Abstract:
The study examined the decision-making process of customers in Oromia Bank (OB)
regarding their preference for interest-free banking (IFB) products. The researchers used
a multistage sampling method and distributed structured questionnaires to 400
respondents. Descriptive statistics and econometric, specifically multinomial logistic
regression were employed for data analysis. The Decomposed Theory of Planned
Behavior (DTPB) theory was used to formulate behavioral variables. The results of the
study revealed several significant factors influencing customers' preference for different
IFB categories, namely Mudarabah, Murabaha, and Qard. Here are the key findings for
each category: Mudarabah Category: Customers' awareness: Customers who are aware
of Islamic banking services and products are more likely to prefer Mudarabah over
Qard. Perceived compatibility: Customers perceive Mudarabah as more compatible with
social system norms compared to Qard, leading to a higher preference for Mudarabah.
Perceived complexity: Customers prefer Mudarabah if the IFB products and services'
procedure, rules, and guidelines are easy to understand. Promotional influence: Well promoted IFB products are more likely to be preferred by customers, leading to a higher
preference for Mudarabah when it is well-promoted compared to when it is not or with
low promotion. Brand reputation: A well-built brand reputation for IFB products can
positively influence customer’s trust. Service quality: Better service quality can attract
and retain customers, as well as influence their choices among various products or
services. In the case of Mudarabah to Qard, customers are more likely to prefer
Mudarabah. Murabaha to Qard Category: Customers' awareness: A higher level of
awareness about IFB services and products is associated with a higher likelihood of
preferring Murabaha over Qard. Perceived complexity: Customers are less likely to
prefer Murabaha over Qard when the procedures, rules, and guidelines of IFB products
are complex to understand. Promotional influence: Well-promoted IFB products are
more likely to be preferred by customers. Brand reputation: A well-established brand
reputation is associated with a higher likelihood of customers preferring Murabaha over
Qard. Sharia compliance: IFB products that comply with Sharia rules are more likely to
be preferred by customers. Gender: Male customers are more likely to prefer Murabaha
over Qard compared to female customers. These findings provide insights into the factors
that influence customers' decision-making process while choosing between different IFB
products in Oromia Bank.
