International Journal of Islamic and Middle Eastern Finance and

Management
Perception of Nigerian Muslim account holders in conventional banks toward Islamic
banking products
Kabiru Jinjiri Ringim
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Islamic banking products", International Journal of Islamic and Middle Eastern Finance and Management,
Vol. 7 Iss 3 pp. 288 - 305
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IMEFM
7,3
288
Received 11 April 2013
Revised 3 November 2013
Accepted 15 December 2013
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International Journal of Islamic and
Middle Eastern Finance and
Management
Vol. 7 No. 3, 2014
pp. 288-305
© Emerald Group Publishing Limited
1753-8394
DOI 10.1108/IMEFM-04-2013-0045
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1753-8394.htm
Perception of Nigerian Muslim
account holders in conventional
banks toward Islamic
banking products
Kabiru Jinjiri Ringim
Department of Business Administration, Ahmadu Bello University, Zaria, Nigeria
Abstract
Purpose – The purpose of this study is to determine the level of perception of a Muslim account holder
in a conventional bank toward Islamic banking products and to determine the relationship between the
perception levels of Nigerian’s account holder’s and their decision to patronize Islamic banking.
Personal perception factor is operationalized as opinion or observations, which are able to influence
customer’s decision to patronize Islamic banking products and services.
Design/methodology/approach – A field survey was conducted and samples drawn using
proportionate stratified simple random sampling techniques. Out of the 500 questionnaires
distributed by hand, only 304 were returned and 286 were usable for the data analysis using SPSS
and PLS Modeling Software.
Findings – First, the means for personal perception variable was 4.91 with standard deviation of 1.007.
This indicates the good perception level of Islamic products by Muslim account holders in a
conventional bank in Kano, Nigeria. The respondents’ level of decision to patronize the Islamic banking
products and services was satisfactory. Second, the results also showed that the research framework
model, structural model and hypothesis were supported. In the measurement model, the convergent,
discriminant validity and reliability/composite reliability of the perception construct were assessed
favorably. The results revealed that perception was positively associated with a Muslim account
holder’s decision to patronize Islamic banking products.
Research limitations/implications – The study is subject to several shortcomings that limit
interpretation of findings. One of the limitations of this study is the use of cross-sectional design for
survey research and subjective self-reported perceptual measures in assessing the studies. Hence, the
findings of this study cannot be generalized in a larger context across the cultures of other countries.
Practical implications – The implication of this study is for the Islamic banking industry to focus on
the people’s level of perception, government support, quality and availability of Islamic banking
products and services that would have an impact on customer decision to patronize Islamic banking
products. The necessary suggestions on new area of research were recommended for future researchers.
Social implications – Islamic banks have the potential to exploit and market to various segments of
customers extending beyond those who are concerned with the legitimacy of the facility from the
Islamic point of view and those who seek service quality, convenience and efficient transactions. To the
practitioners in search of patronage of Islamic banking products and services, patronage studies on
Islamic banking have so far largely focused on the combination of various religious, reputation,
commercial, service satisfaction, staff, confidentiality and convenience factors.
Originality/value – The results of the present study establish the major problem that requires urgent
attention needed to strengthen public education toward the distinctive characteristics of Islamic banks
and how it may profitably suit the interest of customers in their financial dealings.
Keywords Nigeria, Perception, Patronize Islamic banking products
Paper type Research paper
 1. Introduction Islamic banking
Modern Islamic finance begins with the emergence of Islamic banking, where financial
products and services are devoid of riba (interest). As the industry grows, many
products
financial products were initiated and adopted to incorporate Shariah-compliant aspects.
In view of this development, product innovation became inevitable in Islamic financial
