Does Sharia Tag Constitute Heuristic While Choosing an Islamic Financial Institute? Evidence From Pakistan

Abstract

Purpose

Know your customer is one of the cornerstones of financial industry success. Extant literature has explained the reasons for choosing an Islamic financial institute, but no study has explored customers' psychological behavior in making this decision. Based on attribute substitution theory, this study examined the psychology of customers during the selection process, and whether differences in personality type could influence the decision-making process.

Design/methodology/approach

Methodologies combining qualitative and quantitative approaches were employed. An experiment was conducted to generate a discussion among the five focus groups, and their personalities were also noted.

Findings

Results suggest that, despite customers feeling more attached to Islamic institutions that perform better in terms of Sharia compliance, interest-free, and CSR programs, their interpretations of these aspects vary considerably. In addition, the name tag of Islamic and Sharia had been the source of heuristically made decisions, where customers adopted Islamic institutes solely because of their Islamic labels or positive recommendations from Sharia scholars. Finally, it was found that different personality types have different selection criteria.

Originality

This paper was the first attempt to analyze the decision-making process of customers when choosing an Islamic financial institute by employing attribute substitution theory. It is pertinent to note that personality types were also discussed for the first time in this regard.