantage of Islamic finance

products (Ezeh and Nwankwo, 2014).

2.1.8 Subjective Norms Subjective norms is the perception of the most important people for an individual, which either

motivates the individual to either perform or not perform a particular behaviour (Ajzen, 1991). In

the context of Islamic finance, subjective norm suggests that people are more likely to accept and

adapt these products if a large number of other people in the society already are utilizing these

products or have a positive view regarding Islamic finance (Ibrahim et al., 2017).

2.2 Critical review of Theoretical Getting a new idea adopted even with obvious advantages is often very difficult. For much

innovation it requires a long period of time from the time it is available for use to the time when

they are widely accepted and adapted. Therefore, a main problem for individuals and organizations

is how they can speed this rate of diffusion of innovation. Diffusion is the process of the innovation

being communicated to the members of the society through certain channels over a period of time

(Rogers, 1962). Diffusion of innovation theory sees change as being mainly about the evolution or

reinvention of the products and behaviour to fit the needs of the consumers rather than focusing on

persuading individuals to change (Wani and Ali, 2015). As per this theory the rate of adaption of the

innovation depends upon five characteristics of innovation; relative advantage, compatibility,

complexity, trial-ability and observability (Rogers, 1995).

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Relative Advantage The new product or service will only be adapted if it is a better option than the one currently in practice.

Compatibility This is the degree to which the innovation matches with customer’s needs, values and beliefs

Complexity If the innovation is simpler the greater the rate of adaption Observability Easiness to which the results of the innovation is visible to the

consumers and the communication to the prospective users Trial-ability Degree of examining or testing the before adapting it

Table 3 - Diffusion of Innovation characteristics (Wani and Ali, 2015)

As Islamic Finance is relatively new concept in the Maldives, Diffusion of Innovation is a suitable

theory to be applied in this context to introduce and expand Islamic finance products in the

Maldives. Diffusion of innovation is a very well-established theory in both academics and in

practice. It has been theoretically and empirically tested in many fields of human endeavour. In this

paper, the conceptual constructs are derived from Diffusion of Innovation Theory. However, the

Diffusion of Innovation Theory is not fully tested in this paper. The theory is partially adopted to

develop the conceptual framework.

2.3 Critical Review of Empirical Research Empirical researches assists in collecting evidences and to understand key variables that would in

turn support to formulate the theoretical framework for current study. There are several empirical

studies conducted on the subject of customer patronage or customer adoption of different Islamic

finance products.

Recently, research was conducted to determine customer intention on Islamic home financing

products by (Ibrahim et al., 2017). This research was targeted to bank customers in Alor Setar,

Kedah, Malaysia. The research applies the theory of planned behaviour and tests attitude,

subjective norm, perceived behavioural control, level of knowledge or awareness and religiosity as

independent variable to identify their impact on customer’s intention in choosing Islamic home

financing products. The survey was conducted by questionnaires and a total of 421 respondents

participated in the survey. The researcher intends to fill the gap by targeting bank customers who

are working in government sector, private sector and also who are self-employed in the Alor Setar

Kedah area in Malaysia. The researcher believes that this combination is important for better

understanding of customer intention in choosing financing of housing in their desired home. Similar

study was conducted by (Bassir et al., 2014) to identify factors influencing the adoption of Islamic

home financing in Malaysia, by exploring customers perception towards Islamic home financing.

The study identifies the demographic profile of Islamic home financing customers and their

adoption profile. The study is supported by theory of reasoned action and the independent

variables used to explore their effects on adoption are religiosity, price or cost, brand or reputation

and level of awareness. The data was collected via survey questionnaires where 143 responses

where collected from Klang Valley, Malaysia. However, these studies are confined into specific

locations in the Malaysia, and it cannot be used to understand the factors contributing towards

Islamic home financing in Malaysia as a whole, as the perception towards adoption could be

different in other parts of the country such as rural or outside urban areas.

Research by (Yahya and Junaina, 2017) attempted to identify the influential factors that are

associated with Islamic banking adoption among Muslims and non-Muslims in Sarawak, Malaysia.

The framework for this study includes adoption of Islamic banking as the dependent variables to

study its relationship with seven independent variables; relative advantage, compatibility,

observability, complexity, perceived risk, perceived trust and customer innovativeness.

Furthermore, this study uses Diffusion of Innovation as its supporting theory. Self-administered

questionnaires were used to collected data and it was collected from 436 respondents in Sarawak,

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Malaysia and the research found that relative advantage, compatibility and complexity have

significant relationship with customer adoption of Islamic banking products. Another similar study

was conducted more recently by (Selvanathan et al., 2018) to determine and identify the factors

influencing consumers to choose Islamic bank products and services. The research was targeted

around Selangor area is Malaysia. This research investigated cost and benefit, bank reputation,

convenience and religious value and the analysis showed that bank reputation, religious value and

cost benefit are significant factors influencing customer’s selection. These researches assist in

development of the right approaches to attract more customers to adopt Islamic banking services.

There are researches conducted in other geographical areas such as in Bangladesh where (Roy,

2014) conducted a research to study the customer awareness and attitude towards choosing

Islamic banking. The paper also paves the way for the opportunities and chances for Islamic

banking to develop into a main stream banking system in their financial market. The research was

conducted via in-depth interviews and thematic analysis. The factors analysed were religious

sentiments, recommendation, abundance of Islamic economy and brand value. The research finding

of this study suggests that Bangladesh’s Islamic banking system has great potential to grow as

customers have an attraction towards Islamic banking mainly due to religious sentiment. Further to

this, research was also conducted in Bingol city, Turkey by (Aslan, 2017) to identify the reasons for

choosing Islamic banking. Questionnaires were used to collect data from 500 customers of Turkey

Finance Bank in Bingol city. While many factors were investigated it was it was found that they

choose Islamic banking due to close relationship with bank personnel, religious sensibility, friendly

and helpful personnel, image and popularity of banking.

