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International Journal of Bank Marketing
Moderation effect on Islamic banking preferences in UAE

Mohammed Hersi Warsame, Edward Mugambi Ireri,
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Islamic
Moderation effect on Islamic banking
banking preferences in UAE preferences in
UAE
Mohammed Hersi Warsame
Department of Finance and Economics, University of Sharjah, Sharjah,
United Arab Emirates, and

41
Edward Mugambi Ireri Received 25 August 2016
Department of Planning Research and Development, University of Kabianga, Revised 1 January 2017
23 January 2017
Kericho, Kenya Accepted 13 February 2017
Abstract
Purpose – The purpose of this paper is to examine the direct and indirect moderation effects of demographic
and socio-economic(s) factors on the adoption of Islamic banking in UAE.
Design/methodology/approach – Convenience sampling was done on the residents of Sharjah, Dubai, and
Abu Dhabi. A closed-ended questionnaire with 30 items was designed and pre-tested before the start of the
study. Path analysis and moderation testing were the main analytical approach. A total of 320 respondents
completed the survey.
Findings – The research revealed that demographic and socio-economic(s) moderators may have direct and
indirect moderation effects on the adoption of the Islamic banking in the UAE, which indicates the importance
of these factors in the provision of Islamic banking products and services in the UAE.
Practical implications – This study further revealed that these moderators have huge practical
implications for Islamic bank managers and marketers as they can exploit these demographics to enhance
their market share in the UAE.
Social implications – In UAE, minimal attention has been directed toward the role moderators would play
in the criterion that individual investors would use in the adoption of Islamic banking products and services
in a cosmopolitan environment that is experiencing competition from conventional banks.
Originality/value – An extensive review of the existing literature on the adoption of Islamic banking reveals
that no empirical research has been undertaken to explore the role played by demographic and socio-economic(s)
moderators in the adoption of Islamic banking in UAE and internationally. This study attempts to fill this gap.
Keywords Islamic financial services marketing, Adoption of Islamic banking, Awareness on Islamic banking,
Demographic impact in Islamic banking, Level of Islamic financial literacy,
Moderation effect on Islamic banking
Paper type Research paper
1. Introduction
The essence of Islamic finance is that it strictly adheres to the rules of Sharia (Islamic law) in its
day-to-day operations, and one of the most distinctive features of Islamic finance is the
avoidance of interest in all its financial dealings (Khan and Bhatti, 2008; Salman and Ausaf,
2004). According to Chapra (1985), since Islamic finance is perceived as a value-based system, it
should strive to achieve certain Islamic objectives such as social equity, the alleviation of
poverty, and human well-being. Other scholars who came to the same conclusion include
Ahmed (1994), Naqvi (1982), Saeed (2012), Siddiqi (2000), Zarqa (1983). Consequently, the
adoption of the Islamic financing model is supposed to enhance the self-esteem of the faithful
investor as he or she has the comfort of complying with the tenets of Sharia (Islamic law) in this
respect (Dogawara, 2011; Wilson, 2007). Furthermore, the resilience of Islamic finance during
the last financial crisis has attracted attention to its underlying concepts (Hasan and
Dridi, 2010). Another important feature of Islamic finance is the role it can play in tackling
International Journal of Bank
financial exclusion, as it removes the access barrier for those who are financially excluded on Marketing
religious grounds. For instance, the authorization of Islamic finance in Turkey in late 1980s Vol. 36 No. 1, 2018
pp. 41-67
encouraged many Muslims of Arab origin to invest in the Turkish banks, which has greatly © Emerald Publishing Limited
0265-2323
contributed to the country’s economic development by adding USD50 (Mehmet, 2013). DOI 10.1108/IJBM-08-2016-0121
IJBM Several studies have been published with regard to factors that influence Islamic
36,1 banking in the Middle East and North Africa (MENA) region. Some of these relevant studies
have been summarized on Table AI.
1.1 Purpose of the study

The objective of the current study is to assess the role played by demographic and
42 socio-economic(s) factors on the adoption of Islamic banking products and services in

United Arab Emirates (UAE). The effect of moderators such as age, gender, possession of a
bank account, the level of education, and employment status is investigated. In addition, the
study examines the direct and indirect moderation effect of the factors that affect the
adoption of Islamic banking in UAE.
An extensive review of the existing literature on the adoption of Islamic banking
reveals that no empirical research has been undertaken to explore the role played by
demographic and socio-economic(s) moderators toward the adoption of Islamic banking in
UAE. In UAE, minimal attention has been directed toward the role moderators would play
in the criterion that individual investors would use in the adoption of Islamic banking
products and services in a cosmopolitan environment that is experiencing competition
from conventional banks. In this study, an attempt to fill this gap is made using path
regression analysis and moderation testing using AMOS. We will also develop a
hypothetical model based on the existing literature on factors that influence the adoption
of Islamic banking products and services that will help us meet the research objectives of
our study.
1.2 Hypothetical model

The purpose of conducting the current study is to determine the main moderation factors
that contribute to the adoption of Islamic banking model in UAE. The study intends to
examine residents in UAE irrespective of their possession of an account in an Islamic bank,
a conventional bank, or none. Previous studies have outlined service quality ( Jabnoun
and Khalifa, 2005; Al-Tamimi et al., 2009; Al-Tamimi and Al-Amiri, 2003; Jabnoun and
Hassan Al-Tamimi, 2003), awareness level (Bley and Kuehn, 2004), religion (Bley and
Kuehn, 2004; Hassan Al-Tamimi and Anood Bin Kalli, 2009), trust ( Jabnoun and Khalifa,
2005), networking (Al-Tamimi and Hussein, 2010), perception (Bley and Kuehn, 2004;
Suliman and Al Obaidli, 2011; Al-Tamimi et al., 2009; Jabnoun and Hassan Al-Tamimi, 2003),
marketing (Bley and Kuehn, 2004; Al-Tamimi and Hussein, 2010), customer satisfaction
( Jabnoun and Khalifa, 2005; Fernandes and Awamleh, 2005; Masood and Abdul Rehman,
2012; Al-Tamimi et al., 2009), type of products (Mansoor Khan et al., 2008), and knowledge
(Bley and Kuehn, 2004; Mansoor Khan et al., 2008; Jabnoun and Khalifa, 2005) as the main
factors that would influence the growth of Islamic banks in UAE. In the current study, we
examine the awareness about Islamic banking products and services, level of Islamic
financial literacy, Islamic financial services marketing, religion, and reputation to see if they
have direct and indirect influence on the adoption of Islamic banking model in UAE. We also
hypothesize that the direct influences are moderated by age, gender, possession of a bank
account, the level of education and the employment status. The hypothetical model of the
current study is shown on Figure 1.
2. Literature review: moderation testing

