An Exploratory Study of Risk Perception and Consumer Decision Making in Islamic Banking Products in UAE
Author
Qambar, Reem Sabah Obaid
Date
2020Type
Thesis
Publisher
Cardiff Metropolitan University
Metadata
Show full item recordAbstract
In spite of the success and growth of Islamic banks, the importance of continually
aligning products and services to consumers has been identified as a critical issue in the
performance of Islamic banks. Globalisation, technology and liberalised market structures
have contributed to a highly dynamic business environment generating significant
competitive pressures on the fast-growing Islamic financial sector. Risk perception is
acknowledged as an important determinant of risk attitude but few studies have researched
the role of risk perception in Islamic banking (IB). This study addresses a limited
understanding on how the dynamic and fragile financial context impacts on the risk
perceptions of Islamic banking consumers and their decision-making. This research
investigated the relationship between risk perceptions of IB products and investment
decision-making in terms of switching likelihood and switching intention. A key objective
was to determine the switching point and understand the degree to which external
conditions influence risk attitudes of risk averse investors towards investments decisions
and the decision to change from IB to an alternative banking system. A cross-sectional case
study strategy was adopted employing survey and semi-structured interviews to gather
quantitative and qualitative data and analysed using Structural Equation Modelling (SEM)
and thematic analysis. The results pointed to significant differences in risk perceptions and
switching likelihood under different conditions. Key findings indicate that risk perception
is not a wholly objective financial cognitive assessment. Rather, the findings point to an
interplay of a range of subjective factors that influence risk perceptions towards IB
products and decision-making. On the basis of the empirical evidence, IB consumers
perceive a higher level of risk associated with three of the four scenarios. Overall, external
conditions impact on risk perceptions, which vary across different types of products based
on subjective knowledge and information investors possess in relation to those products. In
terms of the relation between attitudinal constructs, a key finding reveals that risk
perception mediates the effect of risk tolerance and risk aversion on switching likelihood
and switching intention. The study makes a key contribution in identifying risk perception
as a distinct component of overall risk attitude and its relationship as a predictor and
mediator of switching likelihood and switching intention. This contributes novel insight
into the interplay between attitudinal constructs, personal and contextual factors in
influencing investor decision-making in an Arabic context. A framework is advanced for
risk practitioners for assessing risk culture based on understanding of risk perception as a
factor amplified by internal and by external factors that affect consumer decision-making.
Description
PhD Thesis - School of Management
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