Application of Theory Reasoned Action in Intention to Use Islamic Banking in Indonesia

This paper investigates the constructs of Theoryof Reasoned Action (TRA), and Theory of Planned Behavior (TPB) (attitude,subjective norm, religion, knowledge, pricing, and government support) oncustomer behavioral intention and Islamic banking selection. This research usingPartial Least Square Structural Equation Modeling with variables such as:attitude, subject norm, religion, knowledge and government support, and pricing.The result shows that attitude, subject norm, religion, knowledge and governmentsupport are statistically significant effect on intention to select Islamic bank inIndonesia. Pricing however is not significant. The results imply that IndonesianIslamic banks should strategize ways to develop positive attitude and referenceamongst their customers through greater dissemination of knowledge about Islamicbanking while emphasizing on the religious compliance.DOI: 10.15408/aiq.v8i1.2513


Introduction
Indonesia is the most populated Moslem country in the world with a total population of 207.18 million Moslem (Indonesian Central Bureau of Statistics, 2010). Although, it has the world's largest population of Moslems, Islamic banking came fairly late to Indonesia. The work of the Islamic Bureau of Bank Indonesia showed that Indonesia, especially in certain parts of the country, has considerable unmet demand for Islamic banking (Blue Print of Islamic Banking of Bank Indonesia, 2010). In Indonesia, the banking industry becomes highly competitive since the government deregulated the banking sector in 1998. A deregulation program known as PAKTO eliminated various rules and regulations in which on one side has restricted establishment of new private banks while on the other side, the government permitted foreign banks to operate in Indonesia in the form of joint venture with local banks. The local banks including Islamic banks face stiff competition from foreign banks entry. However, judging from the vast untapped Islamic banking market, Indonesian Islamic banks are eager to expand their market share as a strategy to have the competitive edge over its competitors. Considerable efforts to expand Islamic banking in Indonesia have shown good results as shown in Table 1. Islamic banking deposits on average have grown by 31.6%, while financing recorded an average growth rate 37.5%. Billion. This represents 5.05% market share for Islamic banking deposis of the total deposit of the banking system in 2013. Islamic financing is Rp.174,537 million IDR representing 3.6% of the total banking system. Despite the increasing trend, it can be observed that until August 2013, the Islamic banking share was only 6.5% to total banking assets, 5.1% the amount of funding and 3.64% of financing of the total Indonesian banking system. The statistics suggests that the Indonesian Islamic banking market share of 6.5% was very small when compared with the 93.5% market share of the conventional banking.
The statistics also indicate weak participation by the Indonesian population with the largest number of Muslim populations in the world in particular when compared to Malaysia which has achieved a 20.6 percent share of Islamic banking although its total population was only 29.7 million in 2013 (Economic Report, Ministry of Finance, Malaysia 2013). This situation presents a challenge to Indonesian Islamic banks in marketing of their financial services to their retail customers who are in the culture which greatly depends on face to face relationship to build sales (global business Indonesia, 2013). The challenge motivates an investigation to be undertaken to identify factors which could assist Islamic banks to develop appropriate strategies to create demand for Islamic banking. Against this backdrop, this study intends to identify the factors which could increase the Islamic banking share in Indonesia based on the application of Theory of Reasoned Action and Theory of Planned Behavior.

