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Theory of Islamic consumer Theory of

Islamic
behaviour consumer
behaviour
An empirical study of consumer behaviour of
Islamic mortgage in Malaysia 273

Hanudin Amin Received 8 June 2013

Revised 4 December 2013
Labuan School of International Business and Finance, Universiti Malaysia Accepted 21 December 2013
Sabah, Labuan, Malaysia and IIUM Institute of Islamic Banking and
Finance (IIiBF), International Islamic University Malaysia,
Kuala Lumpur, Malaysia
Abdul-Rahim Abdul-Rahman
IIUM Institute of Islamic Banking and Finance, International Islamic
University, Kuala Lumpar, Malaysia, and
Dzuljastri Abdul Razak
Department of Business Administration, International Islamic University
Malaysia, Kuala Lumpur, Malaysia

Abstract
Purpose – The purpose of this study is to propose a theory of Islamic consumer behaviour to
explain the factors that influence the Islamic mortgage industry. Although previous works have
shown that conventional marketing theories were, to a certain extent, able to predict factors
influencing halal marketing and Islamic mortgage, these theories fail to capture or accommodate
the Islamic perspectives of consumer behaviour. Conventional marketing theories have also been
found to be inadequate to explain the Islamic mortgage preference among consumers.
Design/methodology/approach – Drawing upon the Maqasid al-Shariah, this study develops an
Maqasid al-Shariah index (MSI) and religious satisfaction (RS) for Islamic mortgage industry in
Malaysia. These indexes are developed as the basis of the theory development in this setting. The model
developed is later examined using survey data.
Findings – This study reveals that education and RS are instrumental in determining the Islamic
home financing preference. In contrast, justice and welfare are insignificantly related to the Islamic
home financing preference. Religious satisfaction, to a certain extent, plays role not only as a mediator
but also as a moderator. We find that RS has a full mediation effect on the relationship between welfare
and willingness to consider applying Islamic mortgage. We discover justice is moderated by RS.
Education and welfare however are not moderated.
Originality/value – This study contributes to the development of an empirical Islamic framework in
predicting consumers’ behaviour in an Islamic mortgage market using a Maqasid approach. This study
is also pioneering in introducing two indexes, notably MSI and RS, and applying these indexes to
Islamic home financing context. Journal of Islamic Marketing
Vol. 5 No. 2, 2014
Keywords Islamic business ethics, Islamic marketing, The Muslim consumer, Islamic financial pp. 273-301
services marketing © Emerald Group Publishing Limited
1759-0833
Paper type Research paper DOI 10.1108/JIMA-06-2013-0042
JIMA 1. Introduction
Evidently, conventional theories view materialism and hedonistic philosophy as the aim
5,2 of life for an individual (Lada et al., 2009; Md-Taib et al., 2008), but, particularly, these
theories fail to capture Islamic perspectives of consumerism. The motive of conventional
theories is to predict one’s behaviour in the framework of capitalist norms. In conventional
theory, one is intended to satisfy his own self-defined need in any consumption (Khan, 1995).
274 Consumer theories like the theory of reasoned action (the TRA), the technology acceptance
model (the TAM) and the theory of planned behaviour (the TPB) guide individual
behavioural intention based on conventional worldview, and the use of these theories is
unlimited to incorporate halal and non-halal issues. This means that these theories can be
extended to predict one’s behaviour for consumption of haram and halal goods and services.
These demonstrate individual acts without boundaries. Thus, the theories fail to capture the
Islamic philosophy, and the founders built them for psychology rather than Islamic finance.
This explains why these existing theories may prove to be insufficient to analyze consumer
behaviour in an Islamic society (Khan, 1995).
In response to this, the Islamic consumer theory is thus of significance. An Islamic
consumer theory views eternal happiness as the aim of life for an individual. One act is
particularly influenced by considerations of moderation and benevolence rather than
self-maximization and acts without limitations (Khan, 1994). The motive of Islamic
consumer theory was to predict one’s behaviour in the framework of Islamic norms. It
drives one’s action based on genuine need. This is viewed by Al-Faruqi (1982), who
asserts that “a person may consume according to his need”. The rest of his income or
wealth should be spent on charity for the cause of Allah (S.W.T) (Al-Faruqi, 1982).
Viewed particularly, earlier scholars such as Khan (1984, 1995) and Kahf (1978) have
argued the importance of Islamic consumer behavioural theories. Of this, Kahf (1978)
argues that a choice of an action by a consumer is composed of two parties, its immediate
effect in this life and its later effect in the life to come. This view is also supported by
Khan (1984, 1995) who claims that the choices of consumer for the first level are
“spending for worldly needs” and “spending for the cause of Allah”. Consumption of
good things is considered as a virtue in Islam (Kahf, 1978).
On the basis of these arguments, the current work intends to develop a theory of
Islamic consumer behaviour to predict one’s demand intention to choose Islamic home
financing. For the purpose, Maqasid al-Shariah index (MSI) and religious satisfaction
(RS) are developed and used as a point of departure. We postulate MSI and RS to
influence one’s receptivity on Islamic mortgage. Further, we postulate RS serves not
only as a mediator but also as a moderator.

