CONVENTIONAL AND ISLAMIC BANKING SYSTEM: UNDERSTANDING LEVEL OF KNOWLEDGE AMONG STUDENTS IN UITM INTRODUCTION General

Attitude is an important aspect to understand or predict the behaviors of customers in some situation (Sethi, 2002). General attitudes are relatively good predictors of general behavioral likelihoods (Eagly and Chaiken, 1993). Furthermore, customers attitude toward a product or service is influenced by a match of the product or service user image with the customers selfconcept (Ekinci and Riley, 2003; Sirgy et al., 1992; Wang and Heitmeyer, 2005). Results of the present study may help the Islamic banking service providers to find out the potential customers for expanding their services. So, it seems fundamental to understand the customers thinking or attitudinal behavior on how they perceive about the Islamic banking. The development of the Islamic banks in Malaysia is increasingly challenging with more conventional bank participating and offering banking products and services based on Islamic principles after two decades of its establishment. The establishment of Islamic banks has grown charily for the past four decades .It has spread across the whole universe and received wide acceptance by both Muslims and non-Muslims (Iqbal & Molyneux, 2005). This is because Islamic banks play their role similar to conventional banks except that they have to conform to Islamic principles and regulations (Henry & Wilson, 2004). The analysts and customers instinctively want to compare the performance and the pricing between the Islamic and conventional banking systems. Malaysia has practiced a dual banking system where Islamic banking system operates side-by-side with a conventional one. According to Bank Negara, the number of branches of Islamic banks increased from 766 at end 2005 to 1,167 at end 2006 in Malaysia. Malaysia is emerging as a global leader in Islamic banking, offering a suitable environment that fosters shariah without inhibiting the further growth of Islamic banking in the region and that makes the country an attractive one to Islamic investors.

Overview of our study

Is it really Islamic? ......In this era of development this is the question being raised at every forum by various quarters. While we celebrate the achievement of Islamic banking on one hand, we should not being ignoring the foundations and objectives in order to ensure that we lay the foundations of this industry on strong, straight and acceptable to all grips. Thus, all dealing, transaction, business approach, product feature, investment focus, responsibility are derived from the Shariah law, which lead to the significant difference in many part of the operations with as of the conventional.

BACKGROUND OF THE STUDY The independent variables are terms and concepts, product and service, religion, and demographic different. Our research is to study term and concept between Islamic banking and conventional banking. Which one is most respondent liking? Besides that we also study the product and service that using Islamic law for example wadiah, mudharabah and so on. The preference for Islamic banking is primarily driven by religious beliefs. That is the stronger the religious commitment the more preference for Islamic banking service. So the dependent variable is to known what respondent knowledge/ belief/ perception/ about Islamic banking. For our research we will focus on student business in UiTM Dungun. Student Business Degree Level Number of student 186 304 319 106

COUSE Operation Management Islamic Banking Finance Marketing

PROBLEM STATEMENT Two things seem clear from a survey of the literature: (1) The level of knowledge of Islamic products seems weak across studies that measured such knowledge. (2) The attitudes toward Islamic financial services are at least partly influenced by religious factors and perhaps other individual characteristics of the consumer. MISSION AND OBJECTIVE OF OUR RESEARCH We look for what is the difference between conventional and Islamic system by using the quantitative and qualitative question. The objective of our research is:
1. Religious beliefs and consumer attitudes 2. To know which products and service customer more prepared and what common

products and service their use

3. Terms and concepts in Conventional and Islamic banking.

SIGNIFICANCE OF STUDY This research will give impact to our self, university, company and society. For our self, this research can help us in working environment in the future. As a student of university, we can get new information and increase the knowledge especially for the students who have a related subject or course. So this research is not specific to Islamic banking students only. Therefore, the bankers also get the benefits about this research, it will help them to know their customer better, and know what customer wants. And for society, it will be important researches to them to understand more about banking services. The customers also have their own choice to choose either Conventional or Islamic services.

LITERATURE REVIEW
Based on Omer (1992), there are 300 interviewed Muslims at UK was regard to what constitutes acceptable Islamic Finance principles. The report shows that religious commitment is the higher ones and the lower is a level of general education. The most selection criteria of Muslim bank customers in Malaysia are based on non-religious aspects (Haron et. al, 1994). The result shows that 40% of respondents are using Islamic banking services and they have a high level of awareness of Islamic product, it will have differences between Islamic and Conventional banking between poor understanding and they also have a poor knowledge regarding Islamic product and services. Banks reputation and perceived level of confidential to this list of selection criteria noted in surveying by 2006 bank customer on Jordon, 70% of the respondent stating that religion have their own reason to select an Islamic bank because the researches have noted a high level of ignorance regarding specific Islamic product (Nasser et. al 1999 ; Haron et. al 1994) Difference between Muslims and non- muslims on bank selection criteria found by Gerrard and Cunningham 1997. They found that the religion was to the sole basic for choosing an Islamic bank based on nearly 25% of the respondent. Contrast to Metawa and Almossawi (1998) found that the single most important factor for the selection of an Islamic bank is the Sharia based on interviewed 100 Islamic bank customers in Bahrain. (Gerrard and Cunningham 1997, Metawa and Almossawi 1998) Hamid and (2001) find that Islamic banking have a high awareness but law self-reported knowledge of specific Islamic products include difference between Islamic and Conventional banking a poor understanding. Other then that they also views of Islamic financial services, 65% of the respondents admitted to having limited knowledge of Islamic banking. (Hamid and Nordin 2001; Ahmad and Haron, 2002) Since, consumers make product or service choice based on which combination of product attributes best meets their needs based on dimensions of value, cost, and prior satisfaction (Kotler, 1997). It has been widely recognized that demographic factors have a great impact on consumer attitudes and behavior (Jayawardhena and Foley, 2000; Mattila, 2001; Karjaluoto et

