Introduction (Ahmad, Rustam, & Dent, 2011).On the other

 Introduction and background of thestudyThis section of the study explainsthe important aspect of the topic and the research. It includes objectives,introduction to the topic and study.

It also explains the significance of thestudy along with limitations, purpose and scope of the study.Introduction:Islamic Banking is an emerging bankingpractice that is considered to be ethical, because of prohibition of usury andother uncertainties that are harmful mostly for poor, but are beneficial forthe rich people(Aminet, al., 2011).Islamic banking is more like tradingthat provides social and economic benefits to the needy ones. It is not on theextreme side, not only concerns with religious principles, but also concernswith economic benefits(Henry & Wilson, 2004). Besides it, the main goal ofIslamic banking is to provide Social and Economic benefits to people underreligious teachings of Islam and Shariah(Metawa&Almossawi, 1998).

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As Islamic Banking is new and emergingindustry that fulfills the economic needs of its customers under religiousprinciples of Islam, it is attracting new customers by making Islamic BankingServices improved (Ahmad, Rustam, & Dent, 2011).On the other hand, Islamic Banks have toput extra efforts to identify customers’ needs, designing products/ offeringservices according to customers’ needs and complying these products andservices with Islamic and Shariah principles(Chong & Liu, 2009).The earnings of Islamic Banking isincreasing more as compared to the earnings of overall financial sector for thefirst time, the reason being that it works under the Shariah rules for trade,and thus it not only attracts Muslim customers but also non-Muslim customersbecause Islamic Banks not only refer to religious teachings of Islam, but italso proved to be the best economic and financial system that is improving theoverall economy of the country.Evolutionof Islamic Banking:Before the arrival of Islam, the city ofMakkah was considered to be the centre of trade for investors and otherbusiness people. The trading was done in Darham and Dinars (Awan, 2009).With this trading the money changingbusiness was common and so, the lending and borrowing of money on interest orusury was also there. The Jews of Madina, Banu Nadir had power of localbusinesses, they lent money to the needy ones, and in return charged highinterest rates and hence interest was there major source of income.

They werein majority, whereas tribe of Quersh was people dealing in trade and commerce.They collected financial resources for carrying out business on a large scale,and the profit they earned from that large scale business were shared amongpartners according to the proportion of their investments(Warde, 2006).When the Holy Prophet (P.B.U.H) migratedfrom Makkah to Madina, the business activities also transferred from Makkah toMadina.

After the arrival of Holy Prophet (P.B.U.H) and His companions, thecity of Madina emerged as the main centre of business activities. (K.Ali, Studyof Islamic History, p.

59).The Holy Prophet (P.B.

U.H) and Hiscompanions were loyal and honest traders. They introduced pro-poor, equitableand welfare oriented financial system, and thus the city of Madina emerged intothe big-empire of the world (Awan, 2009). IslamicBanking in Pakistan:Islamic banking emerged in Pakistan in1981. In its initial stages, customers were not focusing on Islamic Banking,but with the passage of time, when the loop wholes in Islamic Banking gotcleared, customers started using Islamic Banking services. In Muslim countriesreligious teachings of Islam are important to people and thus, the concept ofIslamic Banking opened new horizons for Muslims to get benefited from Interestfree banking and to deal in banking transactions under acceptable teachings ofIslam. As day by day Islamic Banking is striving to improve its quality and toreduce ambiguity of its services, they are attracting more and more customersespecially In Pakistan (Taimoor, 2012).