2. Review of literature
2.1 Theory of consumer behaviours
In this study, three theories are addressed. In this study, the discussion for the three theories
is given a proper deliberation owing to the fact that the theories receive rich empirical
supports from various researchers in diverse disciplines including in Islamic marketing,
Islamic financing, Islamic accounting, etc. This includes the TRA, the TPB and the TAM.
First, the TRA was first coined by Fishbein and Ajzen (1975) to establish an
association among beliefs, attitudes, intentions and behaviours. This theory expounds
that one’s behaviour is determined by his or her intention to carry out the behaviour. On
the same note, behavioural intention is, in turn, a function of the person’s attitude and
subjective norm towards the behaviour (Fishbein and Ajzen, 1975). According to Theory of
Fishbein and Middlestadt (1997), clarify that one is rational in performing certain
behaviour, which, in turn, is the key premise of the TRA model. Attributable to its
Islamic
remarkable achievement in developing a behavioral predictive model, the TRA has been consumer
applied to a wide variety of research fields including management, marketing and behaviour
banking (Ramayah et al., 2009; Lada et al., 2009).
There is growing interest by Muslim scholars and orientalists to examine the 275
applicability of the TRA model. Further, five studies are discussed. To the best of our
knowledge, Zainuddin et al.’s (2004) study is the pioneer which first examines the
validity of the TRA into the general context of Islamic banking in Malaysia. The study
first adapts the dimensions of attitude and subjective norms from extant literature. With
their beautiful effort, the theory has been proven to have a significant impact on the
Islamic banking context. Well, as expected, the two predictors of the TRA are
instrumental in explaining why bank customers opt for Islamic banking. Further, a
study by Md-Taib et al. (2008) discovers that musharakah mutanaqisah home financing
is found to be the ideal alternative to the existing bay bithaman ajil (BBA). Customers
criticize BBA because of its contradiction with regard to the Maqasid al-Shariah, while
in an actual case, it is sourced from human errors who wrongly implemented BBA until
it is viewed as haram. The study focuses on examining the appropriateness of the TRA
towards musharakah mutanaqisah home financing. Not surprisingly, attitude and
subjective norms are instrumental in explaining why he chooses the financing facility. It
is explained that a positive attitude leads to the selection of musharakah mutanaqisah
home financing. Whilst, subjective norm is found in the Muslim society in Malaysia that
supports the existence of Islamic banking system since 1983, although there exists some
critics on the implementation’s party. As many have patronized the banking system, one
has the tendency to adhere to the norm of others for acceptance.
Later, TRA extends to halal food. A study by Lada et al. (2009) examines the
applicability of the TRA in predicting one’s consumption of halal food. Generally, the
norm and one’s intrinsic value are instrumental in explaining why one opts for the best
option of halal food. It is explained here that the halal foods offer many advantages
including those for the spiritual hygiene when a halal animal is slaughtered according to
Islam. The dead chicken are haram in the context of food intake in Islam. Given this
assertion, one’s attitude is thus found to be associated with halal food, which denotes the
better the preparation of halal food, the better one’s attitude on it. Norm is also explained
here as nowadays halal food is taken not only by Muslims but also non-Muslims. Those
non-muslims take halal foods because of food safety. Afterwards in 2010, a study
examined the validity of the TRA in Islamic personal financing. Amin et al. (2010) report
that attitude and subjective norms are instrumental in determining one’s patronization
on qardhul hassan financing. They conclude that attitude and subjective norms are
significant patronage factors in the area of qardhul hassan financing. The study reports
68.9 per cent variance in the dependent variable. Therefore, in an Islamic framework,
attitude and subjective norms are appropriate. The former relates to consumption in
that one’s belief with regard to the positive or negative of a particular product can lead
to varying levels of adoption. The latter relates to the influence of Islamic society with
regard to the consumption. In all, Amin (2013) conducts a study on the TRA and Islamic
credit cards and discovers the predictors of the TRA are found to be statistically
JIMA significant. This study, thus, lends support to earlier works by Zainuddin et al. (2004),
Md-Taib et al. (2008), Lada et al. (2009), Amin et al. (2010), to mention a few.
5,2 The second consumer theory is the TPB. The theory has been developed by Ajzen
(1991) in which he adds one variable to the TRA model to give a birth to the TPB model.
It is explained that a person’s action is determined by behavioural intentions, which, in
turn, are influenced by an attitude towards the behaviour, subjective norms and
276 perceived behavioural control (Ajzen, 1991). Evidently, perceived behavioural control
has been proven to be a predictor in determining one’s behavioural intention in
consumer study (Teo and Lee, 2010). Individuals generally have a sort of control in
taking decision or not taking a decision which expounds the importance to respect one’s
control in a decision-making. A study by Alam and Sayuti (2011) examines that the halal
food purchasing has validated the TPB model. The study discovers that all predictors of
the TPB are statistically significant, demonstrating the parsimony of the theory into a
new context of halal food purchasing.
The third theory is the TAM. This theory is developed by Davis (1989) who proposes
perceived usefulness and perceived ease of use as the contributing factors for
behavioural intention in technology’s context. Davis et al. (1989) define perceived
usefulness as the degree to which a person believes that using a particular system would
enhance his or her job performance. Earlier studies have supported the significant
relationship between perceived usefulness and behavioural intention (Luarn and Lin,
2005; Cheong and Park, 2005 and Wang et al., 2003). Following this, Amin (2007) has
attempted to evaluate whether the TAM model is applicable in the context of services of
Islamic banks. He evaluates the validity of the TAM model in a specific service named
Bank Islam Malaysia Berhad’s mobile banking. In his view, mobile banking is a system
used to perform banking activities via bank customers’ hand-held mobile phones.
Customers can perform some basic services such as saving account transaction, current
account and financing transaction account, to mention some. Later, no interest has been
shown in this regard. The applicability of the TAM model in this context is, to the best
of our knowledge, ended in year 2007.
Overall, we discover that the TRA, the TPB and the TAM have some limitations.
They are developed in the Western society, where humans are expected to perform
rational decision, whilst in actual practice, they lack moderation in consumption. In a
simple term, one acts to perform a particular behaviour without any deliberation,
whether his behaviour is halal or haram. To some extent, he attempts to maximize his own
utility whilst ignoring other (Khan, 1995). Despite this limitation, the theories have their own
advantages and surely are still applicable to the Islamic marketing, Islamic financing fields,
provided the researchers should modify it to fit into a context under investigation (Amin
et al., 2010). Such modifications are required to ensure that the theories are relevant, as the
theories mentioned here have been developed in 1980s and 1990s whilst not in 2000s. The
modification, however, should consider new variables, or to be better at least to have a
so-called “Islamic” variable and to be integrated in the model. In this present study, however,
rather than doing so, a Maqasid al-Shariah approach is taken as a baseline theory to explain
one’s adoption of Islamic home financing and to test the argument by Khan and Ghifari
(1992) that maqasid is related to consumer behaviour. Maqasid al-Shariah is directly tapping
the importance of ethical business according to Islam; hence, it is a superior selection. At
least, such an effort is contributed directly to the development of new knowledge in the
context of Maqasid al-Shariah. We note that it is a neglecting area of research in Islamic Theory of
consumer behaviour.
Islamic
consumer
2.2 Some Islamic mortgage studies
A recent work by Tameme and Asutay (2012) provides an overview with regard to the behaviour
Islamic mortgages in the UK. However, there is a paucity of studies that have adequately
addressed Islamic mortgage behaviours in the context of UK (e.g. Dar, 2002). It is also 277
understood that Tameme and Asutay’s (2012) study particularly replicates the study by
Dar (2002). Dar (2002) clarifies the issue of effective demand for Islamic mortgage in the
UK Islamic mortgage market. Tameme and Asutay’s (2012) view the effective demand
for Islamic mortgage markets as the statement of the problem for the study conducted.
The findings indicate that wider social factors and lifestyle choices may be increasing
the demand for Islamic mortgages. The paper also argues that there is scope in the UK
to expand the market for Islamic products and services to non-Muslims as well if
effective and sound marketing strategies are implemented. Unfortunately, the study
does not develop a framework of success for Islamic mortgage in the UK.
Yaakob and Abdul-Rahim (2009) consider the importance of the musharakah
mutanaqisah to the BBA court case involved. The authors report that Kuwait Finance
House, Maybank Islamic Berhad and RHB Islamic Bank provide the facility to their
clients. Normally, the modus operandi of musharakah mutanaqisah home financing in
the named banks is the same, but they are varied in terms of the policies used. For
instance, Kuwait Finance House incorporated ijarah mawsufah fi dhimmah in its
musharakah mutanaqisah home financing. The study also criticizes constructively the
practice of the BBA. The permissibility of the BBA is sourced from the Jumhur fuqaha
in which they argue that the fixation of a high price than that of the selling price is
permissible and not riba. The current practice of the BBA, however, is deviated from the
basis of its permissibility. Earlier scholars in contrast criticize BBA openly without
suggestions for betterment (Mydin-Meera and Abdul-Razak, 2009; Osmani and
Abdullah, 2010). Yet, based on Yaakob and Abdul-Rahim’s (2009) detailed examination,
the BBA meets the Maqasid al-Shariah and proves to be permissible. This is also
supported by the National Shariah Advisory Council, and the Security Commission
proves the permissibility of the BBA.
Md-Taib et al.’s (2008) study is one of the empirical papers on Islamic home financing
conducted in a Malaysian setting. The study asserts the importance of musharakah
mutanaqisah as an Islamic home financing alterative to Malaysians and attempts to
overcome the problem found in BBA. Musharakah mutanaqisah home financing is
generally new in Malaysia, and therefore, the authors intend to explore the public
perceptions with respect to the financing facility. To measure one’s willingness to take up
Islamic home financing, the authors use the TRA as a baseline theory. The study discovers
that attitude and subjective norms are instrumental in explaining behavioural intention. Of
these, the effect of subjective norm is greater than that of attitude. The work, however, is
merely a theory testing, as no additional variables are found in explaining behavioural
intention. On the same note, Abdul-Razak and Md-Taib (2011) examine consumers’
perception on BBA and musharakah mutanaqisah Islamic home financing products. It is a
sort of extension from the previous work by Md-Taib et al. (2008). Concerned with findings,
Abdul-Razak and Md-Taib (2011) report that customers are discontent with respect to the
high pricing of BBA, injustice and a burden faced by society at large. On the other hand,
JIMA customers view musharakah mutanaqisah home financing as an ideal alternative for Islamic
home financing as far as it captures Maqasid al-Shariah. In total, these studies, however, do
5,2 not test any Islamic framework to predict the behaviour of Islamic financing acceptance.
They rely on the theory testing and market survey of Md-Taib et al. (2008) and Abdul-Razak
and Md-Taib (2011), respectively.

