Chapter 1 : Introduction1.1 Background of the study In every country in the world, banking industry is one of the key role of the business industry. In Malaysia, there are 4 types of banking systems which consist of Conventional Banks both national and private, Islamic Banks, foreign conventional banks and lastly is the specialized banks. In the twentieth centuries, Islamic Banks has widely spread almost all parts of the world including muslim and non muslim countries. This bank systems promotes no interest banking and financially based on the equity. The Islamic Banking in Malaysia however now focusing on the growth , structure and performance. In order to stand side by side or above the conventional banks, Islamic Banks needs to develop new strategies to attract more clients. Hence, numerous studies on the performance of the Islamic Banking had been conducted and it shows that non muslim consumers are among the lowest of its clients category. Thus research to study the perception of non muslim on Islamic Banking need to be study. The problems will then be explained more detailed in the problem statement. 1.2 Problem Statement In the past few years, the competition in the economy becomes much more challenging including the Banking Industry. Thus, many banks have now develop their own Islamic Banking products in order to survive. However, the Islamic banking products has not been fully exposed in Malaysia. This was proven when according to Nurafifah and Sudin (n.d.) says that towards the end of 2000, total deposit at conventional banks was RM381 billion while total deposit in Islamic system was RM31 billion . Other than that, according to PWC (2014), the low involvement level by islamic banking towards GCC is because the lack of awareness. The Islamic Banking exist not only for muslim customer but also for the non muslims as well. However, islamic banking still having challenges in penetrating into the non muslim market segment. This can be proven by the PWC(2014) research, which state that 64% of their non muslim respondent says that they did not subscribe to islamic financial products and services due lack of awareness. Other than that, according to research done by Shahril (2017), the non-muslims respondents says that they feels Islamic Banking does not give any advantage to them. Thus, by understanding the perception the non muslims towards Islamic banking will be a good step towards increasing the islamic banking performance. 1.3 Research QuestionThe followings are the research questions for this report:Are the non muslims in Malaysia aware of the Islamic Banking Product and services?Are the non muslims in Malaysia understood about the principles in Islamic Banking?What are other factors that influence non muslims preference towards Islamic Banking?1.4 Research ObjectiveThe objectives of this research are as follows:1. To examine the non-muslims in Malaysia awareness towards Islamic Banking Product and Services2. To examine the non muslims in Malaysia understanding about the principles in Islamic Banking.3. To examine other factors that influence non muslims preference towards Islamic Banking1.5 Significance of Study This study focus on the perception of non muslims in Malaysia towards Islamic Banking and its awareness, social environment, and knowledge. This research is significant for a number of reasons centered on the understanding of the factors that affects the perception on Islamic Banking. This study is important to help the management of banks to understand the consumers issues regarding its islamic product. With this, the banks enable to tackle the problems and improve its marketing strategy to increase the number of its client. Other than that, the banks can also have a brief idea on how to disseminate information to Malaysian regardless of its demographics. This research not only will provide overview for the banks to increase its profitability by increasing its number of clients but it also beneficial to both researchers and academicians because it will help to enhance their knowledge on factors that influence perception towards Islamic Banking with focus on the non muslims. Other than that, this study can be the reference in the development of new researches related to the present one. 1.6 Scope of StudyThis study focus on the perception of non muslims in Malaysia towards Islamic Banking. There will be only three factors involved in this study which are awareness, social environment and knowledge. The study will involves only non muslims in Cyberjaya that will be selected randomly. Thus this study will not include muslims as the sample. The factors that are involved in this study had already been researched by past researcher with similar research. Based on the existing research, there are also other potential factors that contributes to perception of non muslim towards Islamic Banking, however it will not be included in this research due to several limitations.1.7 Summary This chapter introduce the overview of the research thesis and the objective of the study. The significance and the scope of study are also elaborated. By improving the perception of non muslims towards Islamic Banking enable the Islamic Banking sector to expand its business and improving its business strategy. This study is conducted as according to the previous research that explains that the percentage of non muslims clients is low. Hence, the factors that contributes to this situation needed to be studied. The scope and its limitation is also stated in the chapter. The next chapter explains more in literature review and also its hypothesis. Chapter 2 : Literature Review2.1 Concept of perception of non muslim towards Islamic Banking According to (Wang et al.,2007), prerception is crucial cognitive function located in the subconscious layers that reflects personality. However, next concept is that the perception is the primary cognitive processes includes emotion, motivation, and attitude (Wang et al., 2006). Next is the concept of Islamic banking in which according to Shahriar (2014), Islamic Bank is the bank that obey the Islamic Rules and regulations in which resulted in interest free banking system and equity based financing.2.2 Awareness and its relationship on perception of non muslim towards Islamic Banking Awareness is defined by Henley (1984), as subjective and awareness are similar with