Literature Review
The slow growth of Islamic banking in Indonesia could be due to many factors: religion, limited knowledge, attitude and weak government support. The knowledge and understanding of society on Islamic banking is still low as claimed by Fansuri (2010). This might be due the lack of socialization or promotion by the Bank Indonesia to the community throughout the regions. Some people did know about Islamic banking presence. Fansuri (2010) asserts that people might have good or even bad perception on sharia banking. The public's attitudes are that they are still in doubt or do not even believe in Islamic banking performance. The lack of empirical evidence to proof the influence of attitude on Islamic bank selection is a void intended to be addressed in this study. Weak government support is cited by Vizcaino and Suroyo, (2014) In TRA, attitude is an important variable that predicts direclty and indirectly the behavioral intention (Fishbein & Ajzen, 1975). The researchers assert that Al-Iqtishad: Jurnal Ilmu Ekonomi Syariah (Journal of Islamic Economics) Vol. 8 (1), January 2016 attitude towards the object is the function of the individual's belief towards the object and the individual implicit evaluation of the beliefs he/she holds as well as the function of perceived consequences of performing the behavior of interest he subjective evaluation of the individuals towards the consequences (Fishbein & Ajzen, 1975). Past studies have proven significant direct relationship of attitudes towards behaviorial intention but conducted in internet banking setting. (Athiyaman, 2002;Davis et al., 1989;Gopi & Ramayah, 2007;Ma'ruf et al., 2003;May, 2005;Ramayah et al.,2004;Shih & Fang, 2004;Taylor & Todd, 1995;Eri, 2004). Amin et al. (2011) found that attitude is positively related with the intention to use Islamic home financing. This study measures attitude from 5 elements of attitude i.e. awareness, knowledge, religion obligation which may influence lecturers' behavioral intention to select Islamic home financing. Hence the proposed hypothesis is: TRA and TPB theory postulate that subject norm (SN) affect behavioral intention ( Ajzen & Fishbein, 1980;Fishbein & Ajzen,1975). Fishbein and Ajzen (1975) find that subjective norm is a function of the perceived expectation by individual or group who are important to the person and by the persons' motivation to comply with the expectations. The results on the influence of subjective norm on behavioral intention is conflicting. Davis et al. (1989), Chau and Hu (2001), and Lewis, Agarwal, and Sambamurthy (2003) found subjective norm to be insignificant towards behavioral intention. However, Taylor and Todd (1995), Venkatesh and Davis (2000), Ma'ruf et al. (2003), Ramayah, Noor, Nasurdin, and Sin (2004), Eri (2004), Chan and Lu (2004), Ramayah, Ling, Norazah, and Ibrahim (2005), May (2005), and Gopi and Ramayah (2007) found that subjective norm has a positive direct relationship towards behavioral intention. In the context of Islamic finance, subjective norms have a direct impact to the intention (Amin et al., 2011).
Religion is a key element a group of trust. (Haq and Smithson, 2003). Earlier studies pointed that religion (Islam) as the main reason for choosing Islamic banks (Dusuki and Abdullah, 2007;Wilson, 1995;Owen and Othman, 2001;Metawa and Almossawi, 1998;Rashid et al;2009.) However, Haron (1994) and Erol, C and El-Bdour (1989) founded religion is not significant but profit motivated criteria were an important factor to choose Islamic banking in Malaysia and Jordan respectively. In the Malaysian context, Amin et al, (2011) provides evidence that religion obligation significntly influence intention to choose Islamic home financing.  Pricing refers to the appropriate price to sell the financing product and striking a balance between the bank and the consumer's interest (Ebert and Griffin, 1998). Olson and Zoubi (2008) Islamic banks use profit and loss sharing in charging for the financial transactions services. Abdullah and Dusuki (2006) found that Islamic banks charge hire purchase price was more expensive than conventional bank. However, Amin (2008) found lower pricing was one of the motivators for customers to use Islamic banks. Makiyan, (2004) found that in Iran, the government intervention played more important role in Islamic banking than economic factors. In the UK, the main problems facing the development of Islamic banks are the legal structure and the government's reluctance to give Islamic banking license (Karbhari et al., 2004). In Thailand, the future of Islamic banking is very much dependent upon individual Muslims and Muslim organizations' support during the growth phase (Haron and Yamirudeng, 2003). In Malaysia, government supports for Islamic banking is strong and could be seen in the 9 th Malaysian Plan, issuance of manyIslamic banking licenses and development of Islamic regulatory framework. (Amin et al., 2006;BIS Review, 2004). (Teo & Polk, 2003) found government support gprovides significant effect to intention but Tan & Teo, 2000;Hernandez & Mazzon, 2007 results found otherwise. However, based on the experience of Malaysia, it is expected that government support could affect customers intention to use Islamic banking in Indonesia.

Methods
Data was collected through questionnaires distributed to a sample of 500 respondents who are lecturers of 4 public universities. 375 was collected representing 75 % response rate. However, 275 questionnaires were actually used. The questionnaire was adapted from past studies: The Intention to use/select Islamic Banking was measured using 6 items from Ajzen et al (1980); Attitude and Subjective Norm from Ajzen (1980), Religion (4 items), Price (6 items) from Amin et al. (2011), Knowledge (11 items) from Erol C Bdour and Sudin Haron (1989), and Government Support (6 items) from Amin and Tan & Teo, (2000).
The data was analysed and showed high reliability with Cronbach's Coefficient Alpha greater than 0.7 and validity score above 0.7 Kaiser-Meyer Olkin. Subsequently, the research model was tested using Partial Least Square Structural Equation Modeling. PRC=Pricing; GS=Government Support.