The table 4 below present the empirical studies which assisting in formulating the basis of this

research

Authors Purpose Supporting theory

Methodology Theoretical Framework

(Yahya and Junaina, 2017)

Identify the factors that influence customer’s adoption of Islamic banking products and services offered by banks in Sarawak

Diffusion of Innovation (DOI) Theory, Rogers

structured questionnaire through Convenient sampling.

Relative Advantage Compatibility Observability Complexity Perceived risk Perceived trust Customer innovativeness Adoption of Islamic banking

(Kishada and Wahab, 2013)

Degree to which customers are loyal towards their Islamic banks in the Malaysian context

Not specified ordinary self-administered questionnaires distributed by hand to individuals

Service encounter Social value Service experience Trust Reliability Service dependability Satisfaction Expectation Convenience Value Loyalty

(Roy, 2014) Identification of key factors that influence the customers of Bangladesh in

Not specified in-depth interviews and thematic analysis

Religious sentiments Recommendation Abundance of Islamic economy Brand Value

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choosing Islamic bank system

(Selvanathan et al., 2018)

Determine and identify the factors that influence the consumers to choose Islamic bank products or services

Not specified non probability simple random sampling around Selangor area

Bank reputation Convenience Religious value Cost and benefit Customer selection on Islamic banking

(Mariadas and Murthy, 2017)

Determine factors influencing the adoption of Islamic Banking in Malaysia

Not specified survey questionnaire

Compatibility Consumer satisfaction Risk perception Consumer knowledge Adoption of Islamic banking

(Aslan, 2017)

Identifying reasons for choosing Islamic banking in Bingol city

Not specified Survey questions

Orientation of my religious sensitivities Friendly and helpful Staff Image and popularity as a participation bank and interest-free institution The checks/controls made by the state (due to Islamic conformity) are sufficient

(Bassir et al., 2014)

Explore the consumers’ perception towards Islamic home financing as the selection criteria in Malaysia.

Theory of reasoned action

Questionnaire survey

Religiosity Price or cost Brand and reputation High level of knowledge and awareness Adoption of Islamic home financing

(Haque et al., 2009)

Assess the degree of customer perception and awareness towards Islamic Bank by Malaysians

Not specified Self-administered questionnaire

Availability of services Quality of services Social and religious perspective Confidence in bank Customer perception and preferences

(Ibrahim et al., 2017)

Determine customer intention on Islamic home financing products in Malaysia

Theory of Planned Behaviour

Questionnaire Attitudes toward behaviour Subjective norm Perceived behavioural control Level of knowledge or awareness Religiosity Customers intention in choosing Islamic home financing products

Table 4 - Empirical Studies

2.4 Literature Gap There were various studies conducted on customer patronage or adaption of Islamic finance

products using different variables in many geographical regions. Studies such as (Bassir et al., 2014;

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Haque et al., 2009; Ibrahim et al., 2017) conducted research in Malaysia regarding customer

intention on adapting Islamic banks and Islamic finance products such as home financing. Research

by Roy (2014) identified the key factors influencing customers to choose Islamic banking in

Bangladesh. Moreover similar researches has been conducted in Africa (Ezeh and Nwankwo, 2014;

Siddiqi, 2000). This research enables the financial institute to identify what influences the

customers to choose the products and helps the Islamic financing to grow in these areas. However,

there has been no identifiable research conducted in Maldives to identify determinants of customer

patronage or adaption of Islamic finance. Therefore, viewing above mentioned gap, this research

seeks to provide the determinants of customer patronage in the case of Islamic finance products in

the Maldives. The date from this research can contribute to grow the Islamic financing sector in the

Maldives.

2.5 Conceptual Framework From the analysis above of the relevant theories and empirical studies, the following conceptual

framework is developed for this study,

Figure 1 - Conceptual Framework

Religiosity can be defined as the quality of religious life (Ibrahim et al., 2017). Religiosity is

important because it affects individual’s cognitive and behavioural aspects (Alam et al., 2012).

Religion needs to be considered as a long-term phenomenon rather than a short-term change by the

marketers, and need to be considered as a valuable construct in understanding consumers (Fam et

al., 2004). Based on past studies, many researchers have concluded that religiosity is one of the

main factors of customers choosing Islamic finance products (Bassir et al., 2014; Ibrahim et al.,

2017; Rahman and Anwar, 2016; Roy, 2014; Selvanathan et al., 2018). Therefore, it is evident that

customer patronage for Islamic finance products positively correlated with religiosity.

H1: Religiosity has a positive impact on Islamic finance products customer patronage

Subjective norm is defined by theory of reasoned action and theory of planned behaviour. An

individual will intend to perform behaviour when it is positively evaluated and when they believe

people important to them think they should perform it (Ajzen & Fishbein, 1980). There are many research conducted on the influence of subjective norm on behavioural intention and the results

are found out to be conflicting (Reni and Ahmad, 2016). In some fields (Chau and H, 2001; Davis

and Bagozzi, 1989) subjective norm was found to be insignificant towards behavioural intention.

Customer Patronage

Islamic Finance

Products Level of

knowledge

Relative

advantage

Religiosity

Subjective norm

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However, in the context of Islamic finance, subjective norms was evident to have a direct impact on

customer intention (Amin et al., 2011; Taib et al., 2008). Thus, the next hypothesis for this research

is as follows

H2: Subjective norm has a positive impact on Islamic finance products customer patronage

Level of knowledge indicates the form of information that is ready to be applied to decisions and

actions (Ibrahim et al., 2017). By various researches it has been evident that the level of knowledge

or awareness encourages customers to choose a particular product or service. In one of the pioneer

research in Malaysia on bank patronage, customers were more inclined to have a relationship with

the bank if they had a more complete understanding of how the Islamic financing system works

(Haron et al., 1994). Furthermore, research by (Marimuthu et al., 2010) supports this as many

participants perceived that they do not accept Islamic banking and finance products due to lack of

information and understanding regarding the products. Therefore, this proves that level of

knowledge or awareness is an important aspect in customer patronage.