Being central bank, State Bank ofPakistan has strived to introduce Islamic Banking practices in 2000, and thusMeezan bank got registered as fully fledged Islamic Bank in 2002 (Khan, 1986)In 1977-78 steps were initiated towardsIslamization of Banking and financial sector but implementation of these stepswere very difficult to be implemented at national level, therefore this processwas implemented in phases.Interest free Banking windows started tooperate in all commercial banks and one foreign bank in Jan 1, 1981.The following study was carried out toobserve and investigate the factors that consumer’s seek in selecting Islamicbanking in Peshawar.  Statementof research problem:·        Whatis the impact of factors on consumer while selecting Islamic banking inPeshawar?Consumers need motivation to become customers to aninstitution. In terms of banks, the customers need has to be understand andfind out what factors or variables may attract him towards a certain bank outof many(Taimoor,2012).The following study would investigate the impact of factorson consumer while selecting Islamic banking in Peshawar.Researchquestions:·        Whatisthe impact of factors on consumer while selecting Islamic banking inPeshawar?Objectivesof the Study:The researcher proposed the following objectives forthis study:1)     Tofind out the factors ranked for selecting Islamic banking in Peshawar.2)     Toassess the impact of factors on consumer while selecting Islamic banking inPeshawar?Purposeof the study:This study was conducted in order to know the possiblefactors that a consumer chooses when he or she makes mind to use Islamicbanking.

Islamic banking is operating in all Muslim and on-Muslim countries.The following study was proposed to be carried out in Peshawar because thefindings of the study would help the Islamic banking to work on the factorsthat attract customers. Moreover, the study would identify the impact of factorson consumer while selecting Islamic banking in Peshawar?Scopeof the Study:Peshawar was identified and selected as the scope ofthis study where the researcher would conduct the study and the participants ofthis research study would be from Peshawar region. The study would involve thepeople of Peshawar and give them opportunity to become a part of this study.Limitationsof the Study:The study would not be replicated and generalised inany other area due to the fact that the researcher used convenience samplingtechniques for data collection.

Responses were collected from the people livingin Peshawar. The number of population of consumers who uses Islamic banks forservices. Schemeof the Study:This research report is divided in 5 Chapters. Chapter1 includes preliminary information of the research like Background of theStudy, Purpose of the Study, its Scope and Limitations faced in the process ofcarrying out research. Chapter 2 is all about literature about the introductionto the Islamic Banking, Evolution of Islamic Banking in Pakistan. Riba and itsrestrictions in Islam (In the Light of Quran and Hadith).

Chapter 3 is aboutthe methods adapted to conduct the study.. Chapter 4 is the Analysis Chapter.And the last Chapter 5 contains Recommendations and Conclusions drawn based onthe Analysis of Research.

 Chapter 2Literature Review:Althoughdifferent studies have been carried out to know the consumer’s preferences ofIslamic and Conventional Banks but so far, no study has been done to know theConsumer preferences of Conventional over Islamic Banks in PakistanAccordingto Turnball (1983) studied the approach of corporate customers about thepreferences. He studied the responses of 44 corporate customers of UK. Thefindings of Turnball’s study showed that size plays essential role in selectingbanks. Another finding of the Turnball’s study were that corporations selectforeign banks as compared to banks in their home country.Moreover,Chan & Ma’s (1990) studied the perceptions of corporate customers towardsselection of banks or split banking. They found that corporate customers go forbanks with high reputation and they will only switch between the banks if thenew bank provide quality product and services.Likewise,Erol& El bdour (1989) and Erol at al. (1990) also explored the perceptionsof corporate customers about switching between Islamic and Conventional Banks.

The findings of their study showed that corporate customers are sensitivetowards reputation, image and confidentiality of banks. Erol and El Bdour arefamous because they are considered the earlier researcher about patronagestudies on Islamic Banks.Inaddition, Metawa and Almossawi (1989) also studied about the customerspreferences about Islamic Banking. The results of their studies showed that tomost of the customers in Bahrain, Islamic Principles are the most importantfactors for selecting of Islamic Banks. The other factor that was important tocorporate customers was reward extended by banks followed by influence offamily and friends and location.

Likewise,Javalgi et al. (1989) also studies the determinants of banking selection criteria.His study findings showed that “safety of Funds” is of utmost importance tocustomers in selecting banks.

Similarly,Kaynak (1986) studied preferences of customers by dividing his simple into twogroups’ i.e. of Managers and Customers.