services industry (Ayub, 2007). The first successful application of Islamic finance was
undertaken in 1963 by Egypt’s Mit Ghamr Savings Bank, which earned its income from 289
profit-sharing investments rather than from interest. By 1970, the push for Islamic
finance gained momentum (Algaoud and Lewis, 2001). In 1973, the conference of foreign
ministers of Muslim countries decided to establish the Islamic Development Bank with
the aim of fostering economic development and social progress of Muslim countries in
accordance with the principles of Shariah. This marked the first major collective step
taken by Muslim countries to promote Islamic finance (Saeed, 2001).
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The Islamic finance witnessed an unprecedented growth of 15-20 per cent per annum
due to the commitment, dedication and moral contributions of Muslim scholars,
economists, bankers and the Ummah at large (Ayub, 2007; McGee, 2008). During the
period 1996-2005, there are over 300 Islamic financial institutions operating in more than
75 countries, managing funds for over $800 billion in assets (KPMG, 2006). The total
asset of an Islamic banking sector grew from an asset value of $150 billion in the mid-
1990s to about $1 trillion in 2011. The Islamic Financial Service Board, forecasts the
global Islamic Finance assets to reach the USD 1.6 trillion by the year 2013, with Islamic
Banking expected to remain the major contributor at more than 80 per cent share. These
institutions are not only located in the Muslim countries but in other countries as well,
where Muslims are minority (e.g. the USA, Great Britain, Australia, China and France).
In addition, the Islamic banking products are not solely used by Muslims, but people
from other religious backgrounds also patronize Islamic banks. The compliance with
principles that forbid exploitation, deceit and fraud are appealing to many non-Muslims
as well (Venardos, 2006). Zubair and Alaro (2008) argued that Islamic window product
had been in existence and practiced by Nigerian financial institutions before the
revocation of the 1968 banking act that limit the activities of the banks. The banking
reform of 1969 and Central bank of Nigeria Banking act of 1991 as well as BOFIA 2004
amendments recognized the establishment of profit-and-loss–sharing venture referred
as Islamic window products in conventional banks. The Islamic window is supposed to
perform all the activities and functions of the conventional bank with justice and
equitable distribution of benefits as obtainable under Shariah. Many Nigerian
commercial banks were granted licenses by the Central Bank of Nigeria (CBN) for them
to operate the window of Islamic banking product.
However, the Islamic window in Nigeria was not performing due to low level of
knowledge and lack of publicity for the product (Gusau, 2004). People neither heard
about it on radio nor on the television or any advertisement in the newspapers or
specialized journals. There were no pamphlets or leaflets available to educate the
Muslim population about the Islamic bank windows. This means that Muslim
communities in the areas are not aware about Islamic banking products. This was
among other reasons that led to poor patronage and discouraged other banks from
opening up the Islamic window.
In addition, the extent of access to financial service (savings, credit, insurance,
pension, receipt and payment) in a country by its citizens, especially the low-income
 IMEFM segment is important in challenging the poverty trap of that country (Adewusi, 2011).
CBN (2010) reported that only 46.3 per cent of Nigerian populaces are a purview within
7,3 the banking services; this implies that 53.7 per cent of Nigerians are not bankable.
Similarly, Aliyu, 2012) argued that 26.9 per cent of the adult population would be likely
to use non-interest banking (NIB) products if the service is introduced. While 44.9 per
cent of the populations are of the opinion that NIB should be provided by new financial
290 institution. The result from the survey concluded that about 70 per cent of adult
population in Nigeria are under bank.
However, the CBN seeks to reduce this level to 20 per cent by the year 2020. The
emergence of Islamic bank on the scene was no doubt help to cajole and douse the apathy
among non-bank public to accept the banking services that now suit their preferences
and recognize their religious values and beliefs. The provision of Islamic banking
products in Nigeria would improve the product mix and offer a wide range of financial
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services. For instance, murabahah mode of asset financing, musharakah and