H3: Level of knowledge has a positive impact on Islamic finance products customer patronage

Relative advantage is introduced in Rogers Diffusion of innovation theory, which is how much the

new product is better than the one it replaces (Rogers, 1962). In this context it is how Islamic

finance products are better than conventional finance products. The main advantage Islamic

finance has over conventional financing is Shariah law compliance, moreover it is also perceived

that Islamic financing products are less risky, more convenient, more transparent in their

transaction and also more convenient (Siddiqi, 2000). When customer evaluates a new product to be adapted, if the perceived benefits overweighs the perceived costs consumers are more likely to

adapt the product or service (Ezeh and Nwankwo, 2014). Therefore, the hypothesis is formulated

as below

H4: Relative advantage has a positive impact on Islamic finance products customer patronage

3.0 Research Methodology 3.1 Research Design and Approach Explanatory research design is used for this study, as quantitative research is carried out through

questionnaire, to identify the link between the dependent and independent variables, furthermore

this type of research design involves the research having research hypothesis, which is the case in

this study (Saunders, et al., 2009). Using explanatory research design, in this study researcher will

employ religiosity, level of knowledge, subjective norm and relative advantage factors and identify

the determinants of customer patronage of Islamic financing in the Maldives. For this empirical data

will be collected from Maldivian customers and it will be studied and analysed to establish the

relationship between the dependent and independent variable, which will be essential to come up

with an effective and trustworthy conclusion.

The research approach for this study is deductive approach as this approach involves theoretical

testing of research strategy only designed for the purpose of research testing (Wilson, 2010). By

using deductive approach it is possible to forecast the time plan more accurately has it as lower

strategy risk such as questionnaires not been filled, as according to (Saunders, et al., 2009) research

can be completed more quicker with deductive approach if enough time is contributed to formulate

the study before data collection and analysis. Moreover, deductive approach is also implemented

because this research comprises of collection and conversion of data into numerical form to enable

statistical manipulation to make relevant and valid conclusions (Wilson, 2010).

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3.2 Research Method This research will use primary data, where original data is collected from the field. Primary data

will be important to fill the existing literature gap identified for the Islamic finance sector of the

Maldives. Moreover, by using primary data the researcher is in full control of the data collection

process where it can be ensured that only relevant data is collected. Primary data also means that

the most recent data is collected and the findings and conclusion of this research would be suitable

for the needs of the current environment.

3.2.1 Instrument Development Research instrument is a device to gather relevant information regarding the research topic. Survey

questionnaire for this research has two section; Socio-demographics section and research

instrument questions. Socio-demographic section has 6 questions, where fixed option is provided to

avoid unstructured responses. Research instrument questions are questions related to the variable

chosen for this research and this section contains 25 questions, and it is answered using 5-point

Likert Scale, requiring the participant to assign rank from strongly disagrees to strongly agree. The

items included to test the variables are mostly adapted from previous studies as follows;

Construct Description Measures Reference Religiosity Different aspects

of religiosity impacts the customer patronage of Islamic finance products

Religiosity1 - Suitability with values and beliefs

(Bassir et al., 2014; Haron et al., 1994; Ibrahim et al., 2017; Kishada and Wahab, 2013)

Religiosity2 - well-suited to lifestyle Religiosity3 – Adopting Islamic finance makes you feel good Religiosity4 - Trust in institute due to religious principle Religiosity5 - Confidence that the products are in line with Islamic principles

Subjective Norm

Different aspects of subjective norm impacts the customer patronage of Islamic finance products

SubjectiveNorm1 – Makes good impression on others

(Amin et al., 2014; Ibrahim et al., 2017; Kishada and Wahab, 2013)

SubjectiveNorm2 – provides social approval SubjectiveNorm3 – important people can influence to adopt SubjectiveNorm4 – People using Islamic finance encourages adoption SubjectiveNorm5 – earns social prestige

Level of Knowledge

Different aspects of level of knowledge impacts the customer patronage of Islamic finance products

Knowledge1 – Have Islamic finance knowledge in general

(Bassir et al., 2014; Ibrahim et al., 2017)

Knowledge2 – aware of how Islamic finance products function Knowledge3 – familiar with key Islamic finance products Knowledge4 – Know institutes providing Islamic finance products in the Maldives Knowledge5 – Have enough information regarding benefits of Islamic finance

Relative Advantage

Different aspects of relative advantage impacts the customer patronage of Islamic finance products

RelativeAdvantage1 – More secure investments

(Kishada and Wahab, 2013; Yahya and Junaina, 2017) RelativeAdvantage2 – financing as

partnership basis is more beneficial for both parties RelativeAdvantage3 – More profitable than conventional products RelativeAdvantage4 – lower cost than

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conventional products RelativeAdvantage5 – More attractive than conventional products

Customer Patronage of Islamic finance products

Determine the readiness of customers adopting Islamic finance

CustomerPatronage1 – Meets expectation

(Haron et al., 1994; Kishada and Wahab, 2013) CustomerPatronage2 – deeply loyal to

Islamic finance CustomerPatronage3 – intend to adopt in the future CustomerPatronage4 – frequently use Islamic finance products CustomerPatronage5 – Encourage others to adopt

Table 5 - Instrument table

3.2.3 Population and Sample The target population for this research is the general public of the Maldives, who are either current

or potential customers of the financial sector. As the study focuses on adoption of Islamic finance

products it was assumed that the respondents are generally aware of Islamic finance. The reason

for choosing the general public of the Maldives is to get a broader understanding of the factors

affecting different demographics and also because no previous studies have been conducted for this

target population.

Estimation of an adequate number of respondents is crucial for the success of a research (Chuan,

2006). Therefore, Krejcie & Morgan (1970) sample size formula for finite population is used to

determine the sample size of 250 respondents, which will offer enough statistical strength for data

analysis. The survey questionnaire was sent to respondents online targeting 250 responses and a

total of 263 responses were collected.

