Research framework

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CHAPTER 3

METHODOLY

Introduction

The objective of this chapter is to show the methodology used to gather data and analyzed them in order to obtain answers for the research quotations stated in the beginning of the research. By doing this methodology, it will provide a proper guidelines, methods and action to be taken. Conducting a methodology in the early stage can make sure a research develop in an appropriate manner.

This chapter begin with an explanation about the research framework. Then hypothesis will be developed. The data collection method that consists of primary data and secondary data will be discussed next. Next is about the research size and sample and finally the data analysis method for qualitative and quantitative data for this study will also be discussed.

Research Framework

Based on the existing literature, the following theoretical framework has been framed and illustrated as in Figure 1. As shown in Figure 1, the theoretical framework for the customer perception and preference toward Islamic banking consists of three types of variables, which are dependent variable (the variable which is in the primary interest of researcher), independent variable (the variables that could influence the dependant variables and moderating variable (variables which could have strong and deputation effect on dependant and independent variable relationship).

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The framework postulates that the customer perception and preference toward Islamic banking is determine by product and services, technology advancement, growth of capital market, steady economy and political situation, public acceptance, knowledge of Islamic banking and service quality.

In the context of the framework, customer perception and preference toward Islamic banking is thus the dependent variable, while the independent variables comprise product and services, technology advancement, growth of capital market, steady economy and political situation, public acceptance, knowledge of Islamic banking and service quality.

Hypothesis Development

The null and alternative hypothesis will be using in this research. Null hypothesis states a perfect and an accurate relationship between two variables whereas it states the population correlation between two variables are equal to zero or that the difference in the means of two groups in the population is equal to zero. In broad-spectrum, the null statement is expressed as no relationship between two variables or no difference among two groups. The alternative hypotheses however is a statement expressing a relationship between two variables or indicating difference between groups.

Products and Services

Various types of products and services provided by Islamic banking are important for customers to choose Islamic banking services (Sudin Haron and KuMajdi Yamirudeng, 2003). Different types of products and services have different profile and risks toward customer's selection of Islamic banking. Thus the hypothesis stated that:

Ho1: The products and services should positively influence the customer perception and preference toward Islamic banking.

H1: The products and services should negatively influence the customer perception and preference toward Islamic banking.

Technology Advancement

The past studies about technology advancement like internet banking and mobile payment showed that technology provides some advancement to the banks users nowadays. The competitive rules of Islamic banking have change with introduction of sophisticated technology (Sudin Haron, Norafifah Ahmad andSandra L. Planisek, 1994). There are also transactional benefits, which can provide the firm the ability to automate business function through the web and provide service to customers with lower cost and more responsiveness (Graeves et al., 1999). Hence the hypothesis for this study is: Ho2: The technology advancement should positively influence the customer perception and preference toward Islamic banking.

H2: The technology advancement should negatively influence the customer perception and preference toward Islamic banking.

Growth of Capital Market

The capital market has seen the rapid growth of Islamic debt and equity markets. Apart from its growing share, the prospects of Islamic banking are also bright with the flush of petroleum money (James S, 2008). Therefore, the following hypothesis warrants investigation:

Ho3: The growth of capital market should positively influence the customer perception and preference toward Islamic banking.

H3: The growth of capital market should negatively influence the customer perception and preference toward Islamic banking.

Steady Economy and Political Situation

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A stable and steady economy and political situation not only will attract investors to come invest, but I will also boots up the banking and finance sector (Dr Abdullah Mohammed Seidu, 2008). This leads to the hypothesis:

Ho4: The steady economy and political position should positively influence the customer perception and preference toward Islamic banking.

H4: The steady economy and political position should negatively influence the customer perception and preference toward Islamic banking.

Public Acceptance

Public acceptance is one of the challenges that limited the development of Islamic banking and investment opportunities (Sudin Haron and KuMajdi Yamirudeng, 2003). This leads to the hypothesis:

Ho5: The public acceptance should positively influence the customer perception and preference toward Islamic banking.

H5: The public acceptance should negatively influence the customer perception and preference toward Islamic banking.

Knowledge of Islamic banking

Ho6: The knowledge of Islamic banking should positively influence the customer perception and preference toward Islamic banking.