In the current study, we explore the interaction of awareness about Islamic banking
products and services, level of financial literacy, reputation of Islamic banks, and religion as
they are moderated by age, gender, education, employment status, and type of bank account
held on the adoption of Islamic banking products and services in Sharjah, UAE.
Awareness on Islamic
Islamic bank products
and services banking
preferences in
UAE
Level of Islamic
financial literacy
43
Awareness on Islamic Adoption of Islamic
financial services banking products
marketing and services in UAE
Bank
reputation
Moderators
(1) Age
(2) Gender Figure 1.
(3) Type of bank account Hypothetical model
Religion (4) Employment status/occupation used in the study
(5) Education level
2.1 Interaction of awareness about Islamic bank products and services with age, gender,
education, employment status, and type of bank account held
A study by Erol and El-Bdour (1989) in Jordan found that conventional bank customers and
Islamic bank customers did not have any statistically significant differences with as far as
the rating assigned to the selected bank is concerned. The authors also found that peer
group influence had a vital influence in the selection of Islamic banks.
Similarly, a study conducted among the Surakarta Muslim community in Indonesia by
Wahyuni (2012) found a positive and significant relationship between knowledge about
Islamic bank products and intention to use Islamic banks and thus it was concluded that
Muslims with better knowledge on Islamic bank products had a greater intention to adopt
Islamic banks. Wahyuni’s (2012) results also opened an avenue for the inclusion of
knowledge of Islamic banking products in the future design of models for studying the
behavior of selection of the use of Islamic bank products and Islamic banks.
Metawa and Almossawi (1998) investigated the banking behavior of Islamic bank customers
in Bahrain and reported a significant relationship between customer age and the usage of current
accounts and ATM cards. In fact, they noted that the current accounts were more popular among
the older customers as opposed to younger generation. Furthermore, the authors reported a
significant relationship between the level of education and the usage of current account and
ATM cards with the two products being more popular among the well-educated customers.
Khan et al.’s (2008) study on the banking behavior of Islamic bank customers in
Bangladesh reported that customers’ use of Islamic products and services depend on age
and education level. A study conducted in Pakistan by Khattak (2010) also reported that
age, gender, occupation, and academic qualification have significant effects on customer
awareness on Islamic bank products and services. In contrary, a study conducted in
Pakistan by Tara et al. (2014) showed that awareness on Islamic products and services does
not significantly influence the adoption of Islamic banks. Thus we state:
H1. Age, gender, education, employment status, and type of bank account held
moderates the interaction between awareness on Islamic bank products and services
with the adoption of Islamic banking products and services in Sharjah, UAE.
IJBM 2.2 Interaction of Islamic financial literacy with age, gender, education, employment status,
36,1 and type of bank account held
Deepak et al. (2015) define financial literacy as “knowledge of basic economic and financial
concepts, as well as the ability to use that knowledge and other financial skills to manage
financial resources effectively for a lifetime of financial comfort (p. 102).” In their theory and
critical review of literature on financial literacy among investors, the authors noted that the
44 levels of financial literacy of an individual would be influenced greatly by a combination of

financial knowledge, attitude, and behavior.
Akhter (2016) defines financial literacy as “providing familiarity with and understanding
of financial market products, especially rewards and risks, in order to make informed
choices (p. 2).” The author further explains that “financial literacy primarily relates to
personal finance and thus enables individuals to take effective action to improve their
overall well-being and avoid distress in matters that are financial.” In her study conducted in
India, Akhter (2016) found that gender was a strong determinant of financial knowledge
with males performing much better in financial literacy test than females. As part of her
recommendations, the author pinpointed the promotion of financial literacy through
adoption of basic educational programs with respect to financial issues as the core solution
to the development of financial skills and abilities that would foster independent financial
decisions. Tara et al. (2014) found that awareness on Islamic financial literacy had a
significant and positive influence on persuading the Pakistanis to adopt Islamic banking.
In a study conducted in Yazd in Iran, Taft et al. (2013) demonstrated positive
relationships between age, gender, education level, and financial literacy. The authors also
found that men were much better than women in financial literacy though no direct
relationship was demonstrated between gender and financial literacy. Gender has been
demonstrated to influence financial literacy level especially with women scoring lowest
compared to men (Almenberg and Säve-Söderbergh, 2011; Bhushan and Medury, 2013b;
Lusardi, 2012; Volpe et al., 2002; Worthington, 2006).
Studies done by Volpe et al. (2002), Worthington (2006), Almenberg and Säve-Söderbergh
(2011), and Lusardi (2012) demonstrated that age had an influence on financial literacy levels
whereby older persons tends to score low in terms of financial literacy levels. However,
Bhushan and Medury (2013a) demonstrated that age did not have any influence on financial
literacy levels. Studies done by Volpe et al. (2002), Hassan Al-Tamimi and Anood Bin Kalli
(2009), Almenberg and Säve-Söderbergh (2011), Lusardi (2012), and Bhushan and Medury
(2013a) demonstrated that education has an impact in terms of financial literacy level with
persons having lower education scoring low levels of financial literacy. A study conducted in
UAE by Ibrahim and Alqaydi (2013) on financial literacy, personal finance, and forms of
personal debt among residents found that the level of financial literacy was low though no
significant differences between males and females. Gupta and Negi (2014) studied the financial
literacy of Indians based in Himachal Pradesh. Even though the authors did not specify the
religiosity of their sample, gender, occupation, and education level showed significant
relationships with financial literacy but not age. Thus we state that:
moderates the interaction between Islamic financial literacy with adoption of Islamic
banking products and services in Sharjah, UAE.
2.3 Interaction of Islamic financial services marketing with age, gender, education,
employment status, and type of bank account held
Erol and El-Bdour’s (1989) study suggested an increase on promotional activities of the
Islamic bank products and services among the peer group in order to increase the potential
customers’ awareness of Islamic banking services. Metawa and Almossawi (1998) noticed a
gap in Bahrain between awareness and usage of most Islamic bank products and services Islamic
and recommended for an effective advertising and promotional strategies to lure more banking
customers and create awareness on existing/new products and services. Tara et al.’s (2014) preferences in
study in Pakistan showed that awareness in terms of advertisement had no significant
influence on the adoption of Islamic banking by the Pakistanis. Rammal and Zurbruegg UAE
(2007), in their study on Australian Muslims, recommended the need “to develop an effective
communication plan that goes beyond just marketing and advertisement to ensure the 45
populace is aware of how Islamic banking products operates (p. 74).” A study conducted by
Rashid and Hassan (2009) on the determination of customer demographics affecting bank
selection criteria, preference, and market segmentation highlighted the lack of marketing
among the many attributes that hinder the development of majority domestic Islamic banks
in Bangladesh. Marimuthu et al. (2010) reported that mass media advertising was not a
significant factor among customers when it comes to the selection of an Islamic bank in
Malaysia. Similarly, Loo (2010) reported that the advertising campaigns by Islamic banks in
Malaysia were ineffective in changing the attitude of both Muslims and non-Muslims
toward the usage of Islamic banking. Thus we state:
H3. Age, gender, education, employment status, and the type of bank account held,
moderates the interaction between Islamic financial services marketing with the
adoption of Islamic banking products and services in Sharjah, UAE.
2.4 Interaction of reputation of a bank with age, gender, education, employment status,
and type of bank account held
According to Erol and El-Bdour (1989), the choice of an Islamic bank is highly dependent on
the bank reputation. Customers’ opinion on a bank will determine if the customers will opt to
quit the bank or remain loyal customers to the bank. Thus we predict that the higher the bank
reputation, the more likely the customers will select the bank. A study conducted by Haron
et al. (1994) in Malaysia found that non-Muslims ranked reputation and image of a bank as
the third important determinant in selection of a bank, while Muslims ranked reputation as the
seventh important determinant. In a study conducted in Australia by Rammal and Zurbruegg
(2007) to examine the awareness of Muslim Australians with regards to Islamic banking,
implied that purchasing of Islamic financial products was dependent on reputation of the
bank “well known” on the provision of its services. Khattak (2010) reported as the significant
relationship between different age group and bank reputation.
However, Marimuthu et al. (2010) reported that size and bank reputation were not
significant factors when it comes to a selection of Islamic banks in Malaysia. The reputation
of bank was found to have a significant and positive influence toward the adoption of
Islamic banking in Pakistan (Tara et al., 2014). However, Sayani and Miniaoui (2013), in their
study in UAE, did not find reputation of a bank to be among the main determinants of bank
selection between the Islamic and the conventional banks. Thus we state:
moderates the interaction between reputations of a bank with the adoption of Islamic
2.5 Interaction of religion with age, gender, education, employment status, and type of
bank account held
In their study, Erol and El-Bdour (1989) found that religious motivation was not the primary
criterion in the selection of Islamic banking services even though the authors later clarify that
“the fact that religious motivations did not appear in the analysis as being strong does not
IJBM deny that they may exist” (p. 33). Haron et al. (1994) compared the determinant of bank
36,1 selection in Malaysia between Muslim and non-Muslim conventional bank customers and
found that only 40 percent of the Muslim felt that religion was an important factor in
maintaining an account with an Islamic bank. This meant that Islamic banks should not only
rely on religion to attract more customers. A study conducted by Metawa and Almossawi
(1998) in Bahrain demonstrated that the selection of Islamic banks was predominantly based
46 on religious factors and the adherence to Islamic principles. The authors reported a significant
relationship between customer age (especially the younger customers 25-35 years) and the role
played by Islamic principles in selection of an Islamic bank. Metawa and Almossawi (1998)
reported a significant relationship between education level and Islamic principles in selection
of an Islamic with the well-educated customers placing more emphasis in Islamic principles.
Khan et al.’s (2008) study in Bangladesh noted religious principles as the main factor in
the selection of an Islamic bank. Similarly, Ahmad et al. (2008) studied religiosity and the
criteria of selecting a bank in Malaysia and found a significant and positive correlation
between age, religious education and a higher index of religiosity. A study conducted in
Malaysia by Marimuthu et al. (2010) found religion to be a significant factor when it comes
to the selection of Islamic banks. Loo (2010) investigated attitude and perceptions toward
Islamic banking among Muslims and non-Muslims in Malaysia and found out that religion
was ranked as the most important factor that would attract Muslims to Islamic banking,
while religion was ranked as the least factor among the non-Muslims.
Khattak (2010) investigated the factors that would influence customer satisfaction and
awareness of Islamic banking in Pakistan and found out that religion was among the main
attribute regarding Islamic banking selection criteria. Studies by Tara et al. (2014) and Khan
and Khanna (2010) found religion to significantly and positively influence the adoption of
Islamic banks. A study conducted in UAE by Sayani and Miniaoui (2013) on the determinants
of bank selection found that religious preferences was the main factor considered by a
customer in the choice between an Islamic and a conventional bank. Thus we state:
moderates the interaction between Islam (religion) with the adoption of Islamic
3. Research methodology
This study investigates the interaction effect between demographic variables and adoption
of Islamic banking model in UAE. Convenience sampling of the participants was done on
the residents of Sharjah, Dubai and Abu Dhabi (n ¼ 320). A closed-ended questionnaire with
30 items was designed and pre-tested before the start of the study. A total number of 437
self-administered questionnaires were randomly distributed to the residents of these cities
above the age of 18 years. At the completion of the survey, the questionnaires that were
uncompleted were excluded from the study and hence the completed questionnaires left
were 320. Thus the response rate in the study was 73.2 percent. A five-point Likert scale was
adopted with the average response weights being; strongly agree (1 ⩾ 1.8), agree (1.9 ⩾ 2.6),
neutral (2.7 ⩾ 3.4), disagree (3.5 ⩾ 4.2), and strongly disagree (4.3 ⩾ 5). Moderation testing
was done using AMOS while reliability testing of the data and the interactions were
estimated using IBM Corp (2013). The survey instrument used in the study with respective
reliability scoring on the responses is attached as Table AII.
3.1 Measuring the adoption of Islamic banking products and services