278 2.3 Maqasid al-Shariah and hypotheses development

By definition, Maqasid al-Shariah generally refers to the objective of Shariah. To be
specific, Choudhury (1986) provides the insightful concept of Maqasid al-Shariah as
outlined as follows:
The basis of an integrative or systematic approach to Islamic values distinguishing between
universal goals and principles on the one hand and instrumental goals and specific applications on
the other hand so as to define the hierarchy of values in Islamic law (p. 93).
Previous scholars have addressed the significance of Maqasid al-Shariah in
understanding Islamic economics from an Islamic perspective (Choudhury, 1986;
Chapra, 1992, 2000; Kamali, 2008; Dusuki and Bouheraoua, 2011) and biotechnology
(Amin et al., 2011). These scholars, however, provide the general basis of the importance
of Maqasid al-Shariah to ummah without pinpointing the specific application of
Maqasid al-Shariah. The only study examines Maqasid al-Shariah from a very specific
area is a study conducted by Mohammed et al. (2008). This work explains the
significance of Maqasid al-Shariah in explaining the performance of selected Islamic
banks. The explanations of these studies are provided.
Chapra (1992) provides meaningful explanation with regard to the appropriateness
of Maqasid al-Shariah into an Islamic business activity. Any Islamic business activity is
expected to achieve Maqasid al-Shariah, that is to meet the falah and individual
well-being or it is the attainment of good life. Some orientalists view Islamic economics
are beyond the prohibition of interest, gharar and maysir. Richardson (2011) asserts that
Islamic economics is venerated as promoting equity, communal justice, the prevention
of exploitation, the protection of private property and the elimination of greed. In fact,
the author views that a successful, fully Islamic economy has yet to be achieved
anywhere which explains the reason why Islamic banking has lagged behind than
existing traditional banking models.
Chapra (2000), in his article titled “Is it necessary to have Islamic economics?”,
explains the viability of Islamic economics. He provides important connotation that is
“different societies may have different visions”. In the Western society, well-being is
defined in a purely material and hedonist sense, then it would be perfectly rational for
economics to give prominence to the serving of self-interest and the maximization of
wealth, bodily pleasures and sensual satisfactions. Unlike conventional economics,
Islam views the importance of moderation and self-sacrifice for the ummah benefits.
Chapra (2000) notes the importance of promoting a balance between individual and
social interest and help actualize the Maqasid al Shariah or what may be referred to as
the vision of Islam, two of the most important constituents of which are socio-economic
justice and the well-being of all Allah’s creatures.
Amin et al. (2011) view the importance of Maqasid al-Shariah in Islamic bioethics in
genetics and modern biotechnology. Amin et al. (2011) claim that any conduct that is
deemed ethical or permissible must fulfil its four purposes:
 (1) preservation of religion and health; Theory of
(2) preservation of progeny; Islamic
(3) preservation of intellect; and consumer
(4) preservation of wealth. behaviour
It is therefore worth noting that a modern biotechnology application or product is of
importance to fulfil one of the purposes if it is aimed at considering itself as ethical. On 279
the same note, Kamali (2008) claims that Maqasid al-Shariah is yet a somewhat
neglected theme of the Shariah. Kamali (2008) views justice, elimination of prejudice and
alleviating hardship in one’s behaviour. This expounds that the importance of
cooperation and mutual support within the individual, family and the society are the
fulfilment of maqasid al-Shariah. Interestingly, Dusuki and Bouheraoua (2011) examine
the framework of Maqasid al-Shariah and its implications for Islamic finance. The
authors propose four characteristics of maqasid al-Shariah, namely, the basis of
legislation, universality, inclusive and definitive. These features have rarely been
discussed in prior works (Chapra, 2000; Kamali, 2008). Importantly, the study notes that
Islamic finance is generally fallen under the second category of maqasid that is of
preservation of one’s wealth. Although these studies are essential, there is no effort
initiated to empirically test the relationship between Islamic mortgage and Maqasid
al-Shariah, which warrants future investigations.
Of the reviewed articles, Mohammed et al. (2008) provide a departure. The study
evaluates banks based on their performance ratios, performance indicators and the overall
maqasid index. Despite suggesting three objectives of Shariah, the study only manages to
analyze two objectives, namely, education and welfare owing to the unavailability of
financial data. Findings indicate that Islamic International Arab Bank of Jordan is ranked
first, followed by the Bank Syariah Mandiri of Indonesia and Bahrain Islamic Bank using the
developed maqasid index. The Malaysian bank, however, that is Bank Muamalat Malaysia
Berhad, is ranked fifth. Importantly, the study proves the applicability of Maqasid
al-Shariah in measuring Islamic bank’s performance. As a point of departure, the current
work extends Maqasid al-Shariah to predict behavioural preference of consumer on Islamic
mortgage. Hence, we make the following hypotheses:
H1. Education is positively related to willingness to consider applying for Islamic
mortgage.
H2. Justice is positively related to willingness to consider applying for Islamic
mortgage.
H3. Welfare is positively related to willingness to consider applying for Islamic
mortgage.