The study results showed that formanagers “reputation” is essential while to customers “fast and efficientservices” are the important criteria for selecting banks.Onthe other hand , Rehman (2011) explored factors that were the main reason forwhich people preferred Islamic banks in Cairo, the study focused on people whoused Islamic banks and for that purpose 115 consumers participated in theresearch paper. The results indicated that consumers chose Riba free banking asthe sole factors for choosing Islamic banks.Accordingto Rehman et, al., (2008) explored factors that were the main reason for whichpeople preferred Islamic banks in KaulaLampur, the study focused on people whoused Islamic banks and for that purpose 500 consumers participated in theresearch paper.

The results indicated that consumers chose efficient servicesas the sole factors for choosing Islamic banks.Onthe other and, Zulfiqar et, al., (2014) explored factors that were the mainreason for which people preferred Islamic banks in Sahewal, the study focusedon people who used Islamic banks and for that purpose 520 consumersparticipated in the research paper. The results indicated that consumers choseinternet banking as the sole factors for choosing Islamic banks.Accordingto Awan (2014)explored factors that were the main reason for which peoplepreferred Islamic banks in Multan, the study focused on people who used Islamicbanks and for that purpose 550 consumers participated in the research paper.The results indicated that consumers chose customer satisfaction as the solefactors for choosing Islamic banks.

Likewise,Suhbani (2012)explored factors that were the main reason for which peoplepreferred Islamic banks in Karachi, the study focused on people who usedIslamic banks and for that purpose 600 consumers participated in the researchpaper. The results indicated that consumers chose religious motives as the solefactors for choosing Islamic banks.Moreover,Rasheed (2012) explored factors that were the main reason for which peoplepreferred Islamic banks in Quetta, the study focused on people who used Islamicbanks and for that purpose 280 consumers participated in the research paper.The results indicated that consumers chose quality of service as the solefactors for choosing Islamic banks.Taimoor(2012) explored factors that were the main reason for which people preferredIslamic banks in Bahawalpur, the study focused on people who used Islamic banksand for that purpose 180 consumers participated in the research paper. Theresults indicated that consumers chose service quality as the sole factors forchoosing Islamic banks.Moreover,Aswan (2009) explored factors that were the main reason for which peoplepreferred Islamic banks in Chaman, the study focused on people who used Islamicbanks and for that purpose 140 consumers participated in the research paper.The results indicated that consumers chose product features as the sole factorsfor choosing Islamic banks.

Onthe other hand, Haroon (1994) explored factors that were the main reason forwhich people preferred Islamic banks in Hyderabad, the study focused on peoplewho used Islamic banks and for that purpose 240 consumers participated in theresearch paper. The results indicated that consumers chose bank’s image as thesole factors for choosing Islamic banks.Inaddition Khan (2014) explored factors that were the main reason for whichpeople preferred Islamic banks in Lahore, the study focused on people who usedIslamic banks and for that purpose 150 consumers participated in the researchpaper. The results indicated that consumers chose banks services for customersas the sole factors for choosing Islamic banks.Likewise,Abduh (2012) explored factors that were the main reason for which peoplepreferred Islamic banks in Malaysia, the study focused on people who usedIslamic banks and for that purpose 180 consumers participated in the researchpaper.

The results indicated that consumers chose service quality as the solefactors for choosing Islamic banks.Accordingto Awan (2011) explored factors that were the main reason for which peoplepreferred Islamic banks in Karachi, the study focused on people who usedIslamic banks and for that purpose 210 consumers participated in the researchpaper. The results indicated that consumers chose product featured as the solefactors for choosing Islamic banks.Accordingto Rao (2010) explored factors that were the main reason for which peoplepreferred Islamic banks in India, the study focused on people who used Islamicbanks and for that purpose 175 consumers participated in the research paper.The results indicated that consumers chose quick transaction services as thesole factors for choosing Islamic banks.Onthe other hand, Okumus (2005) explored factors that were the main reason forwhich people preferred Islamic banks in Turkey, the study focused on people whoused Islamic banks and for that purpose 176 consumers participated in theresearch paper. The results indicated that consumers chose speed intransactions as the sole factors for choosing Islamic banks.

