Brand Preference in Islamic Banking by University Students in Pakistan

Bakht Jamal Khan (4671) Business Graduate Iqra University Karachi Jmlkhn88@yahoo.com

Abstract
The purpose of this study is to investigate the brand preference in Islamic banking among the university students in Pakistan. Students need bank account for different purposes and Islamic banking is growing rapidly so the knowledge regarding Islamic banks and selection criteria of Islamic banks by university students is analysed. A questionnaire survey was used to explore different factors like due to which students select or prefer an Islamic bank including convenience and location, charges for transactions, technological and physical facilities and brand choice. Details of each of these areas were asked from the respondents. Respondents were also asked about their satisfaction and trust on Islamic banks and also either they were interested in knowing more about Islamic banking. 200 questionnaires were distributed among the students of different universities in karachi. Exploratory factor analysis is used as a statistical technique or tool.

Keywords: Brand preference, Islamic banking, University students, Pakistan

1.1 Introduction:
Brand preference is the indicator of the strength of a brand in the minds of the customers, it shows that which brand a customer prefer on other if the price and quality are equal. Islamic banking is the banking activity which is performed according to the Islamic law. University students have several needs for having a bank account as they have to pay their fees and other expenses. Islamic banks must focus on the needs of the customers as what they think of importance while selecting an Islamic Bank. Scholars so far have suggested that the main factors which influence the university students to prefer an Islamic bank are the reputation and better financial and banking services. Islamic banking is still in its infancy, it has not yet attracted the attention of the customers and investors. But if we examine the Islamic banking sector, it has the potential to attract new customers. This study aims to examine the criteria of selecting an Islamic bank adopted by university students in Pakistan. As these students are young between 19 to 25 years, they will reflect the future of Islamic banking industry. As Islamic banking has the solution to several finance related issues and is alternative to conventional banking containing interest that is haram in Islam, it can be attractive for many Muslims and even non-Muslim customers. This study will help the Islamic banks to understand how they can improve relationship with existing customers as well as how they can attract new customers. The factors which determine the choice of customer in selecting an Islamic Bank will be examined in this study.

1.2 Problem Statement:

Banking Industry (in particular Islamic Banking) is growing day by day in Pakistan and the competition is getting tougher. In this scenario the banks must target the young customers and must know what they prefer in selecting an Islamic Bank. The bank must know what these young customers want from the bank and must target them according to their needs so that the bank attract these young customers and start growing. The main problem is to identify the elements that are given value by these young customers.

1.3 Research Question:

RQ1. What are the factors that affect the brand preferences in Islamic Banking among the university students?

1.4 Objectives:
The objective of this study is to find the elements that influence university students in selecting an Islamic bank. Brand awareness regarding Islamic banking will be studied and the level of customer satisfaction of young customers will be measured in this research.

2. Literature Review:
AlMossawi (2001) investigated the bank selection criteria adopted by college students in Bahrain. Students from the University of Bahrain were asked questions and the sample size of 1000 students which contained 45 percent male and 55 percent female were selected. It was a quantitative research in which factor analysis was applied. It was found that this market segment prefer convenience and technology for bank selection decisions. Kaynak and Harcar (2005) investigated American consumers attitude towards commercial banks. Data was collected through self-administered questionnaires. Two sets of variables were used to in this research. A number of 425 Bank customers were selected living in Beaver, Allegheny, Lawrence and Butler counties. It was a quantitative research in which t-test was performed to test for the statistical significance of patronage factors between local and national bank customers. A mean score was calculated for the importance of each patronage factor. Factor analysis was further used as the statistical technique. Authors find out that National bank customers give more importance to service charges while commercial bank customers prefer convenience. Al-Ajmi et al. (2009) studied the attitude of bank customers in Bahrain that which bank they choose between conventional and Islamic. Three types of bank clients were selected those who used commercial banking, Islamic banking and those who use both. 1000 copies of the questionnaire were distributed in Bahrain out of which 664 copies were got back. It was a quantitative research in which Descriptive statistics and non-parametric statistics (MannWhitney and Kruskal-Wallis tests) were applied and factor analysis was used to analyze the responses.