Religious satisfaction
Previous works on Islamic mortgage have not suggested specifically the RS index for
mortgage (Rosly, 1999; Mydin-Meera and Abdul-Razak, 2005; Md-Taib et al., 2008;
Amin, 2008; Shuib et al., 2011). Further, earlier works on Islamic banking have not
attempted to examine the relationship between the RS and the Islamic home financing
preference (Haron et al., 1994; Dusuki and Abdullah, 2007). The RS dimension is mainly
suggested to measure one’s well-being instead of mortgage behaviour (Poloma and
JIMA Pendleton, 1990; Casas et al., 2009; Tiliouine, 2009). The current work intends to provide
empirical supports with a special reference to the importance of RS. The current work
5,2 expects to contribute in this respect. As a point of departure, the current work uses three
studies by Poloma and Pendleton (1990), Casas et al. (2009) and Tiliouine (2009) to
examine the appropriateness of RS in an Islamic mortgage behavioural context. Poloma
and Pendleton’s (1990) study discovers the significant effect of RS on the social
280 well-being. Further, the current work will establish a RS index from an Islamic home
financing perspective, whilst some items from Poloma and Pendleton’s (1990) study are
clearly selected for the index development.
On the same note, two studies by Casas et al. (2009) and Tiliouine (2009) are also
reviewed considerably. Casas et al. (2009) examine satisfaction with spirituality,
satisfaction with religion and personal well-being among Spanish adolescents and
university students. The study reports that “satisfaction with religion” is significantly
related to “satisfaction with your spirituality” of adolescents. Tiliouine (2009), on the
other hand, examines satisfaction with religiosity and its contribution to the personal
well-being index in a Muslim sample. The study reports that there is a higher
satisfaction with religiosity/spirituality is found in women when it is compared to men,
married individuals are compared to single ones and inhabitants of the Sahara desert
locations are compared to people from other regions of Algeria. The findings by Casas
et al. (2009) and Tiliouine (2009) are useful and we expect a similar result can be obtained
when RS is extended to our Islamic mortgage context. Hence, we propose the following
hypothesis:
H4. Religious satisfaction is positively related to willingness to consider applying
for Islamic mortgage.
The potential of RS as a mediator and a moderator is largely overlooked in the literature
of Islamic mortgage (Tameme and Asutay, 2012; Yaakob and Abdul-Rahim, 2009).
Religious satisfaction can explain how the relationship happens between education,
justice, welfare and willingness to consider applying for Islamic mortgage. It is
explained that RS can tell us a sequence of effects that occurrs when independent
variables and a dependent variable are found significant, whilst the inclusion of RS can
alter such a significant relationship between independent variables and a dependent
variable. If the relationship is found to be insignificant, RS is particularly served as a full
mediator. Moreover, RS can affect the direction and strength of the association between
independent variables and willingness to consider applying for Islamic mortgage. This
may explain that when RS is higher, education, justice and welfare become so important
to affect his willingness to patronize Islamic home financing products. We review the
works of Poloma and Pendleton (1990) and Tiliouine (2009) to make the following
hypotheses:
H5. RS mediates the relationship between education and willingness to consider
applying for Islamic mortgage.
H6. RS mediates the relationship between justice and willingness to consider
applying for Islamic mortgage.
H7. RS mediates the relationship between welfare and willingness to consider
applying for Islamic mortgage.
 H8. RS moderates the relationship between education and willingness to consider Theory of
applying for Islamic mortgage.
Islamic
H9. RS moderates the relationship between justice and willingness to consider consumer
applying for Islamic mortgage.
behaviour
H10. RS moderates the relationship between welfare and willingness to consider
applying for Islamic mortgage. 281
3. Theory of Islamic consumer behaviour
Generally the model of this study is developed based on the need of “Theory of Islamic
Consumer Behaviour” where the emphasis is on the religion along with the worldly
investment by individuals. By definition, it refers to a framework developed to capture
thoughts, feelings and actions of consumers towards halal services, halal commodities, etc.
In this study, it refers to behavioural finance framework, which captures customers
of Islamic banks on the willingness to consider applying for Islamic mortgage.
Generally, three assumptions are established for the theory: the theory captures both
Muslim and non-Muslim customers. Earlier study by Khan (1995) pinpoints the
significance of developing a framework for Islamic consumer theory which captures
both customers, namely, Muslim and non-Muslim, as both contribute to the Islamic
banks’ well-being. The current scholars such as Wilson and Hollensen (2013) have
captured the importance of having both segments. Considering Muslim is based on the
fact that Muslims represent a quarter of world’s population and, more importantly, they
have initiated the introduction of Islamic finance, takaful, in which these financial
institutions later are the source of growth for halal industry which caters for food, drink,
cosmetics, etc. (Wilson and Hollensen, 2013).
In Malaysia, since 1983, Islamic banks cater the financial needs of those Muslims and
non-Muslims, whilst those non-Muslims find Islamic banks are more ethical in
generating profits and the same thing goes when providing services to them. It is no
wonder that the findings by Haron et al. (1994) denote that non-Muslims are also the
main source of Islamic banks’ customer base which, in turn, generate profits for the
banks. Knight (2006) argues that up to 25 per cent of Islamic accounts are opened by
non-Muslims. This is owing to the clarification that they are attracted by the prospect of
their money not being invested by bank in haram activities such as pornography
(Wilson and Liu, 2010). They have views that Islamic banks are more secure, ethical and
religiously based which make them patronize Islamic financing products. In fact,
halal-conscious consumers are risk averse, which drives discerning and
high-involvement behavioural traits (Wilson and Liu, 2011). Second assumption, the
theory developed is based on Maqasid al-Shariah. Maqasid al-Shariah is generally
referred to benefits/welfares/advantages for which Allah S.W.T has revealed His
Shariah. Khan and Ghifari (1992) provide important notes with regard to link between
Maqasid al-Shariah and consumer behaviour. In their study, they claim that
consumption of prohibited goods openly tends to violate the Shariah and order of
economic society. It is also explained, however, that one is argued to be inconsistent with
the need of Shariah when he spends the bulk of the budget of tahsiniyyah and ignoring
daruriyyah mainly when he consumes for banking products as apparently under
investigation in the current study. Importantly, Maqasid al-Shariah offers betterment in
one’s well-being by making the best decision to fit his needs and wants according to an
JIMA Islamic framework. The last assumption, the third assumption, the theory expects to
promote moderation (iqtisad) in one’s consumption. One is anticipated to spend to buy
5,2 basic stuffs that are useful for the sustainability of his living including his loved ones.
This is likely related to the worldly consumption where one tends to buy food, cloth,
house, car, etc., in which the first three are the very significant part of basic need in the
contemporary society. Classically, the first two are sufficient. Any remaining part of his
282 wealth can be channelled out to participate in the altruistic activities, which offer
spiritual well-being between folks and also for the submission to God. Al-Faruqi (1982)
argues that one should consume based on his need, whilst any extra part of his wealth
should be spent in the cause of Allah S.W.T. In this theory, one is rationale when
spending his wealth for his need to meet the worldly need and also spends for the cause
of Allah S.W.T. to gain for pahala (e.g. reward). This sort of assumption is generally
expected, as the wealth generated by the individual is a trust from the Almighty, and he
is responsible to distribute any extra of it in the form of sadaqah, waqf and zakat.
Furthermore, the idea of having an Islamic consumer theory has been firstly coined
by Kahf (1978) in his work entitled “The Islamic economy: an analytical study of the
functioning of the Islamic economic system”. The study deals with the theory of
consumption from an Islamic perspective. His theory has been argued to have an impact
in constructing a theory of production and suggesting policy measures to ensure a
pattern of production is Islamically guided. However, his work does not come up with a
theoretical framework for consumer behaviour. Later Khan (1984), through his
interesting work entitled “Macro consumption function in an Islamic framework” is
aimed at expounding a proper Islamic consumer behaviour theory. In his work, the main
elements of a Muslim consumer behaviour are spending to achieve satisfaction in this
world and spending for others with a view to earn reward in the hereafter. This explains
what is consumed by oneself in this world for the cause of Allah S.W.T. tends to be
rewarded by Allah S.W.T. and brings its implication to the hereafter.
In Khan (1989) explains that the consumer behaviour is a complex phenomenon
determined by such diverse forces as habits, customs, traditions, fashions, religious
beliefs and resources at the disposal of an individual. He asserts that a consumer in the
West tends to maximise his utility and minimise his costs in which he behaves
rationally. In Islamic economics, Shariah regulates consumer behaviour, and we believe
Shariah serves as a protector. The Quran depicts such regulation as iqtisad, which
literally means moderation. Hence, a Muslim consumer is required to adopt a moderate
attitude in the acquisition and utilization of resources. In his view, the Prophet
Muhammad (S.A.W.) offers an example of Muslim consumer in which the Prophet
promotes moderation in all of his doings. Khan (1989) views the Prophet Muhammad
(S.A.W.) as a masterpiece on his own, where the Prophet practices simple living and low
consumption. Two extremes of consumer behaviour, israf and bukhl, are not included in
the Islamic consumer behaviour (Khan, 1989).
In 1990, Elgari produces interesting work pertaining to the need of Islamic consumer
behaviour theory. His work on “some Islamic insights on the theory of consumer
behaviour” has been published in the Journal of Objective Studies. Among findings
generated are Muslims have been classified into two categories, namely, those who are
in the loss and those who are in the benefit. These categories have implications on
consumption in which one spends money to fulfil his daruriyyah needs and later spends
in the ways of Allah S.W.T. for rewards. He lives in moderation where there is no room
of luxury living, up until it satisfies the need of his family. On the contrary, one who Theory of
earns money and spends only to the worldly need and overlooks to understand his
purpose of creation tends to be punished. His wealth tends to be diminished unless
Islamic
otherwise if he repents to improve his living style. consumer
In Khan (1995) once again asserts the importance of having a framework of Islamic behaviour
consumer behaviour theory. In his theory, consumption of one’s self must be within an
Islamic parameter, in which he is the rationale to spend his wealth for his own consumption, 283
helping his family members and giving out for sadaqah at his own discretion. Countries like
Malaysia and Indonesia should be given consideration when proposing the framework. This
is so because these nations have Muslim and non-Muslim customers who patronize Islamic
banking products. The proposed theory should tap the right combination of the customers to
contribute to the generalization of the theory and could be extended to other nations. On the
same note, Indonesia has the great potential for halal industry including Islamic banking.
This is owing to the halal markets that are continuously expanding which consist of halal
meat market and halal money market (Wilson et al., 2013). The driving force behind this
development is the population of the country. According to Wilson et al. (2013), Indonesia is
the most populous Muslim nation, with 240 million inhabitants, of whom 88 per cent are
Muslim. It is explained, however, that some Indonesian Muslims are still reluctant to use
Islamic banking, as they still cannot appreciate any functional benefits (Wilson et al., 2013).
They are searching for more than just the Islamic aspects of a product – they also seek the
functional and emotional benefits to add to the value of the product (Wilson et al., 2013). As
such, looking beyond the “religion factor” is pivotal to promote Islamic banking products in
an attractive manner. Consideration on service quality and some benefits, at least financial
benefits, could encourage Muslims to opt for Islamic banking products in Indonesia. In all,
Khan (1995) expects future researchers to work on a framework, which explains Muslim
consumer behaviour, and even better to apply such framework to Malaysia and Indonesia.
The reasons of this selection are explained earlier.
His proposed idea motivates Hamdani and Ahmad (2002) to undertake further
research in the area in which these two scholars come up with the concept of divine
economics. The study provides six propositions in explaining their divine economics
model. Further, such propositions are not yet tested empirically which provide room for
further investigation. The propositions, however, are found to be complex, as they deal
with afterlife value. The authors, however, claim the model offers many advantages:
• it provides opportunity to analyze income, substitution and cross-effects for
resource allocation between religious and other activities;
• it does not dichotomize Islamic economics and rational choice theory;
• it provides thought-provoking propositions which may be focussed by
economists for further empirical testing in future; and
• the resource allocation pattern suggested by the faith model which addresses
accomplishment of goals relating to both body and soul of mankind is general in
the sense that it represents the fundamental principle of all divine religions and
paves the way for emergence of a “divine economics”.

