Introduction

The Malaysian government has implemented a number of programs to ensure the

sustainable growth for the Micro-Enterprise sector. With the encouragement from the
government Micro-Enterprises in Malaysia have been able to excel in supply chain products
and services delivery. (Mahadevan, 2007).
Micro-Enterprises in Malaysia are the enterprises whose annual sales turnover is less than
RM 250,000 or the no. of full-time employees are less than five. Micro-Enterprises comprise
of 91% of total Malaysian business but they contribute only 32% of the GDP. The capital
invested in this business is too less which further hampers their growth. The improvement in
the GDP contribution of Micro-Enterprises of Malaysia would improve the Malaysian
economy much better. Hence the Micro-Enterprises are the most targeted customers to the
Malaysian banks in the present scenario.
The Micro-Enterprises usually gets funds from the family, relatives and promoters to get their
work started initially which is usually too less for a company to become large and successful.
The banks are the sources of credit-based and relevant risk analysed capital investment to the
Micro-Enterprises. What matters most to the banks in Malaysia is the customer loyalty of the
Micro-Enterprises with the bank they are operating with. It is of prime necessity to the banks
to check the personal factors that have been affecting the loyalty of Micro-Enterprise owners
towards Conventional and Islamic banking services in Malaysia.

Qualitative Data Analysis on the factors influencing Micro-Enterprises loyalty to their bank
in Malaysia.
Qualitative Data Analysis or QDA is the set of collective processes wherein the collected data
is converted into a form of expression or explanation of the conditions and the people who
are to be investigated. Interpretative philosophy is taken into consideration while going
through QDA process. Through this process, the appropriate and relevant qualitative data gets
picked for interpretation.
The process of Quality Data Analysis includes the following two procedures:
1. Writing.
2. Identification of Themes.
There are six questions that are needed to be addresses for a qualitative content analysis.
They are as follows:
1.
2.
3.
4.
5.
6.

What kind of the data is to be analysed?

In which fashion they have been addressed?
What is the total population from which the data is collected?
The data is collected and analysed for which context?
What would be the limits under which the data analysis has to done?
What would be the ultimate target of the interpretation? (Krippendorff, 1980)

The Data Analysis procedure could be explained with above diagram more elaborately. The
above diagram explains how the things amiss are first brought to the notice. Then the related
data is taken into consideration and thereafter collected in the systematic manner. Afterwards,
the data is analysed in order to come to the proper conclusion.
We have undergone a Thematic Inductive Qualitative Data collection process to determine
the customer loyalty of the Micro-Enterprises towards their banks. The following analysis
could be taken from the data collected. This analysis would further help the banks to maintain
cordial relationship with Micro-Enterprises which would enhance the loyalty towards bank.

Banks Reputation
In order to study how Banks Reputation influences its customers loyalty more thoroughly,
we have further categorised the theme into i) Banks Reputation and ii) Banks Image.
Collectively a broad picture of the factor Banks Reputation could be generated.
i)

Banks Reputation:
From the findings from the data collected, the bigger and stronger the bank is more
preferred by the Micro-Enterprises. This concludes that these enterprises are looking
for the stableness and security from the bank they operate with. Even though the
experienced staff and tailored services according to the needs and expectation are
required, they are not the most important consideration. Since the Micro-Enterprises
operate in small scale, they are not much enthusiastic about the international banking.
The Micro-Enterprises demand the stableness and security from the bank more than
anything else so that they do not lose their money when the banks take up new
venture. Also the risk of the bank getting take overed by any other bank, resulting into
new policies and new systems, is nullified.

ii)

Banks Image:
From the survey conducted, it is clear that the Micro-Enterprise owners look for the
bank which is easy to access and the transactions are conducted most conveniently.
Since Micro-Enterprises are mostly owned by Head of the Family and decisions are
taken like-wise, it is completely left to the Head of the Family if the company could
approach technology compliant bank. Hence mostly the traditional banks are preferred
by such enterprises.
The next preference of the customers would be the ecommerce facility which could
enable the clients to operate without having to visit the bank personally.
The data collected from Micro-Enterprises also concludes that the companies are not
looking for extra features offered by banks. Due to lack of disposable income, the

Micro- Enterprises are only looking for the services which would help them grow
their businesses.
For any bank, its reputation is considered to be a most important asset. During mid-1980s, a
bank named Continental Illinois had a blow on its reputation which further suffered the
liquidity crisis and the total failure of the bank in whole.
To safeguard its reputation should be one of the major tasks for any bank be it traditional
bank or Islamic bank.
The vulnerability of the bank towards the reputation risk can be calculated through following
procedure:
1. Does the bank have its values defined?
2. Are the values outlined are brought up in the bank board meetings?
3. Does the banks incentive program force the implementation of bank values?
4. Has the internal communication assessment procedure been taken to make sure
whether values of the bank are properly complied to?

