Factors Influencing Decisions of University Students to Use Islamic Banking Products and Services in Malaysia

Abstract

This study examined the factors that determine university students in adopting Islamic banks’ products and services. In achieving this objective, this study employed a multiple regression using a structured questionnaire and collected primary data from students of Universiti Poly-Tech Malaysia. From the multiple regression analysis, the results shown that religious motivation, size and reputation, and convenience were significant in determining students’ decision in using Islamic banks for their daily financial needs. Cost and benefits, friends and relative influences, and mass media advertising were found to be insignificant for students when deciding to open accounts with Islamic banks. Realising that student’s segment is imperative to expand customers base, particularly being early in a person’s life cycle, Islamic banks should focus in providing positive information and benefits of Islamic finance on potential customers, as well as sustaining good financial performance and reputation. Senior managers of Islamic banks should also ensure that their branches are located in proximity of the university campus with ample parking space and nice ambiance of banking hall. This study provides insight to understand on students’ decision to open account with Islamic banks, filling the gap in the literature by focusing student’s customer segment in Malaysia, which has received little research.