Of the works examined, Khan (1995) provides a strong support for the proposal of
framework of Islamic consumer behaviour. However, the study is also suffered in that it
has only proposed that idea but without proposing workable variables in explaining the
JIMA framework for consumer behaviour. Similarly, Kahf (1978), Khan (1984), Elgari (1990)
have the similar thoughts as argued by Khan (1995). Later, Hamdani and Ahmad (2002)
5,2 propose divine economics or faith model. These two authors are apparently influenced
by Khan in constructing the faith model. Hamdani and Ahmad’s (2002) framework,
however, does not capture directly the need of Islamic consumer behaviour theory as
proposed by Khan (1995). There exists deviation between Khan’s (1995) theory and
284 Hamdani and Ahmad’s (2002) work. Generally, the former proposes idea to develop an
Islamic consumer framework, which can better capture consumer behaviour, whilst the
latter attempts to propose a divine economics theory in which the emphasis is on
afterlife values. This explains a study on Islamic consumer behaviour theory remains
inconclusive which warrants further investigation.
As depicted in Figure 1, Wilson and Liu (2011) are the pioneers in introducing a
theory on halal decision-making paradigm for Muslim consumer consumption. As such,
it is termed as the Theory of Halal Decision-Making Paradigm (TOHADEMAP). This
theory has given a proper attention on the importance of halal paradigm that is viewed
as the core in their work. Such halal decision is explained to be influenced by cognitive
and affective factors, which, in turn, result in conative factors. TOHADEMAP is
developed to predict one’s behaviour on halal meat and money within a Shariah
parameter. To our knowledge, this theory is useful to understand why Muslims opt
Islamic commodities, Islamic banking and Islamic logistic, to mention some.
Researchers in this area are apparently can extend TOHADEMAP in their future works.
Further, the present study further proposes a framework for the theory of Islamic
consumer behaviour based on Maqasid al-Shariah. Khan and Ghifari’s (1992) study is
used as baseline study to claim the suitability of the Maqasid al-Shariah in the context
of Islamic consumer behaviour. The importance of the inclusion of Maqasid al-Shariah
is sourced from well-known scholars (Chapra, 2000; Ismail, 2011). Of the many works
reviewed, the work by Mohammed et al. (2008) extends the importance of Maqasid
al-Shariah to measure Islamic bank’s charity performance. Instead, the current work
focuses on “consumer behaviour preference” which makes it different from that of
Mohammed et al. (2008).
On the other angle, the study intends to include the religious satisfaction to measure
one’s performance on the receptivity of Islamic mortgage. Three works have been

Kahf (1978) – The
Islamic economy: An
analytical study of
the functioning of the
Islamic economic
system
Khan (1984) – Khan (1989) – Elgari (1990) – Some
Macro consumption Economic teachings Islamic insights on
function in an of Prophet the theory of
Islamic framework Muhammad (May consumer behaviour
Peace Be Upon Him)

Wilson and Hollensen

(2013) – Assessing the
implications on performance Wilson and Liu (2011) – Hamdani and Ahmad (2002) –
when aligning customer The challenges of Islamic Toward divine economics:
Figure 1. lifetime value calculations branding: navigating some testable propositions
Theory development of with religious faith groups
emotions and halal
Islamic consumer and after life time values – a
behaviour Socratic elenchus approach
reviewed but none of these studies has extended the importance of the religious Theory of
satisfaction into the context of Islamic mortgage (Poloma and Pendleton, 1990;
Tiliouine, 2009; Casas et al., 2009). Viewed Islamically, religious satisfaction is viewed to
Islamic
be related with the Islamic mortgage for two main reasons. First, religious satisfaction consumer
generally has a strong tie with the economy activities perform by an individual. Earlier behaviour
work by Hamdani and Ahmad (2002) views the strong association between religion and
economics, but is lacking in terms of religious satisfaction variable. Second, religious 285
satisfaction is related to the feel of comfort, security and gratefulness, to mention some,
when one is of the opinion to extend his religion feeling on the Islamic mortgage which
is to be thought of Islam. These kinds of feelings have been identified as the reasons of
one’s action on the religion-based activities (Poloma and Pendleton, 1990) (Figure 2).
The “willingness to consider applying for Islamic mortgage” is defined as the
dependent variable. Every Muslim has the intention and the intention can be classified
based on the ethical value that is intention perform good thing and intention to perform
bad things. The former is considered as the ibadah and rewarded by Allah S.W.T. This
concept is extended to claim that intention to choose Islamic mortgage is considered
as good intention. It is sourced from several arguments. First, Islamic mortgage is
developed by taking into consideration the divine revelation and tends to be classified as
“divine mortgage”. Second, Islamic mortgage excludes all impermissible elements in
one’s financial dealings (Haron and Shanmugam, 2001). In fact, a good intention, which
turns to a good action, is both given reward by our God, Allah S.W.T. Combining all of
these three aspects of Maqasid al-Shariah, religious satisfaction and “willingness to
consider applying for Islamic mortgage” will help to generate a new model for Islamic
mortgage behaviour.
The model can mathematically be stated as follows:

WN ⫽ ␦0 ⫹ ␦1RSATi ⫹ ␦2EDUi ⫹ ␦3JUSTi ⫹ ␦4WELi ⫹ ␨i (1)

where,
WN ⫽ willingness to consider applying Islamic mortgage;
RSAT ⫽ religious satisfaction;
EDU ⫽ education;
JUST ⫽ justice;
WEL ⫽ welfare; and
␨ ⫽ error for WN.
Concerned with RS, this study postulates it to have three roles, notably as explanatory
variable, mediator and moderator. Equation (1) examines the influence of education,
justice, welfare and also includes the religious satisfaction on the willingness to consider

Three Objectives of
Shariah
▪ Education
▪ Justice Religious satisfaction Willingness to consider
▪ Welfare [RSAT] applying for Islamic mortgage
[EDU], [JUST], [WEL] [WN]
Figure 2.
Figure research model
JIMA applying Islamic mortgage which explains its role as a predictor. On the other hand, the
study also examines the mediating effect of RS for the relationship between the Maqasid
5,2 al-Shariah and the “willingness to consider applying Islamic mortgage”. Baron and
Kenney (1986)’s procedure of mediator is used. Three equations are established based on
Baron and Kenny’s recommendations. Hence, the following are provided:

286 RSAT ⫽ ␤0 ⫹ ␤1EDUi ⫹ ␤2JUSTi ⫹ ␤3WELi ⫹ ␧i (2)

WN ⫽ ␣0 ⫹ ␣1EDUi ⫹ ␣2JUSTi ⫹ ␣3WEL i ⫹ ␨i (3)

WN ⫽ ␪0 ⫹ ␪1RSATi ⫹ ␨i (4)

where,
WN ⫽ willingness to consider applying Islamic mortgage;
RSAT ⫽ religious satisfaction;
EDU ⫽ education;
JUST ⫽ justice;
WEL ⫽ welfare;
␨ ⫽ error for WN; and
␧ ⫽ error for RSAT.
To examine whether religious satisfaction is a moderator or not, we use Chin et al.’s
(2003) moderator’s technique. First, the dependent/criterion variable (Islamic home
financing preference) is regressed on the independent variables, the moderator and the
interactions. Second, the dependent/criterion variable (Islamic home financing
preference) is regressed on the independent variables and the moderator, excluding the
product indicators. Thus:

WN ⫽ ␣0 ⫹ ␣1EDUi ⫹ ␣2JUSTi ⫹ ␣3WELi ⫹ ␸4RSAT⫹ ␤5EDU*RSATi

⫹ ␤6JUST*RSATi ⫹ ␤7WEL*RSATi ⫹ ␨i (5)

WN ⫽ ␣0 ⫹ ␣1EDUi ⫹ ␣2JUSTi ⫹ ␣3WELi ⫹ ␸4RSAT ⫹ ␨i (6)

where,
WN ⫽ willingness to consider applying Islamic mortgage;
RSAT ⫽ religious satisfaction;
EDU ⫽ education;
JUST ⫽ justice;
WEL ⫽ welfare; and
␨ ⫽ error for WN.

