Potential demand for Islamic banking: examining the Islamic consumer behavior as driving factor

Hesi Eka, Puteri and Baginda, Parsaulian (2022) Potential demand for Islamic banking: examining the Islamic consumer behavior as driving factor. International Journal of Social Economics, 49 (7). pp. 1071-1085. ISSN 0306-8293

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Abstract

Abstract Purpose – This study aims to examine the impact of Islamic consumer behavior on the potential demand for Islamic banking by using the Islamic religiosity approach. By classifying the potential demand into the high, middle and low categories, this study attempts to examine whether the level of potential demand is influenced by aspects of social, cultural, psychological and personal considerations. Design/methodology/approach – This research was a quantitative study based on a survey on 18 regions in West Sumatera, Indonesia in 2019. Data were collected from 1818 respondents and analyzed by using multinomial logistic regression. Findings – The findings reveal that the increasing factor of social and personal causes the tendency of the community to be in the high potential group as an Islamic bank customer by 1,661 times and 1,592 times as compared to in the low potential group. Psychological aspects also increase the probability of the community being in the medium demand potential as an Islamic bank customer. Research limitations/implications – Although this study has attempted to elaborate on the consumers’ behavior variable with an Islamic religiosity perspective, theoretically this concept is not yet well established and still requires many applications in future research. Future studies are expected to enrich this analysis by examining more cases with communities that have different socio-demographic characteristics. This study also limits the exogenous variables used as predictors. Practical implications – This study aims to assist managers of Islamic banks to formulate strategies for developing Islamic banks based on Islamic consumer behavior because the facts showed that understanding of Islamic law and religious education in the family, Islamic lifestyle and also religious beliefs affected the potential demand for Islamic banks. Social implications – From a policy perspective, this finding can be a consideration for Islamic banks, that the expansion of the market share of Islamic banks will be more appropriately directed to Muslim groups with indications of high adherence to Islamic values, those with Islamic lifestyles, and the Muslim community groups with Islamic understanding backgrounds and good religious education. Originality/value – This study measures the impact of Islamic religiosity on the probability of people being in the high, medium or low potential group in adopting Islamic bank services, and these findings are important in the development of Islamic banking in Muslim-majority countries. Keywords: Islamic bank, Islamic consumer behavior, Islamic religiosity

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