self-reports proving that an individu “consciously sees” a stimulus. Other than that, based on the researched conducted by Dourish (1992) defined it as the understanding of the activities of others. c Few researcher have conducted research on awareness towards Islamic Banking and among them are Seipati and Norman (2016) which highlighted that the level of product awareness has a significant impact on attitude towards Islamic banking. Other than that, Mariatul (2015) also mention that he financial institutions should continuously increase the non-users’ knowledge and awareness of the existence and principles of Islamic financing, its product benefits and its differences with conventional financing. Lastly, according to Mahmoud and Abduh (2014) research, the results of his study shows that the intention of Mauritanian to patronize Islamic bank is influenced by their subjective norm, attitude and awareness upon Islamic banking products and practices. Hence, this shows that awareness has an significant impact on the perception of non muslim towards Islamic Banking.H1 There is significant relationship between awareness perception of non-muslims towards Islamic Banking.2.3 Social Environment and its relationship on perception of non muslim towards Islamic BankingLatane (1981) says that social includes physiological states and subjective feelings, motives and emotions, cognitions and beliefs, values and behavior which happen in an individual caused by the real, implied or imagined presence or actions of other individuals. Other than that, Emerson (2001) also says that social value occurs with the combination of resources, inputs, processes or policies to improves the life of individual or a society. According to Amin, Abdul Rahman and Abdul Razak(2014), they say that social pressure influence customers’ intention to use Islamic finance products. Hence, A recommendation from friends and relatives play a significant role in influencing customers’ intention to use Islamic home financing. Furthermore, Deloitte(2013) also concludes that for the bank to achieve sustainability, profitability and mutual beneficial relationship, they must learn deeper about the customer and listen to them. Other than that, creating a supportive social environment or social interaction is needed to promote Islamic financing, so that others can influence the consumers’ behaviour. (Mariatul,2015). Hence, this shows that social environment has an significant impact on the perception of non muslims towards Islamic Banking.H2 There is significant relationship between social environment and the perception of non-muslims towards Islamic Banking.2.4 Knowledge and its relationship on perception of non muslim towards Islamic Banking Knowledge is the full utilization of information and data, along with the people’s ability and skills, competencies, ideas, intuitions, commitments and motivations(Warier, 2003). Thus, Buchari, Rafiki and Qassab(2015) says that the knowledge of Islamic Banking are achieved by having in touch with the products and services directly or hearing from other sources on it. According to Mariatul(2015), in her studies, most respondents were unsure that the establishment of Islamic banking will improve banking facility and products, and what are the potential o f Islamic banking products in the future due to lack of information provided by the banks the public on what improvement the Islamic banking system had offered. Furthermore Aziz, Rokiah and Azrin(2012) mention in their studies that non-Muslim respondents with higher education level strongly thought that Islamic banking will dominate the banking scenario in Malaysia. This is due to their easy access to information on Islamic banking along with better knowledge and understanding on Islamic banking products and services due to a wider exposure to news and information from various sources. Hence this shows that educating the market would aid in the competitiveness of Islamic financial products relative to conventional products. Thus, facilitating the understanding of Islamic products and making the comparability with similar conventional products will help consumers make better choices (Sanaullah, Irfana & Javed, 2015).H3 There is significant relationship between knowledge and the perception of non-muslims towards Islamic Banking.2.5 Theory Related The theory that is related to this study is the self-awareness theory by Duval and Silvia (2001). They mentioned that experiments shown that when people are not aware , their actions are not showing their personal standards. Thus, awareness is needed to reduce inverse reaction of ones actions and their ideals. Other than that is the Ajzen’s (1991) Theory of Planned Behaviour (TPB) hypothesized that belief determinants such as knowledge and awareness are positively contributes to attitude towards Islamic financing which will then influence adoption intention. 2.6 Summary In this chapter, the literature review of this study is presented. The literature review shows the evidence that the study has also being conducted by other researchers. The evidence is to proof that the statement is valid. The concept of the independant and dependant variables are explained. The theory used in this study is also presented. Thus, based on the evidence given, hypothesis is generatedChapter 3: Research Methodology3.1 IntroductionThis chapter will elaborate on the relations of the awareness, social environment and knowledge to the perception of non muslims towards Islamic Banking. In order to have deeper understanding on the factors mentioned, the summary of data collection, the research method, and the conceptual framework will be identified. 