Similarly,Marimuthu (2010) explored factors that were the main reason for which peoplepreferred Islamic banks in Turkey, the study focused on people who used Islamicbanks and for that purpose 132 consumers participated in the research paper.The results indicated that consumers chose Riba free banking as the solefactors for choosing Islamic banks.Moreover,Lateh (2009) explored factors that were the main reason for which peoplepreferred Islamic banks in Bnagladesh, the study focused on people who usedIslamic banks and for that purpose 150 consumers participated in the researchpaper.

The results indicated that consumers chose Riba free banking as the solefactors for choosing Islamic banks.Accordingto Khattak (2011) explored factors that were the main reason for which peoplepreferred Islamic banks in Pindi, the study focused on people who used Islamicbanks and for that purpose 145 consumers participated in the research paper.The results indicated that consumers chose marketing of Islamic banking as thesole factors for choosing Islamic banks.Afterreading and examining many published articles it was found that peoplepreferred many factors that include interest rate, fast services, religiousmotives, value added services, reputation of banks, advertising and many more.The following research paper was carried out with an aim to investigate thefactors responsible for consumers in Peshawar to select Islamic banks. Thisstudy would help the Islamic banks to improve the factor further and work onthe factors that are weakness to Islamic banks in Peshawar.    Chapter 3Research methodologyTheresearcher adapted the quantitativeaspect of a research process. The researcherproposed the pragmatic school of thought on the basis of the quantitativetypeof research process.

The deductive approach was selected on the mere fact thatthe study used questionnaire for data collection.Population and sample sizeTheresearcher considered the consumers of Islamic banks of Peshawar as the wholepopulation for this research study though the study could not get hold of thetotal number of consumers as the bank keeps the information confidential.Moreover, the study took in consideration a total 150 participants who gavetheir respective responses for the analysis purpose.

The number of participantswas kept at 150 as the researcher could not get hold of the banking customersduring banking time. Therefore the researcher could get hold of 150 filled questionnairesfrom the banking customers. Sampling Technique:Conveniencesampling technique was used for one main reason. First one was reason was thatthe study did not have access to exact number of Islamic bank’s customers. Bankdid not share the data with the researcher as it was against their company policy. Data collection:Thestudy incorporated the primary data which was to be collected from thecustomers of Islamic banks with help of a closed ended and structuredquestionnaire. The questionnaire was designed to know the factors or reasonsfor choosing Islamic banksand theimpact of factors on consumer while selecting Islamic banking in Peshawar.The questionnaire was used as the researcher just wanted their opinion based onthe simple and straight questions based on the objectives of the study.

Questionnaire:Thequestionnaire used in this research study was developed by the researcher herself.There weretotal fifteen questions in the questionnaire. The researcher ranCronbach alpha reliability test to assess the quality of the questionnaire. Thevalue or reliability was 0.7 or 70%.Questionnaire design:Thequestionnaire was closed ended and had questions which were based on threeoptions i.e., yes and no and don’t know.

People had to answer each questionthat were based on investigating which reason was the core factors forselecting Islamic banks in Peshawar by consumers. The reasons were mentioned inthe questionnaire and they had to choose by either yes, no or don’t know. Theobjectives of the study could be achieved with this questionnaire.Data analysis:Frequencycount to study the perception of consumers was incorporated in the study tofind out the consumer’s preference of factors that make them use Islamic banksservices in Peshawar.Unit of analysis:TheIslamic banks customers were the main unit of analysis in this research study.Independentvariable                                                                          DependentVariables   Variables of the study:Independent Variables derived fromliterature:Factors:1.     ServiceDeliveryIt is the quality of service which is provided by the relationshipofficers and the staff of the banksReligious motivesIt is the motives which are in accordance with Shariah and Quran.

