Degree

Master of Science in Islamic Banking & Finance

Department

Department of Finance

Faculty/ School

School of Business Studies (SBS)

Date of Submission

Fall 2025

Supervisor

Dr. Irum Saba, Associate Professor & Program Director MS-IBF, Institute of Business Administration, Karachi

Keywords

Islamic Banking, Conventional Banking, Religious Factor, Bank Reputation, Multiple Discriminant Analysis

Abstract

The primary objective of this research is to investigate the important factors that influence customers’ selection when deciding between an Islamic and a conventional bank in Pakistan. On the basis of the literature, eight factors were selected for analysis. These include religious factor, bank reputation, convenience, cost, bank services, bank personnel, bank attractiveness, and Islamic financial literacy.

This research adopted a quantitative research design to evaluate the selected factors. Individual factors for Islamic and conventional banks were initially examined separately by applying the one-sample t-test and the Wilcoxon Signed-Rank test. Subsequently, pooled and non-pooled two-sample t-tests, together with the Mann-Whitney test, were applied to examine the comparative importance of these factors across Islamic and conventional banking systems.

For the discriminant analysis, bank selection was used as the dependent variable, where conventional banks were coded as 0 and Islamic banks as 1. The independent variables were religious factor, bank reputation, convenience, cost, bank services, bank personnel, bank attractiveness, and Islamic financial literacy.

A sample size of 384 was determined using a statistical formula applied in previous research. A structured questionnaire and a probability-based random sampling technique were used to collect the data. The total number of responses received from the participants was 403, but seven were excluded due to incomplete responses. Therefore, the final analysis was carried out using 396 valid questionnaires.

The findings show that all eight factors significantly influence customers when selecting either Islamic or conventional banks. The comparison further indicates that customers who prefer Islamic banks give greater importance to the religious factor, cost, and bank reputation than the remaining factors. These three factors play an important role and strongly influence customers’ decisions to select an Islamic bank. The findings also suggest that Islamic banks need to improve their religious image and marketing efforts to attract more customers. Meanwhile, conventional banks should enhance their Islamic banking services, maintain competitive service costs, and improve their reputation to retain existing customers and remain competitive in the banking sector.

Keywords: Islamic Banking, Conventional Banking, Wilcoxon Signed-Rank Test, Mann-Whitney Test, Multiple Discriminant Analysis, Structured Questionnaire, Religious Factor, Bank Reputation


Document Type

Restricted Access

Submission Type

Thesis

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