mudarabah deposits accounts, ijarah financing via asset leasing, purchases and supply
arrangements through salam, istisna and istijrar are all new additions to the existing
conventional banking products and services in Nigeria. These services, however, bear
the unique method of profit-and-loss–sharing, which was lacking in the conventional
banking operations.
Islamic banks are said to be capable of encouraging the non-bank public to accept
banking services that are compatible with their religious beliefs and way of life. This
offers great opportunity for the apex bank to have a full control of monetary policy
instruments money supply and demand, availability of credit and monetary policy rate.
The presence of Islamic banking products and services are therefore important for
achievement of monetary policy objectives in Nigeria. Perception survey would assist
banks and authorities in getting the first-hand information from customers
(respondents) about the true situation of business operations and the need for successful
improvement. Therefore, this study seeks to fill two gaps:
(1) To make literature available for the seemingly scanty research on perception of
a Muslim account holders on Islamic banking products and the effects of their
decision to patronize Islamic banking product and service in Nigeria.
(2) To serve as input for potential Islamic bank (IB) promoter and policy makers on
policy formulation, especially as it relates to people’s perception of IBs products.

Hence, this survey investigated the perception of the Islamic products by Muslim
account holders in Nigerian banks only. The researcher did not asked the opinion of Non
Muslim account holder’s in Conventional bank toward Islamic banking products. The
apex bank chief challenged the non-Muslim critics to take a legal step in protesting
CBN’s decision in favor of Islamic banking (Sanusi, 2011). He further explained that CBN
had not contravened any constitutional provision in respect of banking, by deciding in
favor of Islamic banking. The derivable benefit and advantages in establishing Islamic
banking and finance (IBFs) includes direct investment from the Middle East, creation of
employment for Nigerians who studied Islamic banking, promotion of allied companies,
such as Takaful, Islamic capital market, etc. Islamic banking is no longer regarded as a
business entity striving only to fulfill the religious obligations toward the Muslim
community, but more significantly, as a business that is ineluctably in need for winning
over customers while retaining the old ones (Wilson and Hayes, 1995). This necessitates
 Islamic banks to really know the perceptions of their customers toward them in terms of Islamic banking
service quality and other patronage factors to secure customers’ allegiance.
In Nigeria, customers’ positive perception toward Islamic banking is far more crucial,
products
mainly because Islamic banks have to compete with the long-established conventional
banks in a dual-banking system. The survey research on public perception of Islamic
banking services is timely and very important. According to Fakhrul-Ahsan (1998) and
Usman (2003), the role and functions within the banking system in a modern economy 291
are very important, and in fact, it is at the heart of every robust economy. Hence, the
emergences of Islamic financial activities are in line with the desires of Muslims to live
all aspects to their lives in accordance with the teachings of the Qur’an and the Sunnah
(Ahmed, 2009). The current study is an attempt to examine the conventional account
holder’s’ perception of Islamic banking services in Nigeria and also to uncover the
factors that may influence it based on the theory of reason action (TRA) and theory of
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planned behavior (TPB) with the following specific objectives:

• to determine the level of perception of a Muslim account holder in a conventional
bank toward Islamic banking products; and
• to determine the relationship between the perception levels of Nigerian’s account
holder’s and their decision to patronize an Islamic banking product.

Hence, the study will test the hypothesis that would answer a research question: To
what extent does the perception level of Nigerian Muslim account holders relate to a
decision to patronize Islamic banking products?