There was no definite manner to select a particular type of participants for this study therefore

non-probability convenience sampling method used for the sampling (Kothari, 2004), where the

participants the practical criterions of easily accessible, availability at the time of data collection,

geographical proximity and the willingness to participate in the study (Showkat & Parveen, 2017).

3.2.4 Data Collection Method Data for this research is collected through self-administered online questionnaires constructed in

English. Questionnaires are an effective way of determining opinions and also as due to anonymity

of questionnaires the responses received are more accurate (Murgan, 2015). The data collection

was conducted in the month of January 2019. Likert’s scaling is used in the questionnaires to seek

agreement of disagreement from the respondents. The questionnaire informs the purpose of the

study to the participants of the research and also assures that the information they have provided

will only be used for the purpose of this research. Furthermore, the researcher thanks the

respondents for their participation in the research.

3.3 Data Analysis Plan Data analysis will be conducted using Statistical Package for Social Science (SPSS) software version

22 and AMOS tool will be used for the analysis of the variables to establish relationships between

dependent and independent variables. Primary data gathered through questionnaires from the field

will be input into SPSS and AMOS for analysing and various analyses will be generated as follow;

3.3.1 Demographic Analysis To analyse the socio-demographic data descriptive statistic method is going to be utilized. This will

be presented in graphical mode, which will demonstrate the different demographics of the people

who participated in the study such as age group, level of profession and education, measuring the

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trend and distribution of the sample. However, the data relating to socio-demographics will not

impact the results or conclusion of the research hypothesis

3.3.2 Description and Normality Analysis The central tendency and the variability are measured using descriptive and normality analysis.

Central tendency is measured with mean, median and mode, and standard deviation, skewness and

kurtosis measures variability (Rawlings and Dickey, 1998).

This analysis determines the normality of distribution of the data set (Hair, et al., 2010). The

standard assists in showing the relationship of the scores with the mean of the sample. By

calculating the skewness it shows the irregularities of the probability distribution of a variable

about its mean (Thode, 2002). The normality analysis of the data is considered normal if the

skewness is between +/- 1 (George & Mallery, 2005).

3.3.3 Reliability Analysis Reliability analysis enables the researcher to analyse the extent to which the analysis process and

the data collection techniques will generate consistent findings (Hair, et al., 2010). The researcher

will use Cronbach’s Alpha calculated from SPSS to ensure reliability of the data. The rule of

Cronbach’s Alpha is that the value must exceed 0.7 to be acceptable for further analysis (Hair, et al.,

2010). Table 6 below shows the rule of thumb for Cronbach’s Alpha Coefficient Size when the alpha

value is closer to 1, the higher the internal consistency reliability.

Alpha Coefficient Range Strength of Association

< .5 Unacceptable

> .5 Poor

> .6 Questionable

> .7 Acceptable

> .8 Good

> .9 Excellent

Table 6 - Cronbach’s Alpha Coefficient Rule of thumb

3.3.4 Assumptions for Multiple Regression Autocorrelation shows the degree to which a value of a variable during a particular time (t) is

correlated to its value of a previous time period (t _ 1) (Saunders, et al., 2009). To test the

autocorrelation Durbin Watson Statistics will be used, in this method the value ranges from 0-4.

When the value is 2, it indicates no autocorrelation. Whereas when the value is closer to zero it

means positive autocorrelation and when it is closer to four it is negative autocorrelation

(Anderson, et al., 2003).

Multicollinearity occurs when between two or more of the variables correlation is missing, and this

would make it challenging to identify the specific effects of each variable (Saunders, et al., 2009).

This will be tested using tolerance value and its converse, the Variance Inflation Factor (VIF). It is

high collinearity when the tolerance value is 0.10 or lower, or if the VIF value is 10 or higher (Hair,

et al., 2010).

The equal variances of error through the data values of dependent and independent variables are

shown by homoscedasticity and the unequal variance is shown by heteroscedasticity (Osborne &

Waters, 2002; Saunders, et al., 2009).

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Sample adequacy predicts whether the collected data factors well according to the correlation. This

is measured with Kaiser Meyer Olkin (KMO) statistics. The overall KMO statistics is supposed to be

.60 or higher to continue with factor analysis (Kaiser, 1974).

3.3.5 Regression Analysis Model Fitness

Regression analysis calculates the regression equation and coefficient of determination (Saunders,

et al., 2009). Correlation between observed and predicted values is measured by the R value and R

Square (R2) and further explained the percentage of variation along the regression line from the

total variation. Rule of thumb for R Square (R2) values is 0.75 is considered substantial, 0.50

moderate and 0.25 weak for endogenous latent variables. In addition to R Square value, adjusted R

square measures the overall model fitness accuracy (Hair, et al., 2010)

Model Significance

Model Significance testing is conducted to test probability of an outline, for example the

relationship happening among the variables only by chance. Model significance can be tested by

using the variance, comparing the means within the groups of data and between them. F ratio or F

statistics represents these variances. A high F ratio with probability (p-value) of lower than 0.05 is

considered as statistically significant (Saunders, et al., 2009).

Hypothesis Testing

To test the hypothesis, this research will be using Pearson correlation. Furthermore, the framework

of the research will be tested with linear regression model. A statistically significant relationship is

established when the probability test value is 0.05 or lower (Saunders, et al., 2009).

4.0 Results, Analysis and Discussion 4.1 Analysis of the Demographic Profile of Respondents The demographic profile from the data collected from 263 responses depicted in the below table

shows that 64% of participants were female and 34% were male and 1.5% of the participants did

not specify their gender. The majority age group who participated in the survey is 25-35 years

group, which represents the general population of the Maldives where the majority of the

population is the youth. Following that 30% are 18-24 years age group and 18% are of 36-45 years.