Results and Discussion
The demographic profile of the respondents shows 43.3% of the respondents were male and 56.7% were female with 35.3% of the participants were in the group of 30-39 years. 64.7% of the lecturers have Masters degree. In terms of Religion, 97% are Islam 97%, 1.7 were Christians and 1.3% were Hindu-Budha. In terms of Income, 35.3% earns between Rp.5,000,000-7,000,000 while 27.7% earns Rp 3,000,000-5,000,000. The respondents came from diverse region backgrounds, namely, west region (16%), center region (59.3%), and east region (24.3%). The Descriptive analysis shows that Lecturers using Islamic bank less than 1 year are 8.3%, 1-5 years were 63%, 6-10 years were 24.3%, and more than 10 years were 4.3%. Numbers of frequency using Islamic bank per month in 1-3 times were (18%), 4-6 times were (30%), 7-9 times were (22%), and more than 10 times were (29%).  Table 2 shows that the overall mean for the latent variables ranged between 2.674 and 3.786. In particular, the mean and standard deviation for the attitude were 3.786 and 0.636, respectively. This suggests that respondents tended to have moderate level of attitude to select Islamic banking. The statistics also indicate that the mean for the subjective norm was 2.674 out of scale of 5. This suggests that the respondents perceived the influence from the refereed groups on the intention to select Islamic banks is moderate. However, there was some differences in the responses between the repondents as indicated by the standard deviation of 1.011.The results show a higher mean score for religion (Mean = 3.385) and knowledge with mean of 3.664. This means suggest that the respondents incline to strongly agree that religion and knowledge are important in creating intention to use Islamic banks. Assessment of measurement model and assessment of structural model using PLS path model assessment adopted from two-step processes by Hair et.al. (2014) andHeseler et.al (2009). Assessment of measurement model in the showed individual items reliability, internal consistency reliability, convergent validity and discriminant validity. The composite reliability coefficient of the latent construct. The composite reliability of each construct ranged from 0.856 to 0.977, this namely internal consistency of the scale. The composite reliability of all constructs is above the threshold of 0.70.
The validity and reliability of the measurement model having established, the next was to test the hypothesized relationship by running algorithm and bootstrapping in smart PLS 3.0. Predictive relevance of the model: the quality of the structural model can be assessed by R2. This depicts the variance in the endogenous At the outset, Hypothesis 1 predicted that attitude is significantly and positively influences intention to select IB. Result revealed a significant positive relationship between attitude and Intention (β = .272, t = 4.008, p=0.000 < 0.05), supporting Hypothesis 1. Hypothesis 2 predicted that subject norms significantly and positively influences to Intention. A significant positive relationship between subject norms and Intention (β = -0.093, t = 2.115, p = 0.017 < 0.05) was found, indicating support for Hypothesis 2.
Similarly, in examining the influence of religion on Intention to select IB, result indicated that religion have significantly and positively relationship with Intention (β = 0.237, t = 3.494, p = 0.000 < 0.05), was support Hypothesis 3. Hypotheses 4, knowledge have significantly and positively influences to intention. The result indicated that knowledge have significantly and positively relationship with intention (β = .213, t= 3.341, p= 0.000), supporting Hypotheses 4.

Conclusion
In conclusion, this study examines the factors derived from TRA and TPB which are postulated to influence the intention of customers to use Islamic banking in Indonesia. Using PLS-SEM analysis technique, the findings show there are five factors exhibiting direct and significance impact on intention to use/ select Islamic banking. These are attitude, subjective norm, religión, knowledge, pricing. Therefore, all the direct relationship are supported, except for government support. PLS-SEM results also indicate that the underpinning TRA is applicable to test the intention to use/select Islamic banking in Indonesia. The results imply that Indonesian Islamic banks should strategize ways to develop positive attitude and reference amongst their customers through greater dissemination of knowledge about Islamic banking while emphasizing on the religious compliance. However, since this study employs only lecturers as respondents, it is recommended that future research should expand the scope of the respondents and inclusion of external variables in the model.