2. Literature review
Customers’ perception has become an enduring research topic in banking (Holliday,
1996). Due to higher demand, research should be conducted to check updates on
customer’s perception and satisfaction of Islamic banking product and services. Among
the various authors who have recently focused their investigation on customer
perception on products and services include: Manzoor and Amanaullah (2010), Ismail
et al. (2008), Echchabi and Abdul-Aziz (2012), Haque (2004), Rashid et al. (2012), Dusuki
and Abdullah (2006). Singhal and Padhmanabhan (2008) found that utility request,
security, utility transaction, ticket booking and fund transfer are major factors that
customer perceived valuable to subscribe to Internet banking services. However, Ismail
et al.’s (2008) study revealed that consumers were not ready to sacrifice the basic
attributes of products and services. Also, study on the attitude and perception of
customers toward Islamic banks in Bangladesh, Malaysia and Morocco revealed that
apart from religious sentiment, other factors, such as desire for higher profit, effective
and efficient financial service delivery, lower transaction cost, financial reputation,
consistency and quality of customer service are important in choosing products and
services in Islamic bank (Ramdhony, 2013; Echchabi and Abdul-Aziz, 2012; Islam, 2012;
Rashid et al., 2012; Eze et al., 2011). This indicates that there is no significant difference
between the products and services offered by Islamic banks and conventional banks
apart from the religious factor.
Similarly, Hidayat and Al-Bawardi (2012) evaluate the perceptions of non-Muslim
expatriates in Saudi Arabia toward Islamic banking products and services. The study
found that cheaper transaction costs and better service delivery are the main reasons
that attract them. Fada and Wabekwa (2012) survey the opinion of the people’s
 IMEFM perceptions toward Islamic Banking in Nigeria reveals that there is a misconception of
the subject matter and concluded by calling on relevant stakeholders, including the
7,3 Central Bank to initiate awareness campaign programs to orient and enlighten the
public about Islamic banking and its economic benefits to the people and Nigeria as a
country.
In addition, previous study on corporate customer perception of Islamic bank
292 products and services revealed that factors, such as level of knowledge of Islamic bank
products and services, marketing strategy, cost and service delivery and deficiencies in
a marketing drive of the Islamic bank, contributed toward their smaller market share of
deposits and loan services (Ahmad and Haron, 2000; Khattak, 2010). The selection
criterion for Islamic bank services was low cost, and desire for higher return as the
perception and knowledge of Islamic banking is still low among the corporate
customers. The market share of business volume of transactions in conventional bank is
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higher than that of Islamic banks. Ahmad and Haron’s (2012) study show that
perception of urban banking customers in comparison with rural customers seemed to
vary in terms of perceived complexity, uncertainty and observability. However, there is
no significant difference between the two regions in terms of perceived relative
advantage and compatibility.
Previous studies that were conducted in this area (perception) were mainly catered to
service quality (Metawa and Almossawi, 1998), customer satisfaction with Islamic
financial services (Okumus, 2005), behavior of customers and their perception regarding
existing services, policies and knowledge of Islamic banking in Pakistan, Malaysia,
Kuwait, Iran and Indonesia, etc. (Sarker, 1999; Hassan and Ahmed, 2002; Ahmed, 2000;
Ahmad and Haron, 2002; Bley and Kuehn, 2004; Owen and Othman, 2001). At the World
Islamic Banking Conference in 2004, a session was held on international media
perceptions of the Islamic finance industry. Khalid (2004), Editor-in-Chief of Arab News,
said that media coverage of Islamic banking has been at best promotional and erratic
and at worst hostile and undermining.
In contrast, customers’ perception of service quality in developing countries is
significantly different from the perception of bank customers in developed countries like
the USA (Malhotra et al., 2005). A comparison between Islamic and conventional banks
reflects that four dimensions: personal skills, reliability, values and image were
significant in conventional banks. While two dimensions of service quality, that is
values and personal skills, are significant in case of Islamic banks (Jabnoun and Khalifa,
2005). It is reported that provision of better quality services could result into satisfied
customers who understand the product (Ahmad et al., 2010). Haron et al. (1994)
conducted a survey of both Muslims and non-Muslims’ perception in selecting bank
services in Malaysia. The finding revealed that religious motivation was not a primary
motivation for Muslims in dealing with Islamic bank. Both groups valued the provision
of fast services highly in their patronage factors. Most of the respondents had some
awareness of Islamic banking but are unaware of the difference between conventional
and Islamic bank.
Therefore, customers’ perception is often identified by their level of satisfaction
toward particular products or services. Other important indicators determining
customers’ positive or negative perception is on their patronage criteria toward the
service provider. In one of the earliest patronage studies on Islamic banking, Erol and
El-Bdour (1989) discovered that the most important criteria considered by the customers
 in bank selection are provisioned of fast and efficient services, bank’s reputation and Islamic banking
image and confidentiality (Erol and El-Bdour, 1989). This finding is supported by Naser
et al. (1999) who studied the Jordanian customers’ satisfaction which mainly concerns
products
with the bank’s name, image, confidentiality policy and reputation. Provision of fast and
efficient services are always regarded as high-quality services by bank customers who
value time and expect the transaction to be completed as quickly as possible. Quality
services are also portrayed by the personnel’s friendliness, dress code, communication 293
techniques and customer relations (Haron et al., 1994; Naser et al., 1999). As such, Islamic
banks need to invest in improving their service quality, image and reputation to gain
maximum customers’ satisfaction and impressive perception toward their products and
services. A study by Haron et al., (1994) reveals that only 40 per cent of Muslim
customers consider religion as an important factor in patronizing banks.
The customer perception refers to the extent to which a customer’s assessment
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influences his decision to choose from alternatives observed with respect to the
occurrence of an event and the relative probabilities of these alternatives (Rogers, 2003).
Uncertainty motivates individuals to seek information, as it is an uncomfortable state of
mind. According to Rogers (2003), a kind of uncertainty was generated by an innovation
that is viewed as new by an individual. The perceived newness of an innovation, and the
uncertainty associated with this newness is a distinctive aspect of innovation
decision-making process that is either to adopt or reject an innovation. Thus, perceived
risk, trust and reliability to the system are known to be some of the attributes of
uncertainty (Kotler and Armstrong, 2001; Rogers, 2003). It is believed that there is a
negative relationship between uncertainty and adoption rate (Yusof, 1999). The more
consumers feel uncertain about an innovation, the lower would be the rate of adoption
(Rogers, 2003). Rogers (2003) identified characteristics of innovations as the most
important explanation of the rate of innovation adoption that includes perceived trial;
perceived observation and perceived uncertainty.