4. Research methodology
4.1 Samples
The respondents employed in the current work are undergraduate students who are all
full-time and enrolling Islamic finance course. Our decision to choose students as the
respondents is in line with that of Singhapakdi et al.’s (1996) study. Singhapakdi et al.
(1996) claims that students are considered as valid sample for exploratory study and Theory of
when items in the questionnaires are pertinent to the respondents who answer.
Empirically, many studies have supported that undergraduate students are valid
Islamic
sample, as they are rationale in providing responses in the form of cognitive, affective consumer
and conative (Lian and Lin, 2008; Park et al., 2012). Particularly, those students have behaviour
greater amount of knowledge on personal finance management based on the fact that
they are directly exposed to the management of wealth and property. Relatively, some 287
adults who are the customers of Islamic banks have pushed themselves to patronize
Islamic banking products without deliberating their knowledge on the banking
products. As a starting point, choosing students is, therefore, valid which are proven by
findings of previous works (Amin, 2012).
We conduct the study in May–July 2012 by the help of an enumerator. The study was
conducted in a government university in Labuan, East Malaysia. The selection of the
students is because they are broadly exposed to Islamic banking than that of students who
are taking international banking. The study considers the students as potential home buyers
in the future where the need of financing is of prime importance. The study uses “random
sampling” to approach the respondents. To determine the sample size, we extend Hatcher’s
(1994) recommendation. According to Hatcher (1994), the sample size for the research should
be five times the number of variables. In our case, we have 15 items which require us to have
at least 75 respondents for the research (calculation: 5 ⫻ 15 items ⫽ 75). For the purpose, we
print 160 questionnaires to be distributed and we managed to obtain 141 usable
questionnaires. Based on Hatcher’s (1994) recommendation, the sample size therefore is
sufficient. The response rate is 88.13 per cent (calculation: 141/160 ⫽ 88.13 per cent).

4.2 Measurement
The study examines a number of Maqasid al-Shariah studies to identify the appropriate
items representing objectives of Shariah. The works conducted by Choudhury (1986),
Chapra (1992), Chapra (2000), Kamali (2008), Mohammed et al. (2008), Dusuki and
Bouheraoua (2011) and Amin et al. (2011) provide basis as a point of departure. On the other
hand, three studies by Poloma and Pendleton (1990), Casas et al. (2009) and Tiliouine (2009)
are used to generate a new index of Islamic religious satisfaction particularly developed for
Islamic mortgage behaviour. The dependent variable, that is “willingness to consider
applying Islamic mortgage” is developed based on Khan’s (1994) argument on human
behaviour. Each construct is composed of five items for consistency. It is explained that
human behaviour is based on moderation and benevolence (Khan, 1994) (Table I).

5. Empirical results
5.1 Measurement model
To analyze the data, we use partial least squares (PLS) (Ringle et al., 2005). PLS is chosen
for two main reasons. First, the present study is particularly related to the development
of a new theory in a new context of Islamic mortgage. Our selection is supported by Shi
et al. (2008) in which, they argue that PLS appropriate when a study is aimed at building
a new theory. Thus, our decision to choose PLS is of prime importance. Secondly, PLS
places low demand on normality of data (Chin et al., 2003). Based on the results of the
measurement model, we analyze the convergent validity, discriminant validity and
reliability of the scales. Tables II and III detail the measurement model:
JIMA Construct Item Reviewed literature
5,2
Maqasid al-Shariah EDU1, EDU2, EDU3, Choudhury (1986), Chapra (1992), Chapra
(Education) EDU4, EDU5 (2000), Kamali (2008), Mohammed et al.
(2008), Dusuki and Bouheraou (2011) and
Amin et al. (2011)
Maqasid al-Shariah JUST1, JUST2, JUST3, Choudhury (1986), Chapra (1992), Chapra
288 (Justice) JUST4, JUST5 (2000), Kamali (2008), Mohammed et al.
(2008), Dusuki and Bouheraou (2011) and
Amin et al. (2011)
Maqasid al-Shariah WEL1, WEL2, WEL3, Choudhury (1986), Chapra (1992), Chapra
(Welfare) WEL4, WEL5 (2000), Kamali (2008), Mohammed et al.
(2008), Dusuki and Bouheraou (2011) and
Amin et al. (2011)
Islamic religious RSAT1, RSAT2, Poloma and Pendleton (1990), Casas et al.
satisfaction RSAT3, RSAT4, (2009) and Tiliouine (2009)
RSAT5
Willingness to WN1, WN2, WN3, Khan (1994)
consider applying WN4, WN5
Islamic mortgage
Table I.
Descriptive statistics of Notes: Edu, education; Just, justice; Wel, welfare; RSAT, religious satisfaction; WN, willingness to
variables consider applying Islamic mortgage

Following Ramayah et al. (2011), convergent validity is measured using factor loadings,
composite reliability and average variance extracted (AVE). In terms of factor loadings,
some dimensions that have lower than the threshold value of 0.707 are omitted.
Specifically, the omitted dimensions including Edu5, Just1, RSAT5 and WN3, as these
dimensions do not demonstrate adequate validity. Only welfare has all dimensions well
above the recommended value of 0.707. The second run of SmartPLS reveals that all
dimensions are valid in representing their own constructs. All items are well above the
threshold value of 0.707. This demonstrates the construct validity. Concerned with
composite reliability, all constructs are well above the threshold value of 0.7, suggesting
adequate construct validity. We also assess convergent validity using AVE, which
explains the variance that is measured by the construct in relation to the measurement
error (Shi et al., 2008). All constructs have met the recommended value of 0.5.
Table III depicts the discriminant validity of the constructs in which the square root of the
AVE should exceed the intercorrelations of the construct with the other constructs to
demonstrate discriminant validity (Fornell and Larcker, 1981). As depicted in Table III, the
diagonal values are greater compared with the inter-construct correlations, indicating
discriminant validity. The diagonal values are well above the threshold value of 0.707 (Lee
and Kozar, 2008). Given Table II and Table III, this study reveals that the measurement
model of the study is found to fulfil the requirement of convergent validity and discriminant
validity.

5.2 Structural modelling

Further, we examine the path coefficients of the developed relationships. Path coefficients
indicate the strength of the relationships between the independent variables and dependent
Construct Item Loading Composite reliability AVE Cronbach’s alpha
Theory of
Islamic
Edu Edu1 0.85 0.89 0.67 0.84
Edu2 0.76 consumer
Edu3 0.86 behaviour
Edu4 0.81
Just Just2 0.79 0.90 0.70 0.86
Just3 0.83
289
Just4 0.86
Just5 0.86
Wel Wel1 0.79 0.91 0.66 0.87
Wel2 0.82
Wel3 0.85
Wel4 0.78
Wel5 0.82
RSAT RSAT1 0.79 0.89 0.66 0.83
RSAT2 0.89
RSAT3 0.80
RSAT4 0.77
WN WN1 0.83 0.86 0.61 0.79
WN2 0.73
WN4 0.81 Table II.
WN5 0.76 The measurement model

EDU JUST RSAT WEL WN

EDU 0.82
JUST 0.50 0.83
RSAT 0.23 0.16 0.81
WEL 0.52 0.43 0.31 0.81
WN 0.55 0.42 0.45 0.52 0.78
Table III.
Notes: Square roots of average variances (AVEs) extracted shown on diagonal; bold data indicates the Discriminant validity of
square root of the AVE for discriminant validity constructs

variable. Results of hypothesis testing are presented in Table IV and discussed in the
following. As reported, education and religious satisfaction have significant effects on the
willingness, suggesting the support of H1 and H4, whilst H2 and H3 are not supported.
The reported R2 is 0.47, suggesting that 47 per cent of the variation in willingness to
consider applying Islamic mortgage could be explained by the four independent variables in
which education, justice, welfare and religious satisfaction contributed to the variation. We
conduct the assessment of the fit of the PLS path model. Tenenhaus et al. (2005) define a
global fit measure (GoF) as the geometric mean of the average communality and average R2
for endogenous constructs. GoF has been confirmed in a Malaysia context by Khozaei et al.
(2012). The formula of the index is provided as follows:

GoF ⫽ 兹AVE ⫻ R 2
JIMA Hypothesis Relationship Path coefficient t-value Supported
5,2
H1 EDU¡WN 0.31 4.36** Yes
H2 JUST¡WN 0.13 1.83 ns No
H3 WEL¡WN 0.20 1.70 ns No
H4 RSAT¡WN 0.29 3.59** Yes
R-squared 0.47
290 Redundancy 0.15
Communality ⬎ 0.50
Cases 141
Table IV. Samples (Bootstrapping) 500
Path coefficients and
hypothesis testing Note: ** p ⬍ 0.01; ns ⫽ not significant

GoF ⫽ 兹0.66 ⫻ 0.47

GoF ⫽ 兹0.31
GoF ⫽ 0.56
Akter et al. (2011) suggest GoF should be greater than 0.36 to validate the fit of the PLS
path model. Our GoF is 0.56. Because the GoF is greater than 0.36, we conclude that our
model has better explanatory power than the baseline values (GoFsmall ⫽ 0.1, GoFmedium ⫽
0.25, GoFlarge ⫽ 0.36). This result expounds our model is acceptable and fit.

