Does Islamic financial literacy and motives influence the holdings of Islamic financial products? A study on bank customers in Klang Valley, Malaysia

Abstract

Purpose In a dual financial system where both conventional and Islamic financial institutions co-exist, the motives behind customers’ choices of financial products remain a crucial factor to comprehend. Thus, this paper aims to examine the influence of Islamic financial literacy (IFL) and motives (religious, ethical and economic) on the holdings of Islamic financial products (IFPs). Design/methodology/approach The sample consists of 234 bank customers in Klang Valley, Malaysia, with data obtained through a convenience sampling method. The instrument used was a digital survey that was electronically sent to respondents. Findings Findings reveal that IFL and religious motives positively influence IFPs, whereas economic motives negatively influence IFPs. Ethical motives have no significant impact on IFPs. Research limitations/implications The findings imply that IFPs attract customers due to their adherence to Islamic teachings, indicating strong religious motives. However, the negative leanings of the economic motive suggest that customers may perceive IFPs as less favourable due to higher costs and risks relative to conventional products. Islamic financial institutions must widen their efforts in educating the public regarding IFPs on the benefits of adherence to Shariah principles and at the same time improve their products’ cost-benefits. Originality/value This study contributes to the literature by comprehensively examining IFPs in terms of both assets and financing products. In addition, IFL is measured in an all-inclusive way, covering different dimensions of knowledge related to Islamic savings, investments, protection and financing.