2.1 Conceptual framework

The above discussions and reviews on previous studies on customer’s perceptions and the
relationships between variables form the basis for building the theoretical framework to
examine the relationship between customer perception and their decision to patronize
Islamic banks. The dependent variable for this study is patronage of Islamic bank. The
independent variables of this study are customer perception. Having defined the conceptual
variables, the conceptual framework in the study is shown in Figure A1 and the
relationships between variables (dependent and independent variable). The proposed
framework of the study shows the independent variables (customer perception) is related to
purchasing of Islamic bank’s product and services. The research model was adapted from
previous studies on marketing strategy of Islamic bank (Ahmad and Haron, 2002). The
study found Islamic banks had not done enough in marketing their products to the corporate
clientele’s business, and a deficiency of knowledge of Islamic banking products was found
among the Islamic bank customers (Ahmad and Haron, 2002). This study made some
modification on the previous research framework of Ahmad and Haron (2002). Research
framework is the basic foundation on which other research structures extend the frontier of
knowledge (Sekaran, 2003). Therefore, the research model of this study is presented in
Figure A1. The research model was underpinned by the TRA and the TPB. Theory of
reasoned action suggests that a person’s behavior is determined by person’s intention to
 IMEFM perform the behavior and that this intention is, in turn, a function of person’s attitude and
subjective norm. The best predictor of behavior is intention. This intention is determined by
7,3 person’s subjective norms (perception) and their perceived behavioral control. However,
TRA has a limitation that assumes someone’s forms of intention to act, that will be free
without limitation. However, in practice, constraints, such as limited ability, time,
environmental or organizational limits and unconscious habits, will limit the freedom to act.
294 The TPB attempts to resolve this limitation. The theory of planned behavior holds that we
need to measure the people’s subjective norms (perception). Therefore, based on the general
of rule of TPB, the more favorable opinion on the respondent perception of Islamic bank
product (IBP), the greater the perceived control and the stronger should be the respondent’s
intention to purchase the IBP.
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3. Methodology
This study focuses on descriptive and causal research (hypothesis testing); since the
objective of the study is to examine the relationships between the level of perception and
customer decision to patronize Islamic banking products and services. Descriptive and
research hypothesis’s testing was undertaken for this study. Descriptive study
identified the characteristic of the population, such as respondent (male and female)
variability and characteristics. Causal research or hypothesis testing and correlation
approach conducted in the study explained the relationship between the variables
(independent variable and the dependent variable). The research setting is
cross-sectional survey research design. It involved gathering the data only once or at one
point in time to meet the research objectives (Cavana et al., 2001). Therefore,
non-experimental design or survey using the quantitative method of administering the
questionnaire was used for this research.
The study unit of analysis was individual – male and female, workers in public
and private organization, businessmen, students and traders Muslims in the Kano
metropolis. The population during the study was 10 million Muslim account holders
in Kano, Nigeria (NPCN, 2006). The required sample size of 385 respondents was
obtained by using the equation ⫽ (Z score) 2 ⫻ StdDev*(1-StdDev)/(margin of error)2
assuming 95 per cent confidence level, standard deviation of 0.5, margin of error
(confidence interval) of ⫾ 5 per cent (Scott and Gerald, 2010). The required sample
size of 385 is within the Roscoe’s rule of thumb for determining sample size larger
than 30 and smaller than 500 appropriate for most research.
The probability sampling technique was used for this research instead of non-probability
sampling (Sekaran, 2003). The advantage to this sampling method is that there is no bias of
the researcher against the choice of another and being regarded for its high generalizability
(Cavana et al., 2001). Furthermore, the aim of this study is to have sample drawn from both
male, female, Muslim account holders in Kano. Hence, simple random sampling was used to
guarantee equal and independent representation of the data chosen. In an attempt to get the
completed questionnaire returned as quickly as possible, hand delivery and collection
method was chosen; this gave high response rate. Hand delivery and collection are an
efficient method in an environment, such as Nigeria, where research culture is not
sufficiently developed. For instance, research has shown that the rate of return of mailed
questionnaires is between 3 per cent and 4 per cent (Asika, 1999).
 3.1 Measurement instruments and operationalization of variables Islamic banking
Questionnaire is considered to be one of the most appropriate data collection instruments for
survey research (Asika, 1999). The research independent variable is perception and the
products
dependent variable is a Muslim account holder’s decision to patronize Islamic banking
product and services. Section A contains demographic data asked about the personal
background of the respondent. Section B contains statements about the perception. The
questions were adapted with modification from a study conducted by Noriza (2009). Section 295
C of the questionnaire measures the dependent variable (customer’s decision to patronize
Islamic banking product and services). The questions for this section were adapted from the
study conducted by Hague (2010) with slight contextual modification to fit the environment
of the study. The 6-point type rating scale was used in measuring responses on the questions
because literature has found that scales between 5 and 7 points were more reliable and valid
than shorter or longer scales (Krosnick, 1991). The data have been analyzed using the SPSS
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software and the PLS modeling. SPSS and PLS methodologies differ from a statistical point
of view, but PLS estimates can be good proxies of SPSS results. For example, when SPSS
assumptions are violated with regard to normality of distributions, minimum sample size
and maximum model complexity, or when related methodological matters emerge, such as
inflated parameter estimates’ standard errors. PLS is a good methodological alternative for
theory testing and higher levels of statistical power compared to SPSS. Thus, researchers
should consider both SPSS and PLS when selecting the appropriate statistical method.