Only 4.6% are above 45 years of age, and the reason for this could be that the data was collected

online. Furthermore, half the population of the participants work at government/public sector

followed by 17% working in private sector and 12.5% are students. 28% of the participants are

diploma holders and both undergraduate degree holders and post graduates are both at 20.9%.

16% of the participants have secondary education and 11.4% holds a professional qualification.

60% of the participants currently do not use Islamic Finance and looking at the current finance

methods used by participants’ majority uses conventional method with 45% and only 15.6% uses

Islamic finance and 33% uses both Islamic and conventional Islamic Finance products.

Frequency Percent

Gender

Undefined 4 1.5

Female 169 64.3

Male 90 34.2

Age

Undefined 7 2.7 18-24 years 78 29.7 25-35 years 119 45.2

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36-45 years 47 17.9 above 45 years 12 4.6

Profession

Undefined 4 1.5

Government/Public sector 129 49.0

Private sector 45 17.1

Self employed 23 8.7

Student 33 12.5

Unemployed 29 11.0

Educational qualification

Secondary 44 16.7

Diploma 74 28.1

Undergraduate 55 20.9

Professional qualification 30 11.4

Post graduate 55 20.9

Undefined 5 1.9

Currently using Islamic Finance?

No 156 59.3

Yes 101 38.4

Undefined 6 2.3

Method of Finance currently using?

Conventional 118 44.9

Islamic 41 15.6

Both 87 33.1

Undefined 17 6.5

Total responses = 263

Table 7 - Demographic profile of respondents

4.2 Descriptive & Normality Analysis

4.2.1 Descriptive Statistics . The mean of the variables are between 2.8 – 3.6, where the level of knowledge scored the least

mean value with 2.8 and customer patronage scored highest value with 3.6. Moreover the standard

deviation for all the variables are below the mean value, therefore the descriptive analysis for this

study is adequate.

Descriptive Statistics

Minimum Maximum Mean Std. Deviation

Knowledge 1.00 5.00 2.8656 1.08514

Religiosity 1.00 5.00 3.5837 1.01386

Subjective Norm 1.00 5.00 3.2624 1.00590

Relative Advantage 1.00 5.00 3.4340 .90000

Customer Patronage 1.00 5.00 3.6660 1.04598

Table 8 - Descriptive statistics for aggregated constructs

Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

Statistic Statistic Statistic Statistic Statistic

Knowledge 1 263 1.0 5.0 2.886 1.2052

Knowledge 2 263 1.0 5.0 2.738 1.2121

Knowledge 3 262 1.0 5.0 2.519 1.3122

Knowledge 4 261 1.0 5.0 3.310 1.3125

Knowledge 5 263 1.0 5.0 2.878 1.3019

Religiosity 1 263 1.0 5.0 3.593 1.2833

Religiosity 2 263 1.0 5.0 3.555 1.1802

Religiosity 3 261 1.0 5.0 3.755 1.2654

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Table 9 - Descriptive statistics for each of the construct

4.2.2 Normality Analysis Based on the 263 responses, the normality test for this study is an average of -0.254 of skewness

and kurtosis of -0.668 with reference to the table below. The skewness and kurtosis is within the

range of +/- 1 and therefore it is considered normal distribution. (Hair, et al., 2010). Another

measure to identify the normal distribution of the data is by dividing the score of skewness or

kurtosis with its standard error and if the results are higher than +/- 1.96 indicates that the data is

not normally distributed. For this study, skewness and kurtosis of all the variables shows normal

data distribution.

Religiosity 4 262 1.0 5.0 3.737 1.2392

Religiosity 5 263 1.0 5.0 3.281 1.1610

Subjective Norm 1 262 1.0 5.0 3.515 1.2402

Subjective Norm 2 262 1.0 5.0 3.447 1.1593

Subjective Norm 3 262 1.0 5.0 3.332 1.2926

Subjective Norm 4 263 1.0 5.0 3.034 1.3087

Subjective Norm 5 263 1.0 5.0 2.981 1.1994

Relative Advantage 1 263 1.0 5.0 3.567 1.1731





Customer Patronage 1 261 1.0 5.0 3.502 1.0906





Valid N (list wise) 250 Normality Analysis

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Table 10 - Normality analysis with skewness and kurtosis for each of the constructs

4.3 Reliability Analysis The below table shows the “Cronbach’s Alpha coefficients” the variables of this research and its

individual constructs. The reliability of all variables with all the 25 constructs is 0.957, which is

considered excellent reliability (Hair, et al., 2010). The individual variables Alpha coefficients are

also at adequate level with level of knowledge and customer patronage at excellent results and

religiosity, subjective norm and relative advantage with good results. Therefore, no significant

alterations were made to the survey questionnaires.

Reliability Statistics

Measurement Cronbach's Alpha No of Items Strength of Association

All Variables .957 25 Excellent

Knowledge .906 5 Excellent

Religiosity .885 5 Good

Skewness Kurtosis

Statistic Std. Error Statistic Std. Error

Knowledge 1 .063 .150 -.756 .299

Knowledge 2 .192 .150 -.842 .299

Knowledge 3 .409 .150 -.944 .300

Knowledge 4 -.373 .151 -.979 .300

Knowledge 5 -.013 .150 -1.033 .299

Religiosity 1 -.416 .150 -.974 .299

Religiosity 2 -.456 .150 -.501 .299

Religiosity 3 -.666 .151 -.604 .300

Religiosity 4 -.669 .150 -.502 .300

Religiosity 5 -.167 .150 -.754 .299

Subjective Norm 1 -.412 .150 -.761 .300

Subjective Norm 2 -.248 .150 -.725 .300

Subjective Norm 3 -.316 .150 -.945 .300

Subjective Norm 4 -.053 .150 -1.045 .299

Subjective Norm 5 .117 .150 -.687 .299

Relative Advantage 1 -.433 .150 -.554 .299


Relative Advantage 3 .008 .150 -.437 .299



Customer Patronage 1 -.184 .151 -.490 .300





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Subjective Norm .871 5 Good

Relative Advantage .880 5 Good

Customer Patronage .941 5 Excellent

Table 11 - Reliability coefficient

4.4 Analysis of the Assumptions for Multiple Regression

4.4.1 Analysis of the Autocorrelation The assumption is that there should be no autocorrelation. This is indicated with Durbin-Watson

statistics with the scale 0 – 4, where 2 mean no autocorrelation (Hair, et al., 2010). The below table

shows Durbin-Watson statistics of this research is 2.016 which indicates no auto correlation.