Adoption of Islamic banks was measured using four items. The overall Cronbach’s α
reliability was 0.748. The α values ranged between 0.689 and 0.691. The four items were
included in the final model.
3.2 Measuring awareness about Islamic banking products and services Islamic
Awareness about Islamic banking products and services was measured using four items. banking
The overall α reliability value was 0.74. All the four items had α values ranging between preferences in
0.61 and 0.718. Thus none of the items was removed from the final model.
UAE
3.3 Measuring awareness about Islamic financial literacy
Awareness about Islamic financial literacy was measured using four items. The overall 47
alpha reliability was 0.682. The individual α values ranged between 0.540 and 0.630. All the
four items were deemed suitable to be included in the final model.
3.4 Measuring Islamic financial services marketing

Islamic financial services’ marketing was measured using four items. The overall α value
was 0.777. The values ranged between 0.723 and 0.724. None of the four values were
removed from the final model.
3.5 Measuring reputation of an Islamic bank

Reputation of a bank was measured using five items. Overall, the α value was 0.674.
The α values ranged between 0.611 and 0.638. Therefore, all the five items were retained in
the final model.
3.6 Measuring religion

The influence of religion was measured using three items. Their α values were 0.503 and
0.529. One item was removed from the final model because its α value was less than 0.50.
4. Data analysis and results

4.1 Sample characteristics
The sample characteristics are shown on Table I.
Frequency Percent Frequency Percent
Age Employment status

18-25 83 25.9 Managerial 86 26.9
26-35 87 27.2 Self-employed 60 18.8
36-45 87 27.2 Technical skilled 89 27.8
46-55 55 17.2 Unemployed 75 23.4
56-65 7 2.2 Unskilled laborer 10 3.1
Over 66 years 1 0.3
Gender Education level
Male 209 65.3 Less than high school 10 3.1
Female 111 34.7 High school or equivalent 59 18.4
Diploma/High school diploma 59 18.4
Bank account with College/bachelor 111 34.7
Islamic bank 110 34.4 Graduate degree (master’s or PhD) 81 25.3
Conventional bank 114 35.6
Both Islamic and conventional 50 15.6
None 46 14.4 Table I.
Note: n ¼ 320 Sample characteristics
IJBM 4.2 Path analysis
36,1 The composites scores were determined for the items to come up with six observed
endogenous variables: awareness about Islamic bank products and services, Islamic
financial literacy, Islamic financial services marketing, religion, reputation, and adoption of
Islamic banking products and services.
4.2.1 Normality test. Research works by Mooney and Duval (1993), Nevitt and Hancock
48 (1998), Hancock and Nevitt (1999), Hancock and Nevitt (2001), The University of Texas at
Austin (2016) all suggest critical values that exceeds ±2.00 exhibits statistically significant
degrees of non-normality, with values ranging between 2 to 10 indicating moderate
non-normality, while values that exceed 10 indicating severe non-normality. Thus a joint
Multivariate kurtosis analysis performed indicated that the critical ratio (CR) value on our
data set had moderate non-normality; n ¼ 320; CR (6.95). Thus we accept the null hypothesis
that our final model was correct.
4.2.2 Model fit. Path regression analysis was conducted using IBM SPSS AMOS (IBM
Corp, 2013). The standardized estimations were obtained using maximum likelihood
estimates method because the data were not suffering from severe non-normality.
The model summary of the initial model was (χ² ¼ 7.392; df ¼ 1); p ¼ 0.007. The χ² test
assumes multivariate normality and severe deviations leads to rejection of properly
specified model (McIntosh, 2006). The χ² test is dependent on the sample size (Bentler and
Bonnet, 1980; Jöreskog and Sörbom, 1993), and thus a likelihood of rejecting a better fit
model. Thus to account for the likelihood of rejecting a better fit model as a misfit, the model
fit metric was checked using Wheaton et al.’s (1977) relative/normed χ² method which
suggests that the fit metric (CMIN/DF) should not exceed five for models with good fit, while
Tabachnick and Fidell (2007) suggested the acceptable ratio should be below 2. The fit
metric value for the initial model was 7.39. This value alone would prompt us to declare that
the model was unacceptable. However, our sample size was large enough (n ¼ 320) and
literature has it that CMIN/DF inflates with large sample sizes, and with less constructs and
items (Hair et al., 2010). Simpler models and smaller sample sizes (less than 200) should
apply stricter model indices cut-offs than larger (greater than 200) and more complex
models, with more than 30 items higher than 30 (Hair et al., 2010). Models with large sample
sizes can have an acceptable GFI cut-off level of 0.80 (Dawes et al., 1998).
The fit indices of our initial model was: goodness-of-fit index (GFI ¼ 0.992), comparative
fit index (CFI ¼ 0.986), incremental fit index (IFI ¼ 0.987), normed fit index (NFI ¼ 0.985),
which were all above their recommended levels of above 0.90 (Wheaton et al., 1977; Bentler
and Bonnet, 1980), and well above 0.95 as suggested by Hooper et al. (2008). The root mean
standard error approximation (RMSEA ¼ 0.142; PCLOSE ¼ 0.034) was far above the
recommended limit of less than 0.08 (MacCallum et al., 1996), and an upper limit of 0.07 as
suggested by Steiger (2007). The unconstrained standardized root mean residual
(standardized RMR) value was ¼ 0.024. Research works by Diamantopoulos and Siguaw
(2000) and Byrne (1998) recommend an SRMR value less than 0.05, while Hu and Bentler
(1999) suggest that a SRMR value less than 0.08 is acceptable. The final model after
removing four insignificant paths, that is, the relationships between awareness of Islamic
banking products and services on adoption, levels of Islamic financial literacy on adoption,
awareness of Islamic financial services and marketing on adoption, and religion on
adoption, the relative fit indices were; (χ² ¼ 3.67; df ¼ 1); p ¼ 0.299; CMIN/DF ¼ 1.22;
GFI ¼ 0.996; AGFI ¼ 0.973; CFI ¼ 0.999; IFI ¼ 0.999; TLI ¼ 0.993; NFI ¼ 0.992;
RMSEA ¼ 0.026; PCLOSE ¼ 0.597, and SRMR ¼ 0.017. According to Hair et al. (2014, p. 589),
“multiple fit indices should be used to assess a model’s goodness-of-fit and should include: the
χ² value and its degree of freedom, one absolute fit index (i.e. GFI, RMSEA, or SRMR), one
incremental fit index (i.e. CFI or TLI), one goodness-of-fit (GFI, CFI, TLI), and one badness-of-fit
index (RMSEA, SRMR).” Hence, our final model showed an overall acceptable fit that we had an Islamic
over identified model. banking
Upon a closer consideration of all our fit indices, we decided to adopt Hu and Bentler’s preferences in
(1999) two-index presentation strategy to ensure that our moderation analysis were fit,
acceptable and able to provide us with credible findings that we were investigating in the UAE
study. Thus we concluded that the final used in the current study was fit. See two-index
strategy of Table II. 49