4. Result findings
From a total of 500 questionnaires distributed, 304 were returned, out of which 286 were
usable (valid and completed), thereby yielding a response rate of about 61 per cent; a
response rate considered sufficiently large for statistical reliability and generalizability
(Tabachnick and Fidell, 2007). The statistics presented in Table AI summarized the
frequency distribution of respondent demographic profiles in the questionnaires.
Table AI summarizes the basic statistics on gender, age, marital status, educational
level and monthly income of the respondents. Of the respondents, 73.1 per cent
maintained account in commercial banks, 18.9 per cent had an account in microfinance
bank and 8.0 per cent maintained account in primary mortgage bank, 96.5 per cent of the
respondents said that they had an intention to open an account in Islamic bank. On the
other hand, 3.5 per cent of the remaining respondents did not indicate their intention to
open an account with Islamic bank, 26.0 per cent of the respondents have some
investment in a non-interest bank incorporated. However, 74 per cent of the respondents
do not have any form of investment in Islamic bank. Of the respondents, 25.2 per cent
have their income within a range of 10,000 to 50,000 naira a month while; only 14.3 per
cent earn an income less than 10,000 a month. Therefore, the percentage appears to be in
line with the findings from previous banking studies, for example, Erol and El-Bdour,
(1989); Metawa and Almossawi (1998). The statistical figures of the respondents in
terms of percentages for public servant, businessmen both married and unmarried
suggested the market opportunities for Islamic banking products in Nigeria.
The descriptive statistics on the perception of Islamic banking product and decision
to patronize the product were presented in Table AII and Table AIII, respectively. The
means for personal perception of Islamic banking product variable was 4.91, with
standard deviation of 1.007. This indicates the good perception level of Islamic products
by Muslim account holders in a conventional bank in Kano. Similarly Table AIII
 IMEFM presented the descriptive statistics for decision to patronize Islamic bank. The overall
mean on the variable is 5.12, with a minimum score of 2.00 and maximum score of 6.00
7,3 and a standard deviation of 0.8945. The result indicates the respondents’ level of
decision to patronize the Islamic banking products and services. The researcher
ascertains the construct validity, following two major step’s modeling approach as
suggested by Anderson and Gerbins (1988). First, the researcher accessed the
296 convergent validity and reliability of the construct as shown in Table AIV and
Table AV, respectively. As a rule of thumb, construct validity is ascertained if the
loadings are ⬎ 0.7, average variance extracted is ⬎ 0.5 and Cronbach’s alpha coefficient
exceeded the cut-off point of 0.7 (Nunnally, 1978; Hair et al., 2010).

4.2 Structural model

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Following the measurement model next was the structural model. The results are
presented in Table AVII and Figure A2. The R2 value was 0.1752, which suggests that
the model variable can explain 17.52 per cent of the variance of patronizing Islamic bank
products. H1 stated that personal perception was positively related to patronization of
Islamic banking products:
H1: Personal perception of Muslim account holder’s in conventional bank has
significant effect to patronize Islamic banking product in Nigeria.
The results in Table AIV and Figure A2 shows that H1 is supported (beta ⫽ 0.42;
p ⬍ 0.001).