Model Summary b

Model R R Square Adjusted R Square

Std. Error of the Estimate

Durbin-Watson

1 .866a .750 .746 .52725 2.016

a. Predictors: (Constant), Relative Advantage, Knowledge, Religiosity, Subjective Norm

b. Dependent Variable: Customer Patronage

Table 12 - Autocorrelation analysis

4.4.2 Analysis of Multi-collinearity Multicollinearity level is determined by the Variance Inflation Indicator (VIF) and Tolerance. If the

VIF is between 5 and 10 it indicates that some level of correlation exists and it the VIF is higher than

10 it shows high multicollinearity. When the multicollinearity is high it is considered unfavourable

(Hair, et al., 2010; Saunders, et al., 2009). As shown in the below table VIF is within the range of 1.4-

2.7 indicating no multicollinearity. Considering the Tolerance level, the tolerance coefficient should

be less than 0.90, for there to be no multicollinearity. The Tolerance Level for the research is

between 0.36-0.71 which means there is no multicollinearity.

Coefficients a

Model

Unstandardized Coefficients

Standardized Coefficients

t Sig. Collinearity Statistics

B Std. Error Beta

Tolerance VIF

1

(Constant) .090 .137 .656 .512

Knowledge -.054 .036 -.056 -1.523 .129 .710 1.409

Religiosity .455 .051 .441 8.939 .000 .398 2.515

Subjective Norm .131 .054 .126 2.434 .016 .364 2.748

Relative Advantage .487 .059 .419 8.216 .000 .372 2.685

a. Dependent Variable: Customer Patronage

Table 13 - Multicollinearity analysis

4.4.3 Analysis of Normality of the Dependent Variable

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For this study histogram is used to show normal distribution. Histogram graphically displays single

variable presenting its data distribution, and it shows visual evaluation whether the normal

distribution is achieved (Hair, et al., 2010). Rule of thumb of normal distribution is that it only

applied to the disturbance term and not to the independent variables. Normality is when there is

random error in between the relationship of dependent and independent variable in the regression

model (Byrne, 2010). In this study, the dependant variable is Customer Patronage, and its

distribution disturbance is considered normal based on below histogram. There is no possible

normality assumption violation.

Figure 2 - Normality of dependent variable histogram

4.4.4 Analysis of Normality of the Residuals This model predicts the values that are higher and lower than the equal probability of the actual.

Graphical method of normal probability plot is shown to identify if the data is normally distributed.

The data is normally distributed if the points follow the diagonal line all the way through

(Chambers , et al., 1983). Below normal p-p plot shows, the points are almost in the straight line on

the diagonal line indicating strong correlation among actual results and the model predictions.

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Figure 3 - Normality of residuals probability plot

4.4.5 Analysis of Homoscedasticity From the plots below, it is evident that for the current study customer patronage is positively

associated with all the dependent variables. When there is a great variation is the size of the

scatterplot, it shows that the variability of the size of error is different from the independent

variable. The dependent variable charts below shows that the normality is met with the

standardized residual and equally distributed points for the variables except for subjective norm.

For subjective norm the points are not equally distributed and are in a cluster and therefore the

normality is not met for this variable (Kline, 2011).

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Figure 4 - Homoscedasticity analysis scatterplots

4.4.6 Sample Adequacy The adequacy of the ratio of the sample in the research is essential to avoid possible discrepancy

with the coefficient of the samples. Kaiser-Meyer-Olkin (KMO) provides a suitable scale and it

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identified as a requirement in measuring if the sample is adequate for further analysis of the

factors. KMO of this study is 0.949 which is above 0.60 (Kaiser, 1974). The Bartlett’s Test of

Sphericity is at 0.000 and the recommended value is below 0.05. Therefore, it indicates suitability

and validity in the current study and it ensures the study’s ability to achieve the research objectives

and its ability to tackle the research question.

Table 14 - Sample adequacy

4.5 Regression Analysis

4.5.1 Model Fitness Model fitness is identified by assessing R, R square and the adjusted R square. The higher the value,

it is considered higher coefficient between observed and predicted value. The R square value for

this study is 0.750, and when the R square value ranges above 0.75 it is considered to be

substantial, it also indicates that the data is 75% to the fitted regression line, the coefficient

determination (Hair, et al., 2010). Moreover, the adjusted R square value is 0.746, which specifies

the good model fitness of this study.

Model Summary b

Model R R Square Adjusted R Square

Std. Error of the Estimate

Durbin-Watson

1 .866a .750 .746 .52725 2.016

a. Predictors: (Constant), Relative Advantage, Knowledge, Religiosity, Subjective Norm

b. Dependent Variable: Customer Patronage

Table 15 - Model fitness

4.5.2 Model Significance The rule of thumb for model significant is p value should be less than 0.05 for the model to be

statistically significant (Hair, et al., 2010). The ANOVA table below shows the sig value for this study

was 0.000 which means that the model is statistically significant which suggests that there is 99%

chance of obtaining similar results if study is repeated.

ANOVAa

Model Sum of Squares df Mean Square

F Sig.

