Islamic banking was launched in Malaysia nearly three decades now, back in 1983. However, the market share of Islamic retail banking (IRB) still seemed to be relatively low. Therefore, the main aim of the present study is to analyze the difference in the awareness, perception, and preferences on IRB between the urban and rural banking customers of Malaysia. 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. There also seem to be some variations for returns, loan repayment period, service charges, and overdraft facilities. 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 promoting specific regulations and policies that enhance the market share of IRB.
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