4.2.3 Path regression results. The R2 values estimated on reputation of a bank and
adoption of Islamic banks in UAE were 0.40 and 0.28, respectively. Table III shows that all
the interactions were significant. These preliminary results suggest that religion, Islamic
financial services marketing, and awareness about Islamic bank products and services have
no direct influence on the adoption of Islamic banks in UAE. Reputation of a bank had the
highest and significant β estimate (β ¼ 0.399) toward the adoption of Islamic banks in UAE.
Therefore, Islamic financial literacy and the reputation of the bank were the only two factors
that were found to have a direct and significant influence on the adoption of Islamic banks
in UAE. Similarly, religion, Islamic financial services marketing, and awareness about
Islamic bank products and services were found to have an indirect and significant influence
on the reputation of a bank. Nevertheless, only religion and awareness about Islamic bank
products and services seemed to have a large indirect impact on the adoption of Islamic
banks with β coefficients of β ¼ 0.213 and β ¼ 0.226, respectively. See Figure 2.
4.3 Moderation testing

Moderation testing was conducted to establish if the significant interactions had any
influence that was being moderated. The fit metric indices using Hu and Bentler’s (1999)
two-index strategy for the moderation effects are attached as a part of the notes on the
moderation tables. Due to numerous tables that were generated during the analysis, some
tables were merged to show only significant interactions. Moderation testing was also
achieved by testing the regression weights on an excel macro known as stat tool package
developed by Gaskin (2012). The moderated interactions were interpreted according to the
Fit Index combination Combinational rules UAE model indices
TLI and SRMR TLI ⩾ 0.96, SRMR ⩽ 0.09 TLI ¼ 0.993, SRMR ¼ 0.017
Table II.
RMSEA and SRMR RMSEA ⩽ 0.06, SRMR ⩽ 0.09 RMSEA ¼ 0.026, SRMR ¼ 0.017 Comparison of Hu and
CFI and SRMR CFI ⩾ 0.96, SRMR ⩽ 0.09 CFI ¼ 0.999, SRMR ¼ 0.017 Bentler (1999) strategy
Notes: TLI, Tucker-Lewis Index; RMSEA, root mean standard error approximation; CFI, comparative fit with the final model
index; SRMR, standardized root mean residual indices
Relationships Estimate SE CR p
Reputation ← AIBPS 0.226 0.038 5.901 o0.001

Reputation ← AIFSM 0.083 0.037 2.271 0.023
Reputation ← Religion 0.213 0.038 5.642 o0.001
Reputation ← LIFL 0.133 0.049 2.735 0.006
Adoption ← LIFL 0.257 0.053 4.868 o0.001
Adoption ← Reputation 0.399 0.053 7.537 o0.001 Table III.
Notes: AIBPS, awareness on Islamic banking products and services; AIFSM, awareness on Islamic financial Standardized
services marketing; LIFL, level of Islamic financial literacy regression weights
IJBM Awareness on Islamic
36,1 banking products
and services
50 (=0.226)
Level of Islamic
financial literacy
(=0.113)
(=0.257)
Awareness on Islamic (=0.83) Adoption of Islamic

Bank (=0.399)
financial services banking products
reputation (R=0.40)
and marketing and services (R = 0.28)
(=0.213)
Figure 2.
Significant
relationships in the
Religion
proposed model
significant z-score value and its associated signage. A significant negative z-score indicated
a weaker moderation effect, while a significant positive z-score indicated a stronger
moderation effect.
4.3.1 Gender. Gender was found to have a weak but direct and significant moderation
effect on the interaction between bank reputation and the awareness of Islamic financial
services and marketing. Nevertheless, the other relationships were non-significant
(see Table IV ). The moderation effect was much stronger and significant for females
compared to males. In summary, after using gender as a moderator, we can verify that
gender has a significant moderation interaction between bank reputation with awareness of
Islamic financial services and marketing in UAE.
4.3.2 Age. Age demonstrated some significant moderated interactions (see Table V ). There
was significant negative moderation effect between those persons who belong to the
Male Female
Relationships Estimate p Estimate p z-stat
Reputation ← AIBPS 0.266 o0.001 0.141 0.034 −1.539

Reputation ← AIFSM 0.037 0.398 0.189 0.005 1.913*
Reputation ← Religion 0.222 o0.001 0.209 0.001 −0.164
Reputation ← LIFL 0.131 0.032 0.142 0.077 0.104
Adoption ← LIFL 0.241 o0.001 0.286 o0.001 0.408
Adoption ← Reputation 0.405 o0.001 0.381 o0.001 −0.211
Table IV. Notes: AIBPS, awareness on Islamic banking products and services; AIFSM, awareness on Islamic financial
Moderation testing services marketing; LIFL, level of Islamic financial literacy. *p-valueo0.10; **p-valueo0.05;
using gender ***p-valueo0.01
26-35 years 36-45 years
Islamic
Relationships Estimate p Estimate p z-stat banking
Reputation ← AIBPS 0.201 0.004 0.333 o0.001 1.243 preferences in
Reputation ← AIFSM 0.15 0.038 −0.012 0.858 −1.621
Reputation ← Religion 0.142 0.04 0.313 o0.001 1.629
UAE
Reputation ← LIFL 0.295 0.003 0.037 0.653 −1.997**
Adoption ← LIFL o0.001 −0.303
0.363 0.001 0.319