Perceived Service Quality

The Perceived Service Quality can be determined by analysing the following determinants:
i)

Core Services
The Micro-Enterprises business owners prefer the bank which would provide them
with the same kind of services whatsoever channel they are using. The business
woman or businessman who is travelling would have to contact the bank official on
telephone for urgent monetary transaction. The 24x7 availability of such services will
the increase banks worth. Presenting different type of product and service options to
clients is also very important for a bank.

ii)

Service Delivery from Human elements

The friendly staffs of the bank are always its goodwill. The Micro-Enterprise owner
would always look for the bank whose staff is friendly and is willing to entertain its
client. Rest the interpersonal skills of the staff, the value of advice the staff provide
does not count as much important for the Micro Enterprise owners unless the staffs
are friendly.

iii)

Systemization of service delivery through non-human elements

In this modern age, where all the work is done through internet, the Micro Enterprise
owner would want an internet banking facility from the bank so that he may not have
to run to the bank every time. The client would be benefited if the bank is well located
and easily accessible to operate even in the peak hours. The office layout does not
matter much to the client unless he is provided with required services fast and in
efficient manner.

iv)

Tangibility of the services

Providing the good services to the clients and the rewards and bonuses for the regular
customers always helps in retaining the customers. In Malaysia, there is lot of
problem faced due to parking unavailability. For some client, it does not matter if the
bank premises are big or small. But having ample parking space allotted just for the
customers means a lot to them. A Micro Enterprise owner would always look for the
bank that could look after the customers small needs that would save his time as well
as money.

Relationship Quality
The Relationship Quality of the bank towards Micro-Enterprises can be determined by
considering the following themes:
i)

Trust
The trust factor is very important for Micro Enterprise business owner. The mutual
understanding and the mutual trust is the most important factor for a client to pursue
his loyalty to the bank for a long period of time. Since Micro Enterprises operate in a
very small scale and the cash flow is very less too, it becomes tough for the bank to
trust those enterprises with huge investment. In such cases, if the bank could provide
with even one such employee to client whom the client could totally trust, the bank
could earn the long term loyalty from the client.
The Micro Enterprise business owners might feel even the more secured if the bank is
a public national bank. With the private bank, even if the facilities provided are more,
there is always the threat of money loss.
Some other factors like accessibility and operations through phone call and intimation
of irregular cash flow, even if they are very important for the business to run
smoothly, are not very important for the Micro Enterprise business owner.

ii)

Commitment
Form rhe survey conducted, it is very clear that in the long term relationship with the
bank, and the client would only reconsider changing the bank when it is unhappy with
the bank. A Micro Enterprise business which has good relation with the bank and
functions smoothly would not change its bank because that would increase its
switching cost.

iii)

Satisfaction
The processing fees charged, fees and structure rates charged are the major factors
that get considered while choosing the bank and keeping long term relationship with
that bank. The client would always feel much closer and loyal to the bank if the bank

officials recognize the client and him the yearly incentives as a regular customer. In
the trustworthy and long term relationship, the bank can afford to close its eyes on
policies and procedure meant for client. This would provide the client with the ease of
the operations. If the bank is transparent in all its processes, it would help in gaining
the clients confidence.
The proper and well thought relationship is of prime importance in any business. The level of
personalization and friendliness, the organization is able to maintain with its clients,
determines its success in the near future.
In any part of the world and in any business, consumer is the considered to be the king.
Outlining the values of the organization which enable the staff and management to adhere to
the policies explaining the consumer services is very important for a successful business.

Ethnicity and Religiosity

The Ethnicity and Religiosity factors that determine the customer loyalty of the Micro
-Enterprises towards the bank can be determined through following evaluation:

i)

Faith and Belief

The Islamic Banking does not practice taking or giving interest. It practices profit
sharing. During economic turmoil in 1997, most of the Micro Economic businesses
got affected badly due to fluctuating business rates and most of them transferred their
account to Islamic Banking. The money transactions through this bank are transparent
and good number of services is provided to the client.

ii)

Race and Ethnic Behaviour

The Ethnicity of the bank is not of much concern to the Micro Enterprise owners as
long as the banks are providing good services and good income is being generated
through them with the security factor taken into consideration. But still, having a bank
who knows the language and values of the society help the Micro Enterprise owner
get rid of day today problems. If culturally the bank and Micro Enterprise come from
same background, the bank would be able to address the problems with ease.

Ethnicity and Religion influencing Micro-Enterprises loyalty in Malaysia

Since the establishment of commercial banks in the Muslim world, Islamic scholars have
been continuously examining the methods of the operations conducted by the conventional
commercial bank. As the time flew, Islamic scholars came to the conclusion the conventional
commercial banking system and its operations are against the principles outlined in Shariah.
According to Shariah principles, paying interests on the savings or charging interests on the
loans as well as debts is not allowed. Taking into consideration the growing needs of the
humankind, Islamic scholars and Islamic economists prepared the conceptual models of
financing as well as banking during the twentieth century. This development of this model

