Determinants of Indivdual's Investment Decision in Islamic Banking: A Case Study from Vehari

Abstract

There are two types of banking systems functioning in Pakistan. They include conventional and Islamic banking systems. Individuals take decisions to invest in a particular banking system while considering socioeconomic, religious and psychological factors. The present study is designed to examine factors affecting individual's investment decision in Islamic banking. The study uses cross-sectional data collected from Vehari district of the Punjab province. A total of 150 respondents were selected randomly having accounts or availing any other type of banking facility from conventional and Islamic banking. We used a 5 point Likert scale for getting information on customer satisfaction. The study considers social, religious and psychological factors having influence on individual's investment decision. Logit model was employed to determine factors affecting the decision of individuals in making investment in a specific banking system. The study provides insights on factors inducing individuals to make investment in a particular type of banking system. Age and education of respondents, whether banking is according to Islamic principles, ethical responsibility, wide range of Islamic products and networks are statistically related factors affecting decision on making investment in Islamic or conventional banks. Results of the study are useful for concerned banks to attract individuals to purchase the products.