5.3 Structural modelling: religious satisfaction as a mediator

To establish mediation, a series of PLS analyses are performed following the guidelines
suggested by Baron and Kenny (1986). For the purpose, three models are examined. In the
first run of PLS, we find only welfare is statistically significant. In the second run of PLS, we
report education and welfare have significant effects on the willingness to consider applying
Islamic mortgage. Of these, education is found to be superior. In all, this finding suggests
only welfare qualifies for the next stage of the analysis (Figures 3–5). Yet, but importantly,
we retain all of these explanatory variables for the overall analysis of mediation.
We borrow Shi et al.’s (2008) technique to prove our decision is tolerable. In the final
stage, we find that religious satisfaction completely mediates the relationship between
welfare and willingness to consider applying Islamic mortgage. These findings provide
support for H7 but not that of H5 and H6. Further, we use Sobel statistic to establish the
mediating effect, the indirect effect of (WEL¡RSAT) X (RSAT¡WN) has to be
significant. Explained further, if the Sobel statistic exceeds 1.96, then we can make a
conclusion that there is an indirect effect of welfare through religious satisfaction on
willingness. We use the following formula for computation:
a ⫻b
z⫽
兹b 2 ⫻ sa2 ⫹ a 2 ⫻ sb2 ⫹ sa2 ⫻ sb2

0.32 ⫻ 0.33
z⫽
兹0.332 ⫻ 0.092 ⫹ 0.322 ⫻ 0.092 ⫹ 0.092 ⫻ 0.092
z ⫽ 2.55
 Education Theory of
Islamic
0.13ns consumer
behaviour
0.03ns
Religious satisfaction
Justice
12.5 percent
291

0.26*

Welfare

Significant path
Non-significant path Figure 3.
First condition of Baron
and Kenny (1986)
Notes: *p < 0.05; **p < 0.01

Education

0.34**

0.13ns Willingness to
Justice consider applying
Islamic mortgage-
38.7 percent

0.28*

Welfare

Significant path
Non-significant path Figure 4.
Second condition of Baron
and Kenny (1986)
Notes: *p < 0.05; **p < 0.01

Based on the above calculation, our Sobel statistic is 2.55, which exceeds that that of
1.96. This implies that there is an indirect effect of welfare through religious satisfaction
on willingness. We also attempt to estimate the size of the indirect effect by computing
the variance accounted for value (VAF) which represents the ratio of the indirect effect
to the total effect. Hence:
JIMA 0.31**
Education
5,2
0.09ns

0.02ns 0.29** Willingness to

292 Religious satisfaction consider applying
Justice 11 percent Islamic mortgage-
46 percent

0.14ns
0.26*
Welfare
0.20ns

Significant path
Figure 5. Non-significant path
Third condition of Baron
and Kenny (1986)
Notes: *p < 0.05; **p < 0.01

a ⫻ b
VAF ⫽
a ⫻ b⫹c
0.32 ⫻ 0.33
VAF ⫽
0.32 ⫻ 0.33 ⫹ 44
VAF ⫽ 0.20

Given the above calculation, our VAF is 0.2, indicating that 20 per cent of the total effect
of welfare on willingness is explained by religious satisfaction. This provides additional
support that religious satisfaction has an explanatory power as a mediator for the
relationship between welfare and willingness to consider applying Islamic mortgage.

5.4 Structural modelling: religious satisfaction as a moderator

Concerned with religious satisfaction as a moderator, PLS product–indicator approach
is used (Chin et al., 2003). The approach is useful in detecting the moderating effect of
religious satisfaction on the relationship between the predictors and outcome variable.
For the purpose, the predictors (education, justice and welfare) and religious satisfaction
are multiplied in creating the product indicators (Chin et al., 2003). Because the present
study tests three predictors, therefore, the product indicators are equivalent to 3. The
interaction between education and religious satisfaction represents 16 items
(4 ⫻ 4). The interaction between justice and religious satisfaction represents 16 items
(4 ⫻ 4). The interaction between welfare and religious satisfaction represents 20
items (5 ⫻ 4). Overall, all interactions involve 52 items.
Based on results as viewed in Figure 6, we identify only justice moderated by religious
satisfaction. Education and welfare, however, are not moderated by religious satisfaction. This
 Education Theory of
Education X Religious
satisfaction
Islamic
0.32** 0.17ns
consumer
behaviour
0.11ns Willingness to 0.25* Justice
Justice consider applying X Religious 293
Islamic mortgage-51 satisfaction
percent
0.16ns 0.02ns

Welfare
Welfare 0.31** X Religious
satisfaction

Religious satisfaction

Significant path
Non-significant path Figure 6.
Results of the interaction
model
Notes: *p < 0.05; **p < 0.01

explains that religious satisfaction moderates the relationship between justice and willingness to
consider applying Islamic mortgage, hence, supports H9 but not H8 and H10. To identify the
effect size of religious satisfaction as a moderator, we use Cohen’s (1988) formula to compute such
effect size that is provided as follows (Figure 7):

2
RWOM ⫺ RWM
2
f2 ⫽
1 ⫺ RWM
2

0.51 ⫺ 0.47
f2 ⫽
1 ⫺ 0.51

f 2 ⫽ 0.082

Henseler and Fassott (2010) provide the rule of thumb for such an effect. Effect size of 0.02
considered as small, 0.15 considered as moderate and 0.35 considered as strong. Our current
work indicates f 2 is 0.082, meeting the small effect size requirement. Although it is small, the
inclusion of religious satisfaction provides additional effect on the overall model. Such an
outcome is expected, as only one interaction is discovered significant, whilst another two
interactions are not significant. According to Chin et al. (2003), it is important to understand
that a small f 2 does not necessarily imply an unimportant effect. However, such an effect at
least demonstrates that religious satisfaction serves not only as a predictor or mediator but
also as a moderator.
JIMA Education
5,2
0.31**

0.13ns Willingness to
294 Justice consider applying
Islamic mortgage-
46.5 percent

0.20ns 0.30**

Welfare Religious satisfaction

Significant path
Figure 7. Non-significant path
Results of the main effects
model
Notes: *p < 0.05; **p < 0.01