1

Regression 214.926 4 53.731 193.283 .000b

Residual 71.722 258 .278

Total 286.648 262

a. Dependent Variable: Customer Patronage

b. Predictors: (Constant), Relative Advantage, Knowledge, Religiosity, Subjective Norm

Table 16 - Model significance - ANOVA

KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .949

Bartlett's Test of Sphericity

Approx. Chi-Square 5230.013

Df 300

Sig. 0.000

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4.5.3 Hypothesis testing The covariance matrix is used to test the hypothesis. The sig value of each independent variable

should be less than 0.05, for the hypothesis to be accepted. If the sig value is over 0.05 then the

hypothesis is considered to be rejected (Saunders, et al., 2009). The other measurement used is the

Standardized Beta Coefficient value, which measures how significantly the independent variables

influence the dependent variable (Hair, et al., 2010). The higher the value, stronger the correlation and more significant the impact to the dependent variable.

From the table below, it is evident that religiosity, subjective norm and relative advantage are

accepted as the sig value for these variables are lower than 0.05. However, level of knowledge was

rejected as the sig value for this variable is 0.129 which is greater than 0.05.

Coefficients a

Model

Unstandardized Coefficients

Standardized Coefficients

t Sig.

Collinearity Statistics

B Std.

Error Beta

Tolerance

VIF

1

(Constant) .090 .137 .656 .512

Knowledge -.054 .036 -.056 -1.523 .129 .710 1.409

Religiosity .455 .051 .441 8.939 .000 .398 2.515

Subjective Norm .131 .054 .126 2.434 .016 .364 2.748

Relative Advantage .487 .059 .419 8.216 .000 .372 2.685

a. Dependent Variable: Customer_Patronage Table 17 - Hypothesis coefficient table

Table 18 - Hypothesis summary table

4.6 Discussion

4.6.1 Religiosity and Customer Patronage

Hypothesis Sig Value

Standardized Beta Coefficient

Result Interpretation

H1: Religiosity has a positive impact on Islamic finance products customer patronage

0.000 0.441 Accepted

Religiosity is accepted with 0.000 sig value, and beta coefficient of 0.441 indicates that religiosity has a 44% positive impact on Islamic finance products customer patronage. Therefore it is concluded that Religiosity is a significant factor for customer patronage of Islamic Finance products

H2: Subjective norm has a positive impact on Islamic finance products customer patronage


Subjective Norm is accepted with 0.016 sig value, and beta coefficient of 0.126 indicates that subjective norm has a 12.6% positive impact on Islamic finance products customer patronage. Therefore it is concluded that Subjective Norm is a significant factor for customer patronage of Islamic Finance products

H3: Level of knowledge has a positive impact on Islamic finance products customer patronage

0.129 -0.056 Rejected Level of Knowledge is rejected with 0.129 sig value, and beta coefficient of -0.056 indicates that Level of knowledge does on have an impact on Islamic finance products customer patronage. Therefore it is concluded that Level of knowledge is not a significant factor for customer patronage of Islamic Finance products

H4: Relative advantage has a positive impact on Islamic finance products customer patronage


Relative Advantage is accepted with 0.000 sig value, and beta coefficient of 0.419 indicates that relative advantage has a 42% positive impact on Islamic finance products customer patronage. Therefore it is concluded that relative advantage is a significant factor for customer patronage of Islamic Finance products

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Religiosity is the first independent variable selected for this research. The aim is to investigate

whether the inherent religious value people possess has an impact on the customer patronage of

Islamic finance products.

The descriptive analysis of religiosity showed a mean on 3.58 and a standard deviation of 1.014,

showing that majority of the participants of the survey agreed to Religiosity related questions.

Moreover, the overall reliability of Religiosity is good with 0.885. Further to this the

multicollinearity analysis for this variable shows a VIF of 2.515 indicating no multicollinearity and

thus there is adequate level of accuracy in the model.

In addition, the hypothesis is accepted with a p value 0.000, indicating religiosity has a significant

impact in Islamic finance products customer patronage. Respondents agreed that religiosity has a

positive impact of 44% on customer patronage of Islamic finance products. Many of the

respondents considered Islamic finance products more trustworthy due to the Islamic principles

applied. Furthermore, they also believe that Islamic finance is line with their values and beliefs and

it is well-suited for their lifestyle. Therefore, it is evident that religiosity is a major factor for

customers choosing Islamic finance products. This finding is supported by previous studies where

this variable was tested (Aslan, 2017; Bassir et al., 2014; Haque et al., 2009; Ibrahim et al., 2017;

Rahman and Anwar, 2016; Roy, 2014; Selvanathan et al., 2018).

Subjective norm

Subjective norm is the next variable tested in this research. Subjective norm attempts to identify if

the influence or view of other people in the society impacts the customer patronage of Islamic

finance products.

Reliability test for this variable shows good reliability with 0.871 Cronbach’s Alpha coefficient.

Further to this with an overall mean of 3.26 it is evident that participants mainly agree to the

subjective norm constructs in the questionnaires. Multicollinearity level for subjective norm is at

2.75 VIF, indicating no multicollinearity.

The hypothesis of subjective norm is accepted as the p value is 0.016. The beta coefficient for the

variable is 0.126, which indicates respondents believe that subjective norm is an important factor

in Islamic finance customer patronage and it has 12% positive impact on customer patronage. This

value is lower comparatively to other accepted variables, but it can be concluded that even if it is

not a large impact, subjective norm has a positive impact on customer patronage of Islamic finance

products. It was found out that people believe that adopting Islamic finance products makes a good

impression on others and it can also provide social approval. Moreover, it was also revealed that

recommendation from friends & relatives will encourage people to adopt Islamic finance products.

However, this result is contradicted by researches conducted by (Ibrahim et al., 2017; Kishada and

Wahab, 2013) in Malaysia, where it was found that there is no significant affect between subjective

norm and customers choosing Islamic finance product.

Level of knowledge

Level of knowledge was tested as one of the independent variables to identify whether the level of

knowledge people have about Islamic finance contributed in them selecting Islamic finance

products.

