WHY DO CUSTOMERS PATRONIZE ISLAMIC BANKING IN MALAKAND DIVISION, KHYBER PAKHTUNKHWA

Banks plays a vital role in the socio-economic development of a country. Like in other parts of the world, Pakistan has dual banking environment with intense competition. Knowing the key triggers of patronage factors is utmost important. The aim of the study is to identify the key factors contributing towards Islamic banking patronage factors in Malakand division, Khyber Pakhtunkhwa, Pakistan. 280 customers of full-fledged Islamic banking or conventional banking with Islamic window were selected for the study. Data was collected through self-administered questionnaire designed based on the previous studies. Five pints likert scale range from very important to not important was used. Descriptive statistics and Friedman’s test were used to identify the factors associated with Islamic bank selection and their degree of importance. The results of the study revealed both religious and non-religious factors are considered by customers before opting for Islamic banking. Among the variable religiosity was most important predictor of Islamic banking, followed by friendly and cooperative staff, shariah compliant products, ATM facilities and referral by friends and family. However, banking hours cost of financing and return on investment were given less preference by customers.Results of the study are expected to benefit the bank officials at large as most of the population lives in rural areas of Pakistan. According to Pakistan bureau of statistics, 67% of population of Pakistan consists of rural while, in Khyber Pakhtunkhwa 83.1% accounts for rural population. Furthermore, the government authorities could also get more fruitful results by focusing on the factors identified in the study before devising any strategies for rural areas.Key Words: Riba, Islamic Banking, Religiosity, Shariah Compliance, Patronage, Non-Religious Factor