5. Discussions
The study investigated the influence of personal perception on Muslim account holders
in a conventional bank to patronize Islamic banking products in Nigeria. The result from
the study provided empirical support for the personal perception on the purchase of
Islamic banking products and services. The result from this study is consistent with the
previous studies conducted within the area of personal perception that mainly centered
on service quality (Metawa and Almossawi, 1998), customer satisfaction with Islamic
financial services (Okumus, 2005), behavior of customers and their perception regarding
existing services, policies and knowledge of Islamic banking in Pakistan, Malaysia,
Kuwait, Iran and Indonesia (Sarker, 1999; Hassan and Ahmed, 2002; Ahmed, 2000;
Ahmad and Haron, 2002; Bley and Kuehn, 2004; Owen and Othman, 2001). Furthermore,
the finding from this study is in agreement with Ahmed and Haron (2002) who argued
that the main reason why people select Islamic banking product was based on their
personal perception on religious and economic considerations.
However, customers’ perception of service quality in developing countries is
significantly different from the perception of bank customers in developed countries like
the USA (Malhotra et al., 2005). A comparison between Islamic and conventional banks
reflects that four dimensions, personal skills, reliability, values and image, were
significant in conventional banks. While two dimensions of service quality, that is
values and personal skills, are significant in case of Islamic banks (Jabnoun and Khalifa,
2005). It is reported that provision of better quality services could result into satisfied
customers who understand the product (Ahmad et al., 2010).
Therefore, customers’ perception is often identified by their level of satisfaction
toward particular products or services. Other important indicators determining
 customers’ positive or negative perception is on their patronage criteria toward a service Islamic banking
provider. In one of the earliest patronage studies on Islamic banking, Erol and El-Bdour
(1989) discovered that the most important criteria considered by the customers in bank
products
selection are provision of fast and efficient services, bank’s reputation and image and
confidentiality (Erol and El-Bdour, 1989). This finding is supported by Naser et al.
(1999), who studied the Jordanian customers’ satisfaction which mainly concerns with
the bank’s name, image, confidentiality policy and reputation. Provision of fast and 297
efficient services are always regarded as high-quality services by bank customers who
value time and expect the transaction to be completed as quickly as possible. Quality
services are also portrayed by the personnel’s friendliness, dress code, communication
techniques and customer relations (Haron et al., 1994; Naser et al., 1999). As such, Islamic
banks need to invest in improving their service quality, image and reputation to gain
maximum customers’ satisfaction and impressive perception toward their products and
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services. A study by Haron et al. (1994) reveals that only 40 per cent of Muslim
customers consider religion as an important factor in patronizing banks.

5.1 Implications of the study

5.1.1 Managerial implication of the study. The study provides much-needed information
to the potential promoters and regulators of Islamic banking services in Nigeria
regarding the perception of Nigerian Muslim’s account holders on Islamic banking
product and services and their decision to patronize the Islamic banking product. Thus,
the present study will benefit those who want to establish Islamic bank or to open
Islamic window. The overall results of the present study suggest that perception
contribute toward the customer’s decision to patronize Islamic bank products. Thus,
promoters of Islamic bank should be aware of the prospective customer’s level of
perception of the product. The various ways to improve customer’s perception includes
the people’s perception of Shariah position on business transaction, a concept of
profit-and-loss–sharing practice, availability of Islamic banking products and
government support on Islamic financing structure.
Forums and conferences are important avenues to create awareness, design product
according to customer’s preference, transparency practice in transaction with customers
and full compliance of product with Shariah practice. In the present study, high level
of awareness is associated with public knowledge/perception of Islamic banking
financing and investment products, such as mudharabah, musharakah, murabahah and
ijarah (lease) products.
The finding was that majority of Islamic banks customers responded that religion
was the primary motivation to patronize Islamic bank products. Hence, there is a need to
focus for a provision of quality and efficient service. Other factors suggested are
rewards given by Islamic bank, influence of family and friends, convenient location,
customer education and awareness.
5.1.2 Theoretical implications. This research would add value to an Islamic banking
field on testing the possibility that Muslims account holders perceptions are related to
patronage of the Islamic banking services by investigating the personal level of
perception of Islamic banking product and services in a secular country like Nigeria that
is outside the Middle East or Southeast Asia. Thus, this study would extend further the
current knowledge of Islamic banking products and services in financial and banking
organizations in developing countries generally and Nigeria in particular.
 IMEFM 5.2 Limitation of the study
The study is subject to several shortcomings that limit interpretation of findings. One of
7,3 the limitations to this study is the use of cross-sectional design for survey research and
subjective self-reported perceptual measures in assessing the studies. Hence, the
findings from this study cannot be generalized in a larger context across the cultures of
other countries.
298
5.3 Suggestion for future study
To overcome the limitations to the study, this research suggests the need for further
investigation. In addition, variables such attitudes, awareness can be introduced as
independent variable or mediating/moderating variables. This is to ascertain the
variables (attitudes, awareness) influence on the relationship between the Perception of
Muslim account holder’s conventional and their intention to purchase Islamic banking
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products.
Moreover, future research should enlarge the scope of the study to erase the negative
perception of Islamic banking products and services. Furthermore, future research
should consider replicating this study in other cultures, states, regions and country. A
cross-cultural comparative analysis would further enhance the perception of Islamic
banking products and services. The present study used quantitative techniques. The
result from the study will be more meaningful if both quantitative and qualitative
techniques are used, as both can complement each other.

