An Empirical Analysis on Islamic Retail Banking Adoption in Malaysia

Islamic banking was launched in Malaysia nearly four decades ago, back in 1983. However, the market share of Islamic retail banking (IRB) still seemed to be relatively low. The main aim of the present study is to examine the differences in the awareness and perception on IRB between the urban and rural banking customers of Malaysia and to analyze the factors that determine the intention to use IRB. Hence, a comparative analysis was conducted based on 537 respondents representing both urban and rural regions of Malaysia. Results revealed that there is a significant difference in terms of awareness and on perceived complexity, uncertainty and observablity. Thus, the findings would be useful for the banking sector in understanding the customer perception and preferences concerning IRB and to promote it strategically and for the relevant authorities, in devising specific regulations and policies that enhances the market share of IRB.