H6: The knowledge of Islamic banking should negatively influence the customer perception and preference toward Islamic banking.

Service Quality

Customer satisfaction often depends on the quality of product or service offering. In the context of services, some describe customer satisfaction as an antecedent of service quality (Bitner, M.J., 1990). Therefore, the following hypothesis warrants investigation:

Ho7: The service quality should positively influence the customer perception and preference toward Islamic banking.

H7: The service quality should negatively influence the customer perception and preference toward Islamic banking.

Moderators

The key moderators in the theoretical framework are age, income, education background and internet experience. Gender will not exert the same influence on customer perception and preference. The moderating variables above will also be test in this research.

Research Design

A research design is a framework, structure and strategy which specify the methods used for collecting and analyzing the information (Stephanie Lim, 2009). A research design was used to guide the data collected and data analysis technique based on the research objectives and theoretical framework. To ensure that the questionnaire was clear and though, a set of questionnaire will be piloted first. If any confusing or unclear questions were found, it will be either remove or redesigned. Lastly is the wordings, order of the questions and range of answer were piloted.

Data Collection Method

The purpose of data collection is to obtain information to keep on record and to make decisions about important issues. Data can be collected through observation, interview or questionnaire in form of primary and secondary data. In this research, primary data was used. One of the examples of primary data is questionnaire.

Primary Data

Primary data is information that is developed and gathered by the researcher specifically for the research project at hand. Primary data collection is necessary when a researcher cannot find the data needed in secondary data sources. There are three basic mean of obtaining primary data are observation, survey and experiments. For primary data collection, self-administered questionnaires are used for this research

  1. Questionnaires
  2. The primary data were collected using the self-administered survey method. The questionnaire was given to the respondent and left it with it for a short period of time and will collect back when they completed. Questionnaire is a list of written questions carefully formulated and to be administered to a selected group of people for the purpose of gathering information (feedback) in survey research.

    By using questionnaire to collect the data, it can give an opportunity to interview the respondent regarding the future knowledge of selection on Islamic banking in Malaysia. Questionnaires were carefully developed, tested and debugged before they are administered on a large scale. In preparing a questionnaire, the questions were carefully chosen as well as their wording, form and sequence properly checked as the form of question asked can influence the response.

Secondary Data

Most of the data of this research was gathered from various sources of secondary data. In this research, data was collected from internet, newspapers, journals and books. The most widely used information of secondary data was gathered from Emerald database and search engine like Google. Past research journals will be used as secondary data in this study as it helps one to write the background of the research and literature review at the early stage. One of the benefits from using secondary data is it can collected easily and inexpensive.

Population and Sampling

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The study involved a sampling frame of 300 students and individual customers of banks in Melaka. The population form the sample was selected and formed from 18 to 55 year old English speaking among the campus and banks in Melaka. The respondents can also be randomly approached in the street and shopping complexes. This sampling designed is less time consuming and less expensive. In order to reduce the location and time related bias, the questionnaires were distributed at different location and time.

Pilot Testing

A pilot study was commonly conducted in order to check out the relevance of variables and test the questionnaire efficiency before it send out to a large scale of respondents (Stephanie Lim, 2009). The questionnaire was distributed to several people to get their feedback. Two rounds of pre-testing were conducted. The first round was conducted on two undergraduate bank customers. Based on feedback from this first round, some questions were rephrased for clarity. The second round of pre-testing was conducted with three other working bank customers (two females and one male). They found the questions generally clear, thus, the questionnaire was deemed ready for data collection and analysis process.

The purpose of the pilot testing was to:

  • Check out the validity and reliability of the questionnaire
  • Check out the relevance of the variables selected, and
  • Refine the questionnaire and develop a final draft to be used in this study. (Stephanie Lim, 2009)

Data Analysis Method

The data collected from the questionnaires will be tested by using Statistical Package Social Science 16.0 (SPSS). The results will be presented in the form of frequency, percentage and bar charts. The relationship between the two independent and dependent variables were tested and the result would be discussed and reported in detail under findings and analysis. In the SPSS, a descriptive analysis, frequency, reliability, chi-square test and multiple regressions can be conducted. Finally, the correlation command was used to calculate the Pearson correlation coefficients between pair of variables.