3.2 Research Design The collecting data is done according to the quantitative research. Quantitative research focus more on the numerical data or information. In this study, this research is gained from the questions given in survey to understand more on this issue based on other people’s view. This is a correlational study, hence this study is undertaken in non contrived setting with minimal interference of the researcher. This research will only focusing on non muslims in Cyberjaya age between 18 years old and above. Other than that, the research will be done cross-sectionally.3.3 Research Framework The research framework is developed based on the study of the previous researchers. For example, according to (Abdifatah, 2015), he says that there is no awareness of Islamic banking products and services among non-Muslim students in selected northern Malaysian universities towards Islamic Banking products and services. Other than that, the study conducted by (Mariatul, 2015), she says that social environment or social interaction is vital in order to promote Islamic financing, this is enable others to influence the clients’ behaviour. Furthermore, she also mentions that increasing the knowledge of the existence and the principles of Islamic Banking products should be done by the financial institutions as it is one of the factor which relates to the perception of users towards Islamic Banking.Research Framework3.4 Research Instrument The study implement survey which is an assessment done on selected people depending on the scope of the project. There are few ways to conduct survey and questionnaires is one of them. Questionnaires is a series of written questions for respondents to answer. Respondents are selected by the scope used for the project. They are then recorded and assessed to get the average answer of the respondents. This questionnaire will consist of three parts which is , Part A is the demographics of respondent, Part B, C, D are the informations on the awareness, social environment and the knowledge related to the subject and lastly Part E is the perception on Islamic Banking 3.4.1 Section A: Demographics of Respondent In this section, the demographics or the background of respondent is collected. The questions related will be gender, age range, place of work, place of residence, religion, ethnic group and highest education level.3.4.2 Section B: Awareness In this section, the awareness in which is the self conscious of the Islamic Banking will be asked. This section will have two items. This part will measure the awareness of some specific matter on a rating scale of 1 to 5. This type of questions will indicate that the order of 1 (strongly disagree) to 5 (strongly agree). This is to show what respondents consider significant3.4.3 Section C: Social EnvironmentIn this section, the social environment or social interaction of the Islamic Banking. In this section, the types of questions that will be used is dichotomous questions in which the respondents need to tick either yes or no.3.4.4 Section D: KnowledgeIn this section, the respondents will be asked about the knowledge of the Islamic Principles applied in Islamic Banking. Products. There will be 6 items such as on riba, gharah, product and services, law and principles and also halal transactions. This will be the same as section B, it will be constructed using the degree of knowledge of specific matter on a rating scale of 1 to 5. This type of question will indicate that the order of 1 (totally do not have knowledge) to 5 (deep understanding of the item).3.4.5 Section E: Perceptions towards Islamic Banking This section will asked the respondents on their current perceptions of Islamic Banking. There will be six items in this sections. It will be constructed using the degree of preference of specific matter on a rating scale of 1 to 5. This type of question will indicate that the order of 1 (strongly not prefer) to 5 (strongly prefer).3.5 Pilot StudyThe purpose of pilot study test is to refine the questionnaire to ensure the respondent understand and enable to answer the question easily. Hence, if there is any difficulties faced by the respondent when answering the questionnaire, adjustment can be made before distributing it to the other respondents. The pilot test involved the actual respondents of this study. According to Lackey and Wingate (1998), they mentioned that 10% of the final study size is generally sufficient for pilot testing. 20 respondents will be chosen from the actual population studies to conduct the reliability of the instrument.3.6 Population and SamplingThis study utilizes a convenience sampling technique which is non probability. This research will be conducted to 200 non muslim aged above 18 years old in Cyberjaya, Malaysia. This location is believed to be more condensed and convenience.3.7 Method Of Data CollectionThe data collection process was conducted after the questionnaire is finalized. After adjustment had been made resulting from the pilot study, the questionnaires are then distributed to the target respondents in Cyberjaya. The respondents will be handing the survey question on the same day for data analysis. The distribution are conducted in several locations in Cyberjaya including parks, universities, shopping mall and bus stops. The sample random sampling method is used for this study in which is each respondent had same probability to participate as the research sample through random selection ( Ary et al., 2009)3.8 Data Analysis SPSS Software will be used as the data analysis tool in this study. The SPSS is used by entering the data which is in numbers into the software. The data analysis that will be used in the study is frequency analysis, descriptive analysis and inferential analysis. The frequency analysis is used because of the nominal data. The data that had been analyzed will be presented in pie chart. Next is the descriptive analysis, in which is conducted because there is existence of the nominal data. This analysis shows the mean and the standard deviation of the analyzed data. It will then represented in table form. Next is the inferential analysis in which it determines the relationship of independent variable and dependent variable. In this method, Pearson Correlation Coefficient and Multiple Regression Analysis can be used. The result of both analysis will be presented in table form. The Pearson Correlation Coefficient measures the linear association in other words it measures how the variables are related (high or low relationship). On the other hand, the Multiple Regressions analysis is implement to determine the relationship between variables and also to predict the value of dependant variable based on the value of independant variable.3.9 Summary The research methodology are elaborated in this chapter. Based on previous researcher, the research framework and research design has been developed. Other than that, the further details of the research instrument , the method of the pilot study, data collection method and data analysis method were explained in this chapter.