Many previous researchers have also used this variable to test its effect on Islamic finance adoption

(Bassir et al., 2014; Ibrahim et al., 2017; Mariadas and Murthy, 2017). Finding of research by

(Mariadas and Murthy, 2017) investigating factors influencing the adoption of Islamic banking in

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Malaysia, showed level of knowledge have a direct significant influence on adoption of Islamic

banking, but studies by (Bassir et al., 2014; Ibrahim et al., 2017) contradicts these finding and by

these researches it was found out that level of knowledge did not significantly impact people

choosing Islamic finance products.

Similarly, the hypothesis of level of knowledge for this study was rejected with a p value of 0.129.

Therefore, it is concluded that level of knowledge does not have a positive impact on Islamic finance

customer patronage. From the survey questionnaire it was identified that while Maldivians are

aware of institutions offering Islamic finance products, they have limited knowledge regarding

Islamic finance products, its principles and benefits.

Relative Advantage

The fourth variable of this study is relative advantage. Relative advantage identifies whether the

advantages Islamic finance have over conventional financing providers impacts the customer

patronage of Islamic finance products.

Relative advantage scored a mean of 3.4, which shows mainly participants agrees with questions

related to relative advantage. Cronbach’s Alpha coefficient for relative advantage is 0.880, which

indicates good reliability. Furthermore, no multicollinearity was found with a VIF score of 2.68.

The sig value of relative advantage is 0.000, thus the hypothesis is accepted. Also beta coefficient of

0.419 indicates according to the respondents relative advantage has 42% positive impact on

customer patronage of Islamic finance products. The many respondents believe that Islamic finance

products are more attractive and profitable than conventional products. They also responded that

in Islamic finance their investments are more secure and that Islamic finance products are of lower

cost than conventional products in the market. Therefore, it is evident, relative advantage is a

significant factor influencing people to choose Islamic finance products. This finding is supported

by research conducted in Sarawak, Malaysia to study the factors influencing customer’s adoption of

Islamic banking products and services offered by (Yahya and Junaina, 2017), where relative

advantage was the second significant factor influencing customers adoption of Islamic banking.

5.0 Conclusion, Recommendation and Implication 5.1 Conclusion This research was conducted to identify the determinants of customer patronage of Islamic finance

products in the Maldives. There are many factors which could contribute to this, and from relating

theories and empirical study four variables were selected and tested; religiosity, subjective norm,

level of knowledge and relative advantage. In conclusion, it was found that religiosity is the most

driven factor in customers adopting Islamic finance, which implies that people are adopting Islamic

finance mainly due to Islamic laws and principles. The next most influential factor was relative

advantage, where customers chose Islamic finance because they believe that the products offered

by Islamic finance are relatively better than what is offered by conventional institutes. Subjective

norm was also found to have a positive impact on customer patronage of Islamic finance; therefore

people’s recommendation also can influence customers to choose Islamic finance. However, level of

knowledge was rejected and it was identified as to not have an impact on the customer patronage of

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Islamic finance in the Maldives, which indicates that people lack Islamic finance knowledge and it

also does not affect their decision to choose Islamic finance products.

This finding can further be proven, when looked into the Maldivian society’s lifestyle. Maldivians

lifestyle and culture is very much founded on values and teachings of Islam. Therefore, the way they

conduct themselves, things they consume and buying pattern of the Maldivian society is very much

dependent on this. Thus, this supports religiosity being the most influential factor in adoption in the

case of Islamic finance. Further to this, Maldivians also hold a strong value for family, and their

opinions and recommendations are considered valuable and therefore subjective norm has a

positive impact on customer patronage. Maldives local syllabus has a very limited content on

Islamic finance therefore generally people do not possess the knowledge about Islamic finance

products or principle. This backs up the finding that level of knowledge does not have an impact on

customer patronage of Islamic finance.

5.2 Recommendation Based on the findings of this study, several recommendations can be drawn to increase the

customer base of Islamic finance products offered in Maldives. Firstly, as religiosity has the biggest

impact on customers adopting Islamic finance products, managements of Islamic finance institutes

should thrive to make their products Shari’ah compliant and along with that they also need to

communicate to the public the authenticity of these products through marketing efforts such as

promotional campaigns. They also should emphasize the fact that the Institutions offering Islamic

finance services are continuously monitored by the “Sharia Board”. Moreover, Islamic financing

institutes should introduce and offer products that are more effective than products currently

offered by conventional institutes. Currently, the information available to customers about Islamic

finance products offered by Islamic finance institutes are very limited, for instance in their websites

and advertisements. Islamic finance institutes should therefore, include effective information

regarding the products offered, for customers to comprehend how the products work and for them

to be able to compare the products with other alternatives available and understand the benefits

attached to it. They can also introduce programs where they can work with existing customers in

promoting Islamic finance products and increase their customers, by offering rewards such as cash,

rebates or gifts. Islamic finance institutes should also focus on making their employees thorough

about the principles of Islamic finance and the products offered in the institutes and ensure that

employees have excellent customer service skills, as this will enhance the customer experience and

in turn encourage more customers to adopt. Further to this, as Maldives has many islands and are

geographically dispersed, Islamic finance institutes should find ways to expand and provide access

to more customers throughout the country.

5.3 Implication These research findings have several implications on current operation of Islamic finance institutes

as well as for other researchers. This study fills a significant research gap, as there is very limited

information available regarding customer patronage of Islamic Finance products in the Maldives.

The information generated forms a basis for future researchers to conduct further in-depth analysis

of this topic. Furthermore, as the information collected for this research is primary data and are

reliable future researchers can use this as background to their research and as literature review on

Customer patronage of Islamic finance products. This research finding can also help the

management of Islamic finance institutes to formulate their marketing and product development

strategies as it identifies the factors that influence customers to adopt their products and they can

focus their strategies accordingly. Furthermore, it could also assist policy makers to establish

policies and regulations specific to Islamic Financing in the Maldives to ensure consistency and

more efficient operations among the Islamic financing institution and also increase

competitiveness, thus resulting in better products and more quality services to the customers.

ISSN: 2289-4519

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