Perception of Non-Muslims towards Islamic Banking Revisited: SEM Approach

This study investigates the relationships between non-Muslims’ perceptions and acceptance towards Islamic banking in Malaysia. Specifically this research is to determine the significant contributing factors of perception and its measured indicators; and relationships between the factors which influence non-Muslims to accept Islamic banking. A total 250 respondents participated in the survey at selected areas in Kedah, Malaysia. A structural equation modelling (SEM) approach is employed for the study to provide a robustness to the perception and acceptance model which passes all validity and reliability tests to be a good fit model for causal hypotheses testing. Confirmatory factor analysis is utilised to test for model validity, reliability and goodness-of-fit of the model. The result of hypotheses has revealed that there is a significant relationship between perception among non-Muslims which is indicated by confidence and bank selection criteria, towards acceptance of Islamic banking system in Malaysia. Latent variable for perception also passes mediating test to be a significant mediator between the exogenous indicators and the endogenous acceptance towards Islamic banking. DOI: 10.5901/mjss.2016.v7n1p13