Awan and Bukhari (2011) investigated the customer criteria of selecting an Islamic bank. A sample of 250 respondents was taken from different cities of Pakistan. It was a quantitative research in which ANOVA was used as statistical technique. It was find out that the customers value quality of service and product features while selecting an Islamic bank. Blankson et al. (2007) investigated the bank selection criteria and different cultural and economic scenarios. A sample of 600 students from USA, 500 from Taiwan and 300 from Ghana were selected. In this quantitative research exploratory and confirmatory factor analysis was applied in order to assess the reliability of the results. It was concluded in this paper that liberalized and open climate explains consumers decisions. Mansour et al. (2010) investigated the selection criteria of Islamic banking adopted by customers in UK. A sample of 156 customers from UK were selected which contained both Muslims and non-Muslim customers. The methodology is borrowed from Masood et al, (2009). The findings of this paper show that irrespective of the demographic factors the low service charges are preferred by the customers. Babakus et al. (2004) investigated consumer choice behavior in banking. Data for this study was collected from the residents of southeastern city in USA. 400 questionnaires were distributed out of which 262 were usable. It was a quantitative research and exploratory factor analysis was used as a statistical technique in this paper. The findings show that customers prefer managerial capability and technological advancement of the bank, as well as its trustworthiness in terms of keeping consumer information confidential in selecting a retail bank. Gerrard and Cunningham (2001) investigated the bank selection by Singapore undergraduates. 186 questionnaires were distributed among the undergraduate students of the Nanyang Technological University Singapore out of which all were returned. Factor analysis

was used as a statistical technique in this quantitative research. The findings show that the banks must ensure these things like making the customers fell secure, provide high quality service and electronic services. Akdag and Zneldin (2011) investigated and defined the competitive positioning of banks including state-owned banks, foreign banks and domestic banks. This research included 30 banks in which 1530 questionnaires were distributed for the collection of data in Istanbul, Turkey. Frequency analysis and reliability tests were used to analyze the data. Finding shows those customers prefer the banking services and functional quality of the banks. The finding also shows that the customers are not satisfied and are not getting what they want, especially regarding quality of services. Dusuki and Abdullah (2006) examined the factors which motivate the Malaysian customers to prefer Islamic banks. Data was collected from four different regions in Malaysia in which 750 respondents were selected. The Friedman test was used to analyze the Islamic banking criteria ranking, exploratory factor analysis is employed to further investigate the understanding of customers of Islamic banking. Findings show that both Islamic and financial reputation of a bank influence the customers other factors like convenience, product price and social responsibility were also perceived by customers.

3. Methodology:
The study is conducted on quantitative basis. Questionnaire was designed and the data was collected from university students. 200 respondents from different universities were asked questions. Exploratory Factor analysis is applied as statistical technique. The research design of this article is exploratory research design. To achieve objective of research, data were collected via a questionnaire. A Questionnaire is always very helpful in getting large amount of data in a short period of time.

References:

Almossawi, M. (2001). Bank selection criteria employed by college students in Bahrain. International Journal of Bank Marketing , 19 (3), 115 - 125. Asyraf Wajdi Dusuki, N. I. (2007). Why do Malaysian customers patronise Islamic banks? International Journal of Bank Marketing , 25 (3), 142 - 160. Charles Blankson, J. M.-S. (2007). Determinants of banks selection in USA, Taiwan and Ghana. International Journal of Bank Marketing , 25 (7), 469 - 489. Emin Babakus, S. E. (2004). Modeling consumers' choice behavior: an application in banking. Journal of Services Marketing , 18 (6), 462 - 470. Erdener Kaynak, T. D. (2005). American consumers' attitudes towards commercial banks: A comparison of local and international customers by use of geodemographic segmentation. International Journal of Bank Marketing , Vol. 23 (1), pp. 73-89. Hatice Camgz Akdag, M. Z. (2011). Strategic positioning and quality determinants in banking service. The TQM Journal , 23 (4), 446 - 457. Hayat M. Awan, K. S. (2011). Customer's criteria for selecting an Islamic bank: evidence from Pakistan. Journal of Islamic Marketing , 2 (1), 14 - 27. Jasim Al-Ajmi, H. A.-S. (2009). Clients of conventional and Islamic banks in Bahrain: How. International Journal of Social Economics , 36 (11), 1086 - 1112.

Philip Gerrard, J. B. (2001). Singapore's undergraduates: how they choose which bank to patronize. International Journal of Bank Marketing , 19 (3), 104 - 114. Walid Mansour, M. B. (2010). Islamic banking and customers' preferences: the case of. Qualitative Research in Financial Markets , 2 (3), 185 - 199.

Appendix: Questionnaire on Brand Preference in Islamic Banking

Gender: _____________ Instructions: For each question, put an 'X' in the column that suits your answer. Put one 'X' only in each row. Will you select an Islamic Bank due to following reasons? S. No Strongly Disagree 1 The location of Bank is convenient for me. 2 There is a car parking near the bank. 3 The bank has a large parking area. 4 The head office is near my home or university. 5. ATM machines are available on a number of locations. Disagree Neutral Agree Strongly Agree Questions 1 2 3 4 5 University: _____________________ Date: __________

6 7 8 9

Bank has many branches. Bank has good reputation. Staff of the bank is friendly I like the bank because it is an Islamic Bank.

10

I like the bank because it offers interest free products

11

I do not like to deposit my money in conventional bank.

If you have bank account in Islamic Bank then: 1 I m satisfied with my Islamic bank. 2 I want to know more about Islamic banking. 3. The bank I use is really Islamic.