Adoption ← Reputation 0.344 0.001 0.467 o0.001 0.829 51
Reputation ← AIBPS 0.333 o0.001 0.111 0.13 −2.037**
Reputation ← AIFSM −0.012 0.858 0.044 0.527 0.573
Reputation ← LIFL 0.037 0.653 0.006 0.95 −0.243
Adoption ← LIFL 0.319 o0.001 0.069 0.486 −1.807*
Adoption ← Reputation 0.467 o0.001 0.365 o0.001 −0.677
Reputation ← AIBPS 0.111 0.13 0.299 o0.001 1.681*
Reputation ← AIFSM 0.044 0.527 0.102 0.214 0.539
Reputation ← Religion 0.225 0.002 0.241 0.005 0.138
Reputation ← LIFL 0.006 0.95 0.139 0.294 0.813
Adoption ← LIFL 0.069 0.486 0.263 0.054 1.152
Adoption ← Reputation 0.365 o0.001 0.336 0.002 −0.191
Notes: AIBPS, awareness on Islamic banking products and services; AIFSM, awareness on Islamic Table V.
financial services marketing; LIFL, level of Islamic financial literacy. *p-valueo0.10; **p-valueo 0.05; Moderation testing
***p-value o0.01 using age
26-35 years and 36-45 years age categories. Those respondents who belonged to the 26-35 years
age bracket had a stronger and significant influence on the interaction between Islamic
financial literacy and bank reputation compared to those who belonged to the 36-45 years age
bracket. Awareness about Islamic bank products and services also had a weak, significant
moderation effect between the respondents who belonged to the 36-45 years and 46-55 years
age bracket. As age increases from 46-55 years to 56-65 years, the effect of awareness on
Islamic banking products and services on bank reputation becomes stronger and the
moderation effect significantly increases. Similarly, the moderation effect of age on the level of
Islamic financial services on bank reputation becomes weaker between the 36-45 years and
46-55 years age categories. The effect becomes significantly stronger for those in the
36-45 years age bracket compared to those in the 46-55 years age bracket.
4.3.3 Type of a bank account held. The type of a bank account held in an Islamic bank, a
conventional bank or possession of no bank account had some significant moderation effect
between the levels of Islamic financial literacy on reputation of Islamic banking in UAE
(see Table VI). There was a significant moderation effect by the type of account held between
the Islamic account holders and those who had accounts in both Islamic and commercial
banks. The effect was significantly stronger for who had accounts in both Islamic and
commercial banks compared to the Islamic account holders. Similarly, there was a significant
moderation effect by the type of account held between the Islamic account holders and those
who had no banks accounts. The effect was much stronger for those who had no bank
accounts though none of the categories were significant at 95 percent confidence level.
In summary, the type of a bank account held has a significant moderation interaction between
the levels of Islamic financial literacy on reputation of Islamic banking in UAE.
4.3.4 Education level. Education demonstrated a strong moderation effect between
awareness of Islamic financial services and marketing on the reputation of Islamic banking
in UAE. The effect was much stronger for those who had a high school level of education
IJBM Relationships Estimate p Estimate p z-stat
36,1
Islamic bank account Islamic and commercial bank accounts
Reputation ← AIBPS 0.196 0.004 0.273 0.003 0.667
Reputation ← AIFSM 0.091 0.126 0.036 0.69 −0.515
Reputation ← LIFL −0.002 0.978 0.231 0.037 1.713*
52 Adoption ← LIFL 0.303 0.001 0.283 0.05 −0.117

Adoption ← Reputation 0.415 o0.001 0.304 0.063 −0.578
Islamic bank account No bank account
Reputation ← AIBPS 0.196 0.004 0.146 0.192 −0.376
Reputation ← LIFL −0.002 0.978 0.298 0.057 1.709*
Adoption ← LIFL 0.303 0.001 0.207 0.178 −0.534
Adoption ← Reputation 0.415 o0.001 0.468 o0.001 0.325
Table VI. Notes: AIBPS, awareness on Islamic banking products and services; AIFSM, awareness on Islamic financial
Moderation testing services marketing; LIFL, level of Islamic financial literacy. The moderation testing between Islamic
using type of a bank bank accounts and Commercial bank accounts, and the other moderations not reported in the table were
account held insignificant. *p-valueo0.10; **p-value o0.05; ***p-valueo0.01.
compared to those who had less than a high school level of education. However, none of the
two groups were significant. Similarly, a strong moderation effect between awareness of
Islamic financial services and marketing on reputation of Islamic banking in UAE was
observed between those who had a bachelor’s degree and those who were graduates. The
effect was much stronger and significant for the graduates compared to those who held
bachelor’s degrees. This meant that as the level of education increase, the moderation effect
of education increases.
There was a weaker moderation effect between the levels of Islamic financial services on
bank reputation on persons with a high school level of education compared with persons
who had less than a high school level of education. The effect was significantly stronger for
those with less than a high school level of education compared to those with a high school
level of education. However, the moderation effect of education was stronger between bank
reputation on adoption of Islamic banking products and services. The effect was highly
significant on those who had a high school level of education compared to those who had
less than a high school level of education.
There was a weak moderation effect between the level of Islamic financial literacy on
adoption of Islamic banking products and services. Persons with a high school level of
education demonstrated a much stronger but significant effect compared with those who
had a high school level of education (see Table VII).
4.3.5 Employment status. Employment status was also tested as a moderator.
Employment status demonstrated a weak moderation effect between awareness of
Islamic financial services and marketing on the reputation of Islamic banking in UAE.
The effect was much stronger and significant for those who were unemployed compared to
the unskilled laborers. Similarly, a weaker moderation effect between awareness of Islamic
financial services and marketing on reputation of Islamic banking in UAE was observed
between those who were self-employed and those who were technically skilled. The effect
was much weaker and significant for the technically skilled compared to those who were
self-employed. This meant that as the effect was much stronger for the self-employed
compared to the unemployed.
Employment status was found to have a direct, weaker but significant moderation effect
between religion and bank reputation in UAE. The effect was significantly stronger for the
Relationships Estimate p Estimate p z-stat
Islamic
banking
o High school High school preferences in
Reputation ← AIFSM −0.179 0.095 0.052 0.562 1.652* UAE
Reputation ← Religion 0.405 0.002 0.2 0.088 −1.184
Reputation ← LIFL 0.953 o0.001 0.248 0.063 −2.27**
Adoption ← LIFL 0.738 o0.001 0.444 o 0.001 −1.314 53

Adoption ← Reputation −0.254 0.128 0.294 0.005 2.774***
High school Diploma
Reputation ← Religion 0.2 0.088 0.143 0.078 −0.4
Reputation ← LIFL 0.248 0.063 0.155 0.064 −0.595
Adoption ← LIFL 0.444 o0.001 0.17 0.124 −1.671*
Adoption ← Reputation 0.294 0.005 0.259 0.058 −0.199
Bachelor Graduate
Reputation ← AIBPS 0.182 0.009 0.289 o 0.001 1.074
Reputation ← AIFSM 0.025 0.685 0.255 0.001 2.295**
Reputation ← LIFL 0.015 0.864 0.184 0.063 1.298
Adoption ← LIFL 0.17 0.059 0.33 0.002 1.133
Adoption ← Reputation 0.527 o0.001 0.361 o 0.001 −1.154
Notes: AIBPS, awareness on Islamic banking products and services; AIFSM, awareness on Islamic financial Table VII.
services marketing; LIFL, level of Islamic financial literacy. The moderation testing between diploma holders Moderation testing
and bachelors holders, were not reported in the table because they all had insignificant moderation effects. using the level of
*p-valueo 0.10; **p-valueo0.05; ***p-valueo0.01 education
unemployed compared to the unskilled laborers. Nevertheless, religion had a highly

