Islamic banking system was established in Malaysia since 1983. To date, Islamic banking products are available at two full pledged Islamic banks and at all commercial and merchant banks in Malaysia. However, these products are still not fully accepted by customers. At the end of 2000, total deposit at conventional banks was RM381 billion while total deposit in Islamic system was RM31 billion. In the case of loans, RM416 billion was extended by conventional system, and RM21 billion was given by Islamic system. Since corporate customers are the key players in the economy, it is imperative that the reasons for them to choose or not to choose Islamic system be studied.

This study highlights the perceptions of corporate customers towards Islamic banking system in Malaysia. Aspects studied were the existing usage of Islamic banking facilities, level of understanding of Islamic banking features among corporate financial controllers, their roles in switching and using banking products, and their personal opinions towards Islamic banking products. While the government can use these findings in formulating additional strategies and policies, where appropriate, the Islamic bankers will be able to understand the needs of corporate customers, by providing the necessary services to fulfill these needs.

The respondents participating in this exploratory study were the persons responsible for the financial affairs of the companies listed in the Kuala Lumpur Stock Exchange. A total of 100 respondents were identified and willing to participate in this study. These respondents were financial directors, financial managers, general managers of finance, and accountants. Out of the 100 questionnaires sent to all agreed participants, 45 were returned. No further attempt was made to increase the samples.

The study shows that all respondents used current account for their daily transactions, while 75 per cent had fixed deposit facility in the conventional system. Overdraft, followed by bank guarantee, was the most used facility for financing and trade facilities. Bond and note insurance facilities were unpopular among the respondents. Based on the findings it seems that Islamic banking products were not popular among Malaysian corporate customers. Only 11 respondents maintained banking relationship under the Islamic banking system. Despite of the Islamic banking having been established in Malaysia more than 15 years ago, most of the respondents started patronizing Islamic banks less than five years ago.


Additionally, the respondents indicated that they had knowledge in Islamic banking system. However, more than 65 per cent indicated that their knowledge in this system was limited. Although the majority of the respondents were non-Muslims, they knew that Muslims were not allowed from patronizing conventional banks due to the interest that was prohibited in Islam. The study indicated that there was misconception among the respondents about the objective and philosophy of the establishment of Islamic banks. About 65 per cent of the respondents believed that Islamic banks must adopt profit maximization principle in order to survive in the competitive business environment. This perception however is contradictory with the objective of Islamic banks, i.e. combination of moral and profit motives. The lack of knowledge among the respondents in Islamic banking system was further confirmed when questions about the principles used in Islamic banking system were posed. While 38.1 per cent of the respondents were unsure of the nature of profit-sharing principle in Islamic banking system, about 50 per cent believed that this principle was the only principle used by Islamic banks in replacement of interest. The general inadequate knowledge among the respondents is to be expected since 80 percent of them were non-Muslims.


The study shows that few respondents believed that religious were the only reason for customers selecting Islamic banks. More than 55 per cent perceived that both religion and economics were the patronage factors in this system. About 50 percent of the respondents believed that Islamic banking products and services had a good potential to be accepted by customers. About 75 per cent of the respondents indicated that Islamic banks in Malaysia however have not done enough marketing in promoting their products and services to corporate customers. The study uncovers the factors perceived as important in selection of bank. The most important one was cost and benefit to the company, followed by service delivery (fast and efficient), size and reputation of the bank, convenience (location and ample parking), and friendliness of bank personnel. This finding was inconsistent with previous research whereby size of bank is considered the most important criterion perceived by corporate customers in bank selection.

1. Explain briefly in a diagram the stages that are involved in identifying the research questions for this study.

2. What are the dependent and independent variables for this study .

3. How did the researchers manage ethical issues in this study? 

4. The researchers used qualitative research to achieve the objectives of the study, but they employed a questionnaire as a data collection tool, why? 

5. The researchers indicated that: "Out of the 100 questionnaires sent to all agreed participants, 45 were returned" Discuss this situation.