was necessary for the growth and development of the Muslim businesses around the world.
Indirect or direct intermediation in between resource deficit and the surpluses was taken into
consideration while developing the model. (Ayub, 2007)
In Malaysia, Islamic banking came to existence in year 1963 in the name of Perbadanan
Wang Simpanan Bakal-Bakal Hajj. PWSBH was established to form an institution which
would help the Muslims in Malaysia to save the money for travelling to Hajj. Malaysias first
Islamic bank was established in year 1983. From year 1993, the finance companies, the
merchant banks and the commercial banks were being allowed to give the services and
products of Islamic Banking which was operated under Islamic Banking Scheme, also known
as IBS. However, by the Malaysian policies, these banks and institutions are required to
separate the activities and funds collected from the activities and funds of the conventional
banking. This policy was brought into implementation so that there is no intermingling of the
funds since the interest policies and funds accumulation system in both the types of banking
is different.
Diverse cultures prevail in Malaysia. Malaysia has absorbed in it different languages and
different cultures of other Asian countries. Next to Malays, Islamic population is more in
Malaysian. There are also people from India, China and other origins. Malaysia has 3 rd largest
economy in whole of South East Asia. It ranks 29 th in the world economy. Providing the
financial service is one of the core services in Malaysia. It is very important for Malaysian
Government to recognize the wants and needs of its clients whether retail or corporate. The
government has to encourage the local businesses to make the right choices of banks as far as
their business needs are concerned.
In all, Malaysia has 41 banks out of which 19 banks are Islamic banks. The assets of the
Islamic banks in Malaysia have been showing 20% increase every year (MIDA, 2009). The

Malaysian government has been considering Religion and Ethnicity as an emerging factor
determining the loyalty of the Micro-Enterprises businesses. Islamic banking has emerged as
major competitors to the rest in Malaysia. Initially, Islamic banks were considered as the
means by which Islamic population would be facilitated to perform their religious duties like
visiting Hajj. But now the Islamic banks have been turning their attention towards core
banking services and are ready to offer all those services that other commercial banks are
offering. The Islamic policies still do exist in their banking system (Wilson, 1997).
The major role of a religion as far as choosing the banks are concerned, they been seemingly
over emphasised, as per the opinions of few scholars in regards to the deciding of the loyalty,
which has returns as the prime motive and religious sentiments are just the delight factor for
the banks customer (Dusuki & Abdullah, 2006).
There are separate rules and regulations as far as Islamic banks are concerned. The
Islamic banks should necessarily perform as per the policies defined in the Islamic Banking
Act which had been put to implementation in April 1983. The important factor that
differentiates conventional banks from the Islamic banks is that Islamic bank does not
practice payment of interest on the savings and receipt of the interest on the loan or debts.
Islamic bank practices PLS policy i.e. Profit and Loss sharing policy. The Islamic banking
policies also prohibit undertaking the trading that involves financial risks. It do not fund the
business dealing in alcohol and pork trading and production (Cihak, Hesse & Intenational
Monetary Fund, Monetary and Capital Markets Dept. 2008). Malaysia has been making good
progress after Islamic banking came into existence in year 1983. It has become the main
centre of the global Islamic banking. (International Monetary Fund, 2009).
Malaysia has been successful in maintaining the balancing act between Islamic banking and
traditional banking systems. The Islamic banking system in Malaysia has been outlined in

such a manner, that it goes parallel alongside conventional banking. Both the banking
systems have co-existed in Malaysia and both the systems have been making major
contribution to the Malaysian economy. (El Tiby Ahmed & El Tiby, 2011).
There are many factors that have ensured the Islamic banking success in Malaysia. The most
important factor is inter-banking money market system. The Malaysian government has made
an appropriate atmosphere economically as well as fiscally for the growth of Islamic banking
system.

The newly emerging Ethnicity and Religious factor affecting the customer loyalty of Micro
Enterprises
The Islamic banks in Malaysia have survived the economic slowdown wherein the interest
rates went on fluctuating. This slowdown proved to be a heavy loss to the customer dealing
with commercial banks. Since Islamic banks practices absolutely no interest system. It
believes in profit sharing system, the more and more customers were diverted towards the
Islamic banks in order to avoid another slowdown.
Ethnicity Factors
Next to Malays, Malaysian population mainly comprises of Muslims. The Muslim customers
claim banking through Islamic banks help them to remain close to the culture. Since these

banks are well versed with the daily problems of local Muslims, they could provide easy
solutions to their problems.
The common language spoken by the bank staff and the customers make huge influence on
the clients retention. The client would always be more comfortable dealing with the official
who can speak in his language.
The Islamic bank officials and the customers belong to the same background which would
help them grow the business more by growing their network and contacting as many
customers as possible from their background.
When the bank officials are of same background, there is always a personal touch to the
relation between the Micro Enterprise and the bank official.

Religiosity Factors
The Micro Enterprise owner for the first reason would approach the Islamic bank because it
provides Islamic services and products.
Since the Islamic banks deal in Profit sharing policies, the Micro Enterprise owner feels more
secured investing in those banks rather than the banks dealing in interest which is against the
rules of Islam.
Since there is Islamic element in their transaction, the Micro Enterprises feel more personal
and transparent system as they are mostly well acquainted with the Islamic procedures.

There are few powerful communities existing in Malaysia who would not bear the nonIslamic products and services. In order to deal with such communities in the day to day
business, Micro Enterprises have to follow their policies.
In all, the Ethnicity and Religious factor has been emerging as most influencing factor in
determining the loyalty of the Micro Enterprises towards their current bank.

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