significant moderation effect between the technically skilled and those who held managerial
positions with the effect being significantly stronger for the technically skilled. This meant
that as the employment status increases, its moderation effect on religion and bank
reputation increases.
Education also had a significant moderation effect between the levels of Islamic financial
literacy and bank reputation. The effect was significantly stronger for the unskilled laborers
compared to the unemployed. Nevertheless, a weaker moderation effect was reported
between the technically skilled and those who held managerial positions. The effect was
much stronger and significant for those who held managerial positions compared to those
who were technically skilled. This meant that the moderation effect of employment status on
the relationship between the levels of Islamic financial literacy on bank reputation decreases
with increase in employment position status.
Education status also moderated negatively the influence of bank reputation on the
adoption of Islamic banking products and services. The effect was significantly stronger
among the unemployed compared to the unskilled laborers. Similarly, the effect was
significantly stronger among those who held managerial positions compared to those who
were technically skilled. Nevertheless, a positive significant moderation effect between the
unemployed and the self-employed was reported with the effect being stronger among the
unemployed compared to the self-employed (see Table VIII).
5. Discussion
In the current study, we used path regression analysis to investigate the moderation effect
of age, gender, possession of bank account, the level of education, and the status of
employment toward the adoption of Islamic banking in UAE. The preliminary analysis
IJBM Relationships Estimate p Estimate p z-stat
36,1
Unskilled laborer Unemployed
Reputation ← AIBPS −0.191 0.275 0.249 o0.001 −2.338**
Reputation ← Religion −0.009 0.937 0.25 o0.001 −1.929*
Reputation ← LIFL 0.931 0.002 0.158 0.101 2.399**
54 Adoption ← LIFL 0.395 0.158 0.188 0.088 0.686

Adoption ← Reputation −0.356 0.256 0.515 o0.001 −2.632***
Unemployed Self-employed
Reputation ← AIBPS 0.249 o 0.001 0.436 o0.001 −1.541
Reputation ← AIFSM 0.113 0.098 −0.032 0.727 1.268
Reputation ← Religion 0.25 o 0.001 0.178 0.076 0.593
Reputation ← LIFL 0.158 0.101 0.057 0.632 0.663
Adoption ← LIFL 0.188 0.088 0.378 o0.001 −1.191
Adoption ← Reputation 0.515 o 0.001 0.252 0.014 1.775*
Self-employed Technical skilled
Reputation ← AIBPS 0.436 o 0.001 0.159 0.023 −2.288**
Reputation ← AIFSM −0.032 0.727 0.097 0.146 1.137
Reputation ← Religion 0.178 0.076 0.346 o0.001 1.394
Reputation ← LIFL 0.057 0.632 −0.104 0.248 −1.08
Adoption ← LIFL 0.378 o 0.001 0.204 0.046 −1.137
Adoption ← Reputation 0.252 0.014 0.286 0.003 0.236
Technical skilled Managerial
Reputation ← AIBPS 0.159 0.023 0.142 0.06 0.164
Reputation ← Religion 0.346 o 0.001 0.068 0.372 2.725***
Reputation ← LIFL −0.104 0.248 0.354 o0.001 −3.584***
Adoption ← LIFL 0.204 0.046 0.193 0.081 0.07
Table VIII. Adoption ← Reputation 0.286 0.003 0.602 o0.001 −2.002**
Moderation testing Notes: AIBPS, awareness on Islamic banking products and services; AIFSM, awareness on Islamic financial
using employment services marketing; LIFL, level of Islamic financial literacy. *p-valueo0.10; **p-valueo0.05;
status ***p-valueo0.01
shows that awareness about Islamic bank products and services, awareness of Islamic
financial services marketing, and religion have only an indirect (via bank reputation)
relationship with the adoption of Islamic banking products and services in UAE. However,
these three factors do not have any direct significant relationship with the adoption of
Islamic banking products and services in UAE. Nevertheless, the level of Islamic financial
literacy has an indirect effect via bank reputation and a direct effect on adoption of Islamic
banking products and services. This study thus confirms that the level of Islamic financial
literacy and reputation of a bank has a direct and significant relationship with adoption of
Islamic banking products and services in UAE (see Figure 2).
5.1 Moderation interaction between awareness about Islamic banking products and
services with the adoption of Islamic banking model in UAE
The study did not find any direct significant relationship between awareness about Islamic
banking products and services and adoption of Islamic banking products and services
model in UAE. This finding supports Tara et al.’s (2014) study in Pakistan that
demonstrated no significant relationship between awareness about Islamic banking
products and the adoption of Islamic banking products and services. However, an indirect
significant relationship was demonstrated via reputation of the bank. In this study, the level
of Islamic financial literacy (β ¼ 0.226) is ranked the first most important determinant of
bank reputation though it does not have a direct significant effect on the adoption of Islamic Islamic
banking products and services (see Figure 2). banking
Gender had no moderation effect on the interaction between awareness of Islamic preferences in
banking products and services and the reputation of a bank with the adoption of Islamic
banking model in UAE. This finding contradicts the study performed by Khattak (2010) UAE
that gender has a significant effect on customer awareness on Islamic bank products
and services. 55
Although we were not testing indirect moderation effect, it is worthy to note that the
interaction between awareness of Islamic banking products and services on bank reputation
was significantly moderated by employment status.
Age reported significant moderation effects between among those who belong to the
36-45 years and 46-55 years age categories; and those who belonged to the 46-55 years and
56-65 years age brackets. These findings support studies by Erol and El-Bdour (1989),
Metawa and Almossawi (1998), Khan et al. (2008), Khattak (2010) that age influences the
selection of Islamic banking. The moderation testing in this study confirmed these findings.
Similarly, employment status revealed a weaker and indirect moderation effect when
comparing the unskilled laborers with the unemployed persons; the self-employed and the
technically skilled. These finding supports the findings of Khattak (2010) that occupation/
employment status has significant effects on customer awareness on Islamic bank products
and services.
5.2 Moderation interaction between Islamic financial literacy level with the adoption of
Islamic banking model in UAE
The study revealed a direct and significant relationship between awareness about Islamic
financial literacy with the adoption of Islamic banking products and services in UAE.
This finding supports the Tara et al.’s (2014) study that revealed awareness about Islamic
financial literacy had a significant and positive influence on persuading the Pakistanis to
adopt the Islamic banking model. Thus we concluded that the level of Islamic financial
literacy is among the main determinants that have a direct influence on the adoption of
Islamic banking products and services in UAE. In this study, the level of Islamic financial
literacy (β ¼ 0.257) ranked the third most important determinant on bank reputation
(β ¼ 0.399). However, it ranked second in terms of the significant direct effect on the
adoption of Islamic banking products and services (see Figure 2).
Neither did gender had an indirect significant moderation effect on the level of Islamic
financial literacy on bank reputation nor a direct significant moderation effect on the
adoption of Islamic banking products and services. Though no significant differences,
women were found to have higher β coefficients for Islamic financial literacy on bank
reputation; and Islamic financial literacy on the adoption of Islamic banking compared with
their male counter parts. This finding contradicts Taft et al.’s (2013) study that
demonstrated men were much better than women in financial literacy though no direct
relationship was demonstrated between gender and financial literacy. Similarly, our finding
supports Ibrahim and Alqaydi’s (2013) study in UAE on financial literacy among residents
that found no significant differences between males and females.
Age was found to have a weaker direct significant moderation effect on the relationship
between the level of Islamic financial literacy and bank reputation model in UAE. Persons
belonging to 26-35 years age group were found to have a higher β coefficient on Islamic
financial literacy compared with persons under the 36-45 years age bracket. The same finding
was observed on persons between 36-45 years and the 46-55 years age bracket on the
relationship between the levels of Islamic financial literacy and adoption of Islamic banking
products and services. These finding supports the studies done by Volpe et al. (2002),
Worthington (2006), Almenberg and Säve-Söderbergh (2011), and Lusardi (2012) which
IJBM demonstrated that age influences financial literacy levels whereby older persons tend to score
36,1 low in terms of financial literacy levels.
The type of a bank account held had a moderation effect on the direct relationship
between the level of Islamic financial literacy and bank reputation in UAE. This meant that
persons who held both Islamic and commercial bank accounts in UAE are significantly
influenced by the reputation of bank. The most notable finding on the moderation testing on
56 bank account was that with regard to the relationship between the level of Islamic financial
literacy and bank reputation in UAE, those who only held Islamic bank accounts had
negative β coefficients meaning that the account holders had a negative perception on the
reputation of Islamic banks in UAE.
The level of education was also found to have a weaker direct significant moderation effect
on the relationship between the level of Islamic financial literacy and the adoption of Islamic
banking model in UAE. The moderation was much weaker for persons with a diploma/higher
diploma or a bachelor degree compared with the persons having a high school level of
education. Similarly, the effect was much weaker for those with a high school level of
education compared to those with less than a high school level of education. These finding
supports studies done by Volpe et al. (2002), Hassan Al-Tamimi and Anood Bin Kalli (2009),
Almenberg and Säve-Söderbergh (2011), Lusardi (2012), Bhushan and Medury (2013a), and
Gupta and Negi (2014) which demonstrated that education has an impact in terms of financial
literacy level. These research works state that persons with lower educational levels were
bound to score low levels of financial literacy. Although we had not framed the questions that
were measuring the levels of financial literacy to measure the Islamic financial literacy
directly, we chose to use the most basic concepts to access personal understanding with
regard to the Islamic principles of Islamic finance. To our surprise, the four questions posed
were so direct in relation to Islam, but majority of the respondents disagreed with them, the
second most response was neutral, while the third most response was strongly disagreed.
This clearly demonstrated the low levels of Islamic financial literacy among the residents in
UAE and especially persons with a lower level of education which support the study done in
UAE by Hassan Al-Tamimi and Anood Bin Kalli (2009).
The employment status demonstrated a strong direct significant moderation effect on
the relationship between the level of Islamic financial literacy and bank reputation among
the unskilled laborers and the unemployed; and a weaker moderation effect among those
with technical skills and those who held managerial positions in UAE. The moderation was
much weaker for persons with technical skills compared to those who held managerial
positions. Though we did not access the difference in terms of the educational level between
the two groups, in our own opinion, we tend to believe that persons who held managerial
positions had a higher level of education compared to majority of persons who had technical
skills. This finding supports the findings of Gupta and Negi (2014) that employment status
or rather occupation has a significant influence on the level of financial literacy.
5.3 Moderation interaction between Islamic financial services marketing with the adoption
of Islamic banking model in UAE
The research revealed that Islamic financial services marketing had no direct significant
relationship with the adoption of Islamic banking model in UAE. The factor ranked last with
the least β coefficient as the determinant of bank reputation and neither did it have any
significant direct effect on the adoption of Islamic banking products and services.
This finding supports the findings of Tara et al. (2014) and Marimuthu et al. (2010) that
Islamic financial services marketing had no direct significant influence on the adoption of
Islamic banking products and services. Nevertheless, we cannot completely rule out the
indirect influence (β ¼ 0.082; p ¼ 0.023) of Islamic financial services marketing (via bank
reputation) with regard to the adoption of Islamic banking products and services in UAE.
In moderation testing, gender had a strong indirect moderation effect on the interaction Islamic
between Islamic financial services marketing (via bank reputation) with the adoption of banking
Islamic banking model in UAE. The effect was significantly stronger for females compared preferences in
to males. Gender was reported to have a moderation effect only on the relationship between
the awareness of Islamic financial services and bank reputation (see Table IV ). UAE
Age, employment status, and the type of account held had no moderation effect on the
relationship between awareness of Islamic financial services and marketing on bank 57