2.     EfficiencyIt is the time management by the staff in providing the services inrespective time.3.     Knowledgeof Islamic BankingDoes the staff has the knowledge of Islamic banking by providingsatisfactory answers to the customers query?4.     Valueadded servicesWhat are the extra services offered and provided by the Islamic banks?5.

     Goodrate of InterestWhat is the instalments asked by the Islamic banks ascompared to other conventional and Islamic Banks?6.     CustomerhandlingHow respectfully every customer is eat by the bank?7.     TechnologyIs the bank equipped with latest technology tofacilitate their customers?8.     ReceptionreceivedAre the banks able to document every transactions andgive importance to individual case accordingly?9.     Wordof MouthThe banks are famous in the locality by the people whohave sued their services.10.  Zero balance accountCan the banks offer the service to customers bykeeping a zero balance account or not.11.

  Customer handlingAre the banks able to deal every customer importantly?12.  ProfitabilityIs the bank and customers are able to earn good on theirinvestment in various projects?13.  Reputation of BankWhat is the reputation of the banks in the bankingsector?14.  AdvertisingDoes the bank paying attention to advertise theirproducts through proper advertisingDependent Variables:Selection of Islamic Banks1.      Onthe above discussed factors how customers’ selection of Islamic banks is basedis considered the dependent variables HypothesisH1: Thereis a significant impact of factors on selection of Islamic banks by customersin Peshawar.

H0: Thereis no significant impact of factors on selection of Islamic banks by customersin Peshawar.Inorder to investigate and understand the people’s choice in selecting Islamicbanks in Peshawar, the study carried out a survey in Peshawar. For this reason,customers of Islamic banks were selected for the analysis purpose. The studyused 150 responses from people in Peshawar.

For that purpose Islamic banksoperating in Peshawar were selected and the data collection took place by theresearch through a self-administered questionnaire. There were total 17questions other than the questions which were related to basic demographics ofthe individuals participating in the study. Findings:1.

     The analysis of eachquestion stated that people were not selecting Islamic banks for the reason ofdelivery of service.2.     The analysis of eachquestion stated that people were selecting Islamic banks for the reason ofreligious motives.

3.     The analysis of eachquestion stated that people were selecting Islamic banks for the reason ofefficiency.4.

     The analysis of eachquestion stated that people were selecting Islamic banks for the reason ofknowledge of Islamic banking.5.     The analysis of eachquestion stated that people were selecting Islamic banks for the reason ofvalue added services.6.     The analysis of eachquestion stated that people were selecting Islamic banks for the reason of goodrate of interest.

7.     The analysis of eachquestion stated that people were selecting Islamic banks for the reason ofcustomer handling.8.     The analysis of eachquestion stated that people were selecting Islamic banks for the reason oftechnology.9.     The analysis of eachquestion stated that people were selecting Islamic banks for the reason ofreception received.10.

 The analysis of eachquestion stated that people were not selecting Islamic banks for the reason ofword of mouth.11. The analysis of eachquestion stated that people were selecting Islamic banks for the reason of zerobalance account.12. The analysis of eachquestion stated that people were selecting Islamic banks for the reason ofcustomer handling.13. The analysis of eachquestion stated that people were selecting Islamic banks for the reason ofprofitability.

14. The analysis of eachquestion stated that people were not selecting Islamic banks for the reason ofreputation of banks.15. The analysis of eachquestion stated that people were selecting Islamic banks for the reason of advertising.`Conclusion:The study found that delivery of service;word of mouth and reputation of banks were not the core reason to selectIslamic banks in Peshawar by consumers. the regression test showed that therewas significant impact of factors on election of Islamic banks by customers inPeshawar. Therefore the main hypothesis of the study was accepted.

.Furthermore, these findings are limited to Peshawar area only. More, researchwork is needed to be carried out to check these variables and evaluate themamong Islamic bank users and general public.Recommendations:·        Islamic banks need to work on t heirservice of delivery of services in order to attract more consumers attention·        Moreover, banks need to work on theirpublicity so word of mouth can play its effective role.·        Banks need to improve their reputationand become market leader so it becomes one of the reason to attract consumers.

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