5.4 Conclusion
An attempt was made in the present study to investigate the link between personal
perception and a Muslim’s decision to patronize Islamic bank products. The results of
the present study establish the major problem that requires urgent attention needed to
strengthen public education toward the distinctive characteristics of Islamic banks and
how it may profitably suit the interest of customers in their financial dealings. Islamic
banks have the potential to exploit and market various segments of customers
extending beyond those who are concerned with the legitimacy of the facility from the
Islamic point of view and those who seek for service quality, convenience and efficient
transactions. To the practitioners in search of patronage of Islamic banking products
and services, patronage studies on Islamic banking have so far largely focused on the
combination of various religious, reputation, commercial, service satisfaction, staff,
confidentiality and convenience factors.

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Corresponding author
Kabiru Jinjiri Ringim can be contacted at: kabirujinjiri@yahoo.com

Appendix

Customer
Customer Patronage of
Percepon Islamic banking
(CP) Product and
Services (PIBP)
Figure A1.
Conceptual model

Figure A2.
Results of the structural
model analysis
 Cumulative
Islamic banking
Particulars Frequency Percentage (%) products
Male 200 70.0 70.0
Female 86 30 100
Occupation
Businessmen 15 5.2 5.2
Private sector 29 10.1 15.4
303
Student 112 39.2 54.5
Public servant 130 45.5 100.0
Marital status
Married 128 44.8 44.8
Single 158 55.2 100.0
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Account holder in:

Primary mortgage bank 23 8.0 8.0
Microfinance bank 54 18.9 26.9
Commercial bank 209 73.1 100.0
Intention to open account in Islamic bank
No 10 3.5 3.5
Yes 276 96.5 100.0
Age
Above 55 years 9 3.1 3.1
46-55 years 45 15.7 18.9
36-45 years 91 31.8 50.7
20-35 years 98 34.3 85.0
Below 20 years 43 15.0 100.0
Income (Nigerian naira)
Above 150,000 49 17.1 17.1
101,000-150,000 70 24.5 41.6
51,000-100,000 54 18.9 60.5
10,000-50,000 72 25.2 85.7
Below 10,000 41 14.3 100.0
Qualification
Other professional 5 1.7 1.7
DBA/PhD or equivalent 34 11.9 13.6
MSC/MA/MBA or equivalent 77 26.9 40.6
HND/BSC/BA/BEd or Equivalent 117 40.9 81.5
Diploma/NCE or equivalent 53 18.5 100.0
Investment in Halal fund/shares in NIB Table AI.
No 212 74.1 74.1 Demographic profile of
Yes 74 25.9 100.0 respondents

Variables Minimum Maximum Mean SD

Perception of similarity between Islamic banking

product with conventional 1.00 6.00 4.91 1.007 Table AII.
Personal perception of product development in Descriptive statistics for
Islamic banking (PP) 1.50 6.00 4.82 1.1635 personal perception of
Overall personal perception 1.30 6.00 4.89 1.0482 Islamic banking products
 IMEFM
7,3

304

Table AIII. Variables Minimum Maximum Mean SD

Descriptive statistics for
decision to patronize Decision to patronize Islamic banking products and services 1.75 6.00 5.15 0.8847
Islamic banking products Overall decision to patronize Islamic bank 1.75 6.00 5.15 0.8945
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Variables: items DV–patronize IB products I.V–perception

A4: Perceived government support 0.825817

A5: Product similarity with conventional bank 0.821749
A6: Customer perception level 0.780836
D1: Quality of services 0.765441
Table AIV. D2: P&L sharing 0.832629
Cross loadings D3: Products availability 0.824788

Average variance Composite Cronbach’s

Variables Indicators extracted (AVE) reliability alpha
Table AV.
Reliability and validity Patronize Islamic bank products 3 0.653149 0.849431 0.734871
constructs Personal perception 3 0.65565 0.850935 0.738901

Variables Patronize Islamic bank products Personal perception

Patronize Islamic bank products 0.808176

Personal perception 0.418663 0.809722
Table AVI.
Latent variable Note: Diagonal (bold face) represents the square root of the average variance extracted while other
correlations entries represent the correlations

Hypothesis Relations Beta Standard error t-statistics Findings

Table AVII. H1 PP ⬎ PIBP 0.418663 0.052107 8.034631** Supported
Path coefficient and
hypothesis testing Notes: Patronize IB Products (R2) ⫽ 17.52 per cent; ** p ⬍ 0.01