reputation. Nevertheless, education had a moderation effect where the effect increased with
an increase in education level.
Though no studies have been published on the moderation effect of demographic and
socio-economic(s) variables with regards to the adoption of Islamic banking products and
services in UAE, this study demonstrated that gender and employment status have a direct
effect on the relationship between the awareness of Islamic financial services and bank
reputation in UAE. This is the field that marketers and bank managers can further exploit in
order to increase the level of awareness of customers in relation to Islamic banking products
and services. Thus we agree with studies by Erol and El-Bdour (1989), Metawa and
Almossawi (1998), Rammal and Zurbruegg (2007), and Rashid and Hassan (2009) that lack
of marketing would hinder the development of majority of domestic Islamic banks.
5.4 Moderation interaction between reputations of a bank with the adoption of Islamic
banking model in UAE
Reputation of a bank was found to have a significant relationship with the adoption of Islamic
banking model in UAE. In this study, bank reputation (β ¼ 0.399) ranked the most important
determinant on the adoption of Islamic banking products and services followed by the level of
Islamic financial literacy (β ¼ 0.257) (see Figure 2). This finding contradicts Sayani and
Miniaoui’s (2013) study in UAE which found that reputation of a bank was not among the
main determinants of bank selection between the Islamic and the conventional banks. In our
study, we used random selection sampling and investigated persons who had accounts in an
Islamic bank (n ¼ 110; 49.1 percent) and conventional bank (n ¼ 114; 50.9 percent), while
Sayani and Miniaoui (2013) used convenience sampling and investigated persons who had
accounts in an Islamic bank (n ¼ 111; 45.1 percent) and conventional bank (n ¼ 135;
54.9 percent). Similarly, the current study contradicts the Marimuthu et al.’s (2010) study that
reported bank reputation was not a significant determinant in the adoption of Islamic banking
products and services in Malaysia. Therefore our finding is in support of studies by Erol and
El-Bdour (1989), Haron et al. (1994), and Tara et al. (2014) that reputation of a bank has a
significant influence on the adoption of Islamic banking model.
With regard to moderation testing, this study demonstrated that gender, age, and type of
bank account held had no moderation effect in Islamic banking in UAE. However, education
level and employment status had moderating effect. The effect was much stronger for those
with a high school level of education compared to those with less than a high school level of
education. However, as the level of education increases, the moderation effect attenuates
probably because through increased academic exposure, customers start focusing on other
factors that they feel suits their changing lifestyles. The same is reported for employment
status as a moderator. As the one advances in a job position, the moderation effect becomes
slightly stronger.
5.5 Moderation interaction between Islam (religion) with the adoption of Islamic banking
model in UAE
Religion did not have any direct significant relationship with the adoption of Islamic banking
products and services in UAE. This finding supports studies by Erol and El-Bdour (1989) and
IJBM Haron et al. (1994) that religiosity alone was not the main determinant in the adoption of
36,1 Islamic banking products and services by potential customers. In this study, religion
(β ¼ 0.213) ranked as the second most important determinant on bank reputation though it
had no direct significant effect on the adoption of Islamic banking products and services.
(see Figure 2). Even though religiosity did not have a significant direct effect in the adoption of
Islamic banking model in the UAE sample, we cannot rule out the fact that religion plays some
58 role in the adoption of Islamic banking products and services in UAE. In the current study,
religion was ranked second out of four in terms of the β coefficients on bank reputation. These
findings support the studies performed by Metawa and Almossawi (1998), Al-Tamimi et al.
(2009), Hassan Al-Tamimi and Anood Bin Kalli (2009), Sayani and Miniaoui (2013),
Abou-Youssef et al. (2015) and Souiden and Rani (2015) which reported that religiosity has an
effect in the selection of a bank.
Moderation testing between religion and the adoption of Islamic banking in UAE was
also investigated. In the current study, age, gender, possession of bank account, and the
level of education did not have any direct or indirect moderation effect on the interaction
between religion and the adoption of Islamic banking model in UAE. Nevertheless,
employment status had a weaker moderation effect on the unskilled laborers and the
unemployed. However, a strong moderation effect was reported between the technically
skilled and those who held managerial positions. This means that religiosity has a stronger
effect among those at a lower job position compared to those holding higher positions.
In reality, technically skilled persons form the largest category of persons in the job sector
compared to those holding higher job positions. Therefore, bank managers’ needs to
consider religiosity in terms of the Islamic banking products and services they plan to offer
or they are currently offering.
In summary, with regard to the studies from UAE that have been reviewed in this paper,
our current finding confirms that religion plays a significant role in the selection of Islamic
banking and the finding was similar to the studies conducted by Al-Tamimi et al. (2009),
Hassan Al-Tamimi and Anood Bin Kalli (2009), and Sayani and Miniaoui (2013) in UAE.
The current study was able to demonstrate the role of socio-demographics in the selection of
Islamic banks similar to studies conducted in UAE by Jamal and Naser (2002), Al-Tamimi
and Al-Amiri (2003), Al-Tamimi et al. (2009), and Hassan Al-Tamimi and Anood Bin Kalli
(2009). However, the current study was unique in that it was able to explore the role played
by socio-demographics further the as moderators in Islamic banking preferences in UAE.
Similarly, a majority of the studies reviewed from UAE investigated the influence of Islamic
services and products, which was supported by the strongest significant effect (β ¼ 0.226) in
the current study with respect to awareness of Islamic banking products and services.
In addition, the current study was able to investigate the direct effect of the level of Islamic
financial literacy and awareness of Islamic financial services and marketing with respect to
reputation of an Islamic bank. Similarly, the level of financial literacy had the strongest
effect on adoption of Islamic banking products and services thus confirming the role of
financial literacy as reported by Hassan Al-Tamimi and Anood Bin Kalli (2009).
6. Conclusion
The objective of this research was to assess the role played by demographics and
socio-economic(s) factors on the adoption of Islamic banking products and services in UAE.
To achieve the same, path regression analysis was employed and moderation testing using
AMOS was carried out on the randomly selected sample data collected to investigate the
interaction effect between demographic variables and adoption of the Islamic banking
model in UAE.
In summary, the current study has demonstrated the importance of socio-demographics
in the adoption of Islamic banking products and services and similarly bank reputation.
The most important factors in terms of bank reputation in UAE were: awareness of Islamic Islamic
banking products and services, followed by religion, then the level of Islamic financial banking
literacy and lastly awareness of Islamic financial services and marketing. With regard to the preferences in
adoption of Islamic banking products and services, bank reputation is the most important
determinant, followed by the level of Islamic financial literacy. Thus, marketers and bank UAE
managers can further exploit these demographic and socio-economic(s) avenues through
targeted marketing campaigns in order to increase the level of market share for Islamic 59
banks not only in UAE but in the MENA region.
7. Practical implications for the UAE Islamic banking sector