al., 2002).Actually they have two things seem clear from a survey of the literature (1) the level of knowledge of Islamic product seems weak across studies that measured such knowledge and (2) the attitudes toward Islamic financial services is at least partly influences by religious factors and perhaps other individual characteristics of the consumer. This study investigates more carefully the relationship between knowledge of concept teams Conventional and Islamic. One of the driving motivations for this study was the belief that the lack of knowledge of specific Islamic products by using Arabic hinders the Muslim person will know what Islamic product very well. When add this product in the relative newness the market is generally ignorant of this product.

HYPOTHESES
Omar 1992 say that the poor knowledge of Islamic banking principles has been one area of concern in this literature for over ten years. The number of Islamic banking terms has been considerable increase over this period. But Haron et al (1994) say that, in spite of the growing interest is in the field of Islamic finance, other and that Al Ahmed (1996) say the high level of awareness of the Islamic banks and the growing interest in the use of Islamic banks. Either by government or the financial institutions, there is no general educational initiative has been launched to address this lack of basic product knowledge (Hamid and Nordin, 2001). On the other hand, Conventional banking concepts are covered in the curricula of most business oriented universities and even of high schools. We want to compare knowledge among this relatively elite population. Consequently, we hypothesize that: H1= There is a significant relationship between terms and concepts with knowledge of Islamic banking. Religious aspects are the deciding factor of bank patronage is still in dispute such as return expectation are more important than Islamic finance principles and those customers in Islamic countries would not differentiate between the services offered by conventional and Islamic banks (Erol et al 1990). Person that argue this factor is Omer (1992) and Metawa and Almossawi(1998), Erol and El-Bdour(1989). The whole Islamic Financial system exists because of a religion-based interpretation of economy. We know that religion is a strong driver of individual preferences of consumers. Consequently, we test the hypothesis that:
5

H2= There is a significant relationship between religious beliefs with knowledge of Islamic banking Based on Al Ahmed (1996) bank patronage was giving an impact to the level of education. Besides that Islamic bank also label of products ambiguously that will make causing misunderstanding not only among non-Muslim (Hamid and Nordin 2001). Consequently, we hypothesis that: H3= There is a significant relationship between product and services with knowledge of Islamic banking

In an oriental culture is argued by Tan and Chua (1986) that a close relationship and interaction with the bank personnel is the most important bank selection criteria. Gender, age, and educational background are subject to demographic and this subject is base on bank selection criteria vary from country to country (Kaynak, Kucukemiroglu, and Odabasi (1991). Prior research revealed that age, income and education play important roles in distinguishing preferences. Arabic language always using in namely of Islamic products because we expected that Arabic language fluency would be a distinguishing characteristic, as well as religions background. So, we hypothesis that:

THEORETICAL FRAMEWORK
Based on the literature review, this research concentrates on conceptual framework of knowledge and perception among students in UiTM under faculty business. This framework emphasizes those variables like terms and concepts, product and services, religious believes and demographic differences these independent variables are positively related to the knowledge perception toward Islamic bank. The detailed diagram framework is given below: Figure1.1: Theoretical framework of this study

Terms and concepts

Religious believes

Knowledge of Islamic banking

Product and service

independent variable

dependent variable

RESEARCH METHODOLOGY Sampling Procedures

There are 4 procedure that researcher have to do. There are population, sampling frame, sampling technique and sampling size. For population, there are 915 students of Business faculty across branches in Terengganu. In business faculty at branches in Terengganu we have Operation Management 186 students, Islamic Banking 304 students, Finance 319 students, and Marketing 106 students. Researcher will use the sample of 300 respondents from 4 courses in business faculty. Every course will get the questionnaire from the researcher and they have to answer it and give back to researcher at the times that have been given to them. Researcher used the purposive sampling technique to get the representation of each group. The selection of sampling units is left primarily to the interviewer. The significance of using purposive sampling is more appropriate as the sampling units are accessible, easy to measure and cooperative.

Instrumentation and Data Collection Procedures

The researcher used questionnaire as survey instrument to collect cross-sectional data for the study. The questionnaire has been distributed to each respondent personally. The questionnaire consists of five sections, which are A, B, C, D, and E. Section a asking about questions of demographic background such as gender, age, courses, parts and others. Section B included the question about understanding of knowledge in Islamic banking. Section C has generated information about terms and concepts. For section D, the researcher needs to know about product and service. Last but not least, in section E, researcher has asked respondent about religious believes to support that knowledge of Islamic banking has been given to customers.

REFERENCES
1. European Journal of Economics, Finance and Administrative Sciences ISSN 1450-2887

Issue 18 (2010) EuroJournals, Inc. 2010 http://www.eurojournals.com

2. PDF created with FinePrint pdfFactory Pro trial version http://www.pdffactory.com