6. Conclusion, contribution and future studies

This study introduces a model for Islamic mortgage acceptance by testing the role of
MSI and the religious satisfaction into Islamic mortgage. The need of such theory has
been long recommended by Khan (1994) and therefore is explored by Hamdani and
Ahmad (2002), but it has failed to capture the objectives of Maqasid al-Shariah (Ismail,
2011) and religious satisfaction. Hamdani and Ahmad (2002) also fail to address Islamic
consumer behaviour theory from a particular context such as Islamic mortgage. At this
point, the contributions of the study are provided.
Most fundamentally, the study contributes significantly to the literature from several
aspects. First, we introduce a new theory of Islamic consumer behaviour (TICB) in which this
theory is different from the TRA, the TPB and the TAM. The reasons are twofold:
(1) First, it establishes a theory based on Maqasid al-Shariah, where Abu-Zaharah’s
(1997) specific objectives of al-Shariah is used. In his framework, three objectives
of Shariah are found, namely,
• educating the individual;
• establishing justice; and
• promoting welfare.
(2) Second, the theory is developed to capture Muslim and non-Muslim as suggested by
Khan (1995). The study is a pioneer in testing empirically the three objectives of
Shariah from consumer behaviour of mortgage perspectives. We offer MSI and
religious satisfaction for Islamic mortgage. Of 15 items suggested for Maqasid
al-Shariah, the study manages to validate 13 items and assigned them according to
the objectives of Shariah. These 13 items have good internal consistency towards the
creation of new inventories for Maqasid al-Shariah scale. These 13 items generate
 new properties of the scale for Islamic mortgage behaviour which relatively and Theory of
previously are not reported and studied. The study also examines the religious
satisfaction from the Islamic mortgage setting. We find four items which have good
Islamic
reliability and validity of the scale. Hence, we introduce the religious satisfaction consumer
index. Overall, these inventories will provide direction for better future researches in behaviour
this area.
295
Second, we develop new relationships for interdependencies among variables. We
contribute to the literature by establishing new relationships between the objectives of
Shariah and religious satisfaction, the objectives of Shariah and willingness and also the
development of moderator and mediator for the theory we proposed. Results of our work
provide strong empirical support for the MSI, religious satisfaction index and
willingness to consider applying Islamic mortgage framework. Earlier works in Islamic
mortgages have largely overlooked this matter (Mydin-Meera and Abdul-Razak, 2009;
Osmani and Abdullah, 2010; Tameme and Asutay, 2012). We doubt why these scholars
ignore the importance of Maqasid al-Shariah in predicting one’s behavioural intention
on Islamic mortgage. The main reasons perhaps are driven by intention to introduce
alternative to existing BBA, whilst in the real case this is not an issue. BBA is proven to
be Islamic (Yaakob and Abdul-Rahim, 2009). Some works of these authors mainly those of
Tameme and Asutay (2012) merely as a consultation paper, which were just conducted to
provide a market overview of Islamic mortgage in the UK, whilst the need to examine
Maqasid al-Shariah, religious satisfaction and willingness is untapped. Our work justifies
that Maqasid al-Shariah, religious satisfaction and willingness are working together, giving
an opportunity for a newborn TICB. The inclusion of five constructs includes the overall
picture of Islamic mortgage behaviour from the prospective young home buyers. Their
behaviours are easily expressed by these constructs which imply that our new built theory
considers has good value of parsimonious. The inclusion of religious satisfaction further
(from Islamic mortgage’s perspective) provides valuable insights into the consumers’
cognitive and emotion processes.
We also make a significant contribution to the body of knowledge particularly in
Islamic mortgage, by filling the gaps in Islamic consumer behaviour literature. We note
in this section that the relationship between maqasid al-Shariah, religious satisfaction
and willingness is inconclusive. The current work empirically suggests that religious
satisfaction plays roles not only as a predictor, mediator but also as a moderator, which
in turn accelerating one’s acceptance on Islamic mortgage, for adoption and actual use.
We also intend to explain the implication of our work on managerial aspects. The
finding may shed light on how bank managers could better market their mortgage
services and thus accelerate the rate of adoption. In this regard, the influence of MSI and
religious satisfaction on the acceptance may provide insight into the importance of
constructing future strategies for improvement from the divine perspective instead of
commercial per se. Importantly, the results demonstrate that, to a certain extent,
religious satisfaction plays a mediating role between welfare and willingness and
importantly acts as a moderator between justice and willingness. This suggests that
Islamic bank managers should improve the role of religious satisfaction through the
implementation of religious-based service program (e.g. divine mortgage consultation)
to handle those pious clients for better mortgage services. Bank officers shall be trained
adequately to handle such demands. We also expect the bank officer to handle those
JIMA clients who are performing “window-shopping” prior to the final selection of Islamic
mortgage provider. Of key objectives of Shariah, welfare is found to be fundamental
5,2 determinant of religious satisfaction. This outcome implies one crucial sign. It explains
that Islamic mortgage providers should introduce “welfare program” within the
existing Islamic mortgage facilities. Introducing zakat assistance for those qualified in
the case of financial hardship for mortgage payment is worthy to consider. This could
296 also help to differentiate Islamic mortgage and conventional mortgage.
This study acknowledges two limitations. First, the current work has proven the
applicability of MSI and religious satisfaction but yet the appropriateness of these
components to other contexts of Islamic banking products is relatively unknown. Second,
although the study shows the aptness of MSI into an Islamic mortgage’s context, however,
justice and welfare have no significant influence on willingness, which remains as
interesting questions for future research. In terms of mediating effect, only welfare is
mediated by religious satisfaction, whilst concerned with moderating effect, only justice is
moderated by religious satisfaction. The former suggests that education and justice are not
mediated by religious satisfaction, whilst the latter suggests that education and welfare are
not moderated by religious satisfaction. These outcomes provide debate in future works in
Islamic mortgage. Besides, we hope the model developed in this study can be extended into
other disciplines of Islamic finance. Most fundamentally, Allah S.W.T., our God, knows the
best. Our Prophet Muhammad (p.b.u.h), the messenger of Allah S.W.T guides us to work
with dedication in completing this paper.

Acknowledgments
Earlier draft of this article has been presented in The 2nd International Conference on
Islamic Economics and Economies of the OIC Countries (ICIE 2013), organized by
Kulliyyah of Economics and Management Sciences, International Islamic University
Malaysia (IIUM), Kuala Lumpur, 29-30th January 2013. It is also noted that, this study is
part of PhD’s work of the first author. We acknowledged Prof T. Ramayah at the
UniversitiSains Malaysia (USM) for the technical advice with respect to the moderating
effect. The authors also acknowledged MohdRazaliRalah at the Universiti Malaysia
Sabah-Labuan International Campus for research assistance and data collection. Most
importantly, all remaining errors are ours.

Terminologies:
Quran – The Holy Book of Islam
Iqtisad – Moderation
Israf – Wasteful expenditure
Bukhl – Stinginess
Daruriyyah – Necessities
Falah – Ultimate success
Ijarah – A sale of the usufruct
Jumhur fuqaha – the majority of fuqaha. Fuqaha is the member of
fiqh. Fiqh is Islamic jurisprudence
Musharakah mutanaqisah – Diminishing musharakah
Gharar – uncertainty
Maysir – Gambling
Ummah – Society at large
Ijarah mawsufah fi dhimmah – Forward ijarah Theory of
Shariah – A way of life
Tahsiniyyah – Beautification
Islamic
Pahala – Rewards consumer
Sadaqah – Givings behaviour
Waqf – A Muslim religious endowment
Zakat – Purification of wealth 297
Haram – Forbidden
Halal – Permissible
Qardhul Hassan – Benevolent loan
Musharakah – Joint venture or profit and loss sharing
Bay bithaman ajil – Deferred payment or credit sale
Muslim – One who is embraced the religion of Islam

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About the authors

Hanudin Amin is a Lecturer at the Universiti Malaysia Sabah – Labuan International Campus. He
teaches Islamic Accounting, Islamic Banking, Mutual Fund Management, Banking Management,
Research Method, Issues in Islamic Finance, International Banking and Financial Statement
Analysis, to name a few. His areas of interest include Islamic banking, Islamic accounting and
Islamic marketing. He is currently working as a PhD candidate at the IIUM Institute of Islamic
Banking and Finance (IIiBF) in Damansara, Kuala Lumpur, Malaysia. Hanudin Amin is the
corresponding author and can be contacted at: hanudin_zu@yahoo.com
Abdul-Rahim Abdul-Rahman is the Vice Chancellor and Professor at the Kuala Lumpur
Metropolitan University College (KLMUC). Prior to joining KLMUC, he was a Professor at the
Department of Accounting, Kulliyyah (Faculty) of Economics and Management Sciences,
International Islamic University Malaysia (IIUM). He obtained his Bachelor degree in Finance and
Accounting from University of East London, UK; Master in Accounting and Management Sciences;
and PhD in Accounting from University of Southampton, UK. His PhD thesis title was “An Interpretive
Inquiry into Accounting Practices in Islamic Organisations in Malaysia”. Dr Abdul Rahim is actively
involved in research and consultancy. His current research interests include accounting for Islamic
financial institutions, zakat accounting and governance, Islamic banking and finance, Islamic
microfinance and corporate governance. He has published more than 20 papers in international and
local academic journals, edited books and professional magazines. He has published works in
reputable academic journals including Financial Accountability and Management (Blackwell),
Managerial Auditing Journal (Emerald), American Journal of Islamic Social Sciences (IIIT), Islamic
Economic Studies (IRTI IDB) and Review of Islamic Economics (Islamic Foundation, UK). Dr Abdul
Rahim has also served as the founding director of the IIUM Institute of Islamic Banking and Finance,
Head of the Department of Accounting and Deputy Dean of the Faculty of Economics and
Management Sciences, IIUM
Dzuljastri Abdul-Razak is an Associate Professor at the Department of Finance, Kulliyyah of
Economics and Management Sciences, International Islamic University Malaysia, Malaysia. He
earns his PhD in 2011 from UniversitiSains Malaysia in Islamic Banking and Finance. He teaches
marketing, bank management, bank marketing, Islamic products and services and Islamic
financial planning. His areas of interest are Islamic home financing, Islamic micro-credit, equity
financing, personal finance, service quality in Islamic banking, Maqasid al-Shariah and financial
crisis from an Islamic perspective. He has published a number of articles in Review of Islamic
Economics, International Journal of Islamic and Middle Eastern Finance and Management, Global
Journal of Finance and Economics, JKAU Islamic Economics, Journal of Islamic Marketing and
American Journal of Applied Sciences, to mention some.

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