First, this study demonstrates that Islamic bank managers in UAE need to improve the
awareness about Islamic bank products and services by considering the demographic
characteristics of their potential customers. Second, effective marketing campaigns of Islamic
financial literacy need to be increased in order to attract more customers. Third, Islamic banks
in UAE should not only rely on religion to attract more customers but should bear in mind the
other important moderators explained in this study. This study had proved that religion does
not have any direct or indirect effect toward the adoption of Islamic banking products and
services as this finding has been supported by moderation testing. Fourth, Islamic bank
managers should not ignore the direct and significant relationship between the reputation of
their banks and adoption of Islamic banking model. Islamic banks with good reputations will
always attract and maintain more customers and vice versa. Lastly, Islamic bank managers
should take advantage of the role played by the demographic and socio-economic(s)
moderators to design and develop new marketing strategies to enhance their market share.
8. Theoretical implications
The finding of this study has theoretical implications for both researchers and practitioners.
Researchers can further refine and test the proposed model with regard to Islamic banking,
whereas practitioners can refine the key constructs proposed in the research model and
implement the effects of moderations on the factors influencing bank patronage in UAE.
Awareness of Islamic banking products and services, the level of Islamic financial literacy,
awareness of financial services and marketing, and religion were able to explain 40 percent of
the variance on reputation of the bank. Reputation of the bank had the strongest effect on
adoption of Islamic banking products and services in UAE. Thus, the first theoretical
contribution in this study was to demonstrate the validity of our proposed model in the context
of Islamic banking in UAE. Familiarity with the socio-demographic factors affecting Islamic
banking in UAE, considering both Islamic and conventional banks, will be helpful when
designing products and services that address the right customers’ needs. This will improve on
marketing and advertising strategies in regard to Islamic banking services and products. Thus,
the second theoretical contribution is that this study enriches the current theory-based Islamic
banking adoption studies and demonstrates the moderation effect of age, gender, employment
status, education level, and possession of a bank account on the adoption of Islamic banking.
9. Limitation of the study

Each study has its own limitations and this study is not exceptional. The majority of the
reliability scores were below 0.70. Nunnally (1978) recommends a minimum Cronbach’s α
reliability value of 0.70. This might have been caused by the use of the five-point Likert scale
which might have limited the selection of the responses by the respondent. We probably
would suggest the use of a five-point Likert’s scale in similar future studies. In the current
study, we employed only quantitative analysis. We suggest that future studies adopt the
use of a mixed-methods approach in their data collection processes. The use of a mixed-
IJBM approach method combines the elements of both the questionnaires and the interviews.
36,1 The interviews are used to cross-validate the findings of the quantitative analysis while the
interviews also provide an in-depth understanding of the findings and reveal meaningful
insights regarding possible solutions. The current study only investigated the basic
moderation testing. We recommend that future studies investigate moderation interactions,
such as the two-way and three-way interactions, to further probe the significant effects on
60 the relationships hypothesized and tested in this study. Lastly, only two items were used to
investigate the religion construct. This was done in this paper because we felt that the two
questions were best suited to investigate the basic view on Islamic banking. However, in
case one prefers to conduct structural equation modeling (SEM) on the topic as a future
research area, then we suggest that one use a minimum of three items per construct per the
basic requirement of performing SEM.
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IJBM Appendix
36,1
Author(s) Country Factors that influence Islamic banking; finding(s)
Erol et al. (1990) Jordan Availability of parking space, confidence in bank manager, mass
media advertising, external appearance of the bank, and

64 recommendations from friends and relatives had insignificant
contribution to selection of an Islamic bank. No demographic
variables were investigated
Edris (1997) Kuwait Size of bank assets, location, banking experience, Kuwaiti
ownership, Islamic banking practices, availability of branches
abroad, lending policy, reputation, range of services, innovation,
and interests on deposits. No demographics were investigated
Metawa and Almossawi Bahrain Religiosity was reported as the most important factor in selection of
(1998) Islamic banks. Awareness and usage patterns of Islamic bank
products and services were reported to be below the awareness
levels for the majority of the products and services that were
investigated. Demographic variables were investigated.
A significant relationship was reported between age and usage of
ATMs; income and usage of current account; income and usage of
investment account; income and usage of money orders/drafts;
income and investment accounts; level of education and usage of
current account; level of education and ATM cards; the number of
years of Islamic banking and the awareness of the availability of
various banking services
Naser et al. (1999) Jordan Islamic bank’s name, image, confidentiality, reputation, lack of
awareness of the meaning of specific Islamic banking terms,
religious reasons. Demographics were investigated. Nationality &
religion were insignificant factors in regards to satisfaction with
Islamic banks. Significant differences were reported between age
and efficiency of handling problems on phone; gender and
personnel advice and their proficiency
Almossawi (2001) Bahrain The five most influential factors were convenient ATM locations,
availability of ATM in several locations, bank’s reputation, 24 hours
availability of ATM services, and availability of parking space
nearby. Demographics were investigated. Significant differences
were reported between male and female on convenient ATM
locations, availability of ATM in several locations, bank’s
reputation, and 24 hours availability of ATM services. Availability
of parking space nearby was insignificant
Jamal