Determining Factors of Customers’ Preferences: A Case of Deposit Products in Islamic Banking☆

Abstract Islamic banking and finance are areas that have attracted attention, especially after the recent global financial crisis. While the existing literature highlights a significant shift in consumers’ behaviour with regard to bank selection, it does not investigate the motives behind such moves. Understanding customers’ preferences to deposit their money into Islamic banks are crucial for banks operating in such a highly competitive industry. Having a good understanding of the real motives behind customers’ preferences will help banks to understand customers better. Besides, improving the bank's liquidity issues, it contributes to the growth of the country's economy. Thus, this paper explores the findings from a qualitative data through a face to face interview on factors influencing customers’ preferences for deposit products in Islamic banks. These results will eventually be used for developing a survey questionnaire for future empirical research. The face-to-face interview revealed that sharia compliance, returns, confidence and trust, security, transparency, flexibility of withdrawal scheme were among the determining factors that influence customers’ preferences in making decisions. Safety and security, the human touch and zakat (alms) were the additional elements found to be missing from the literature. Future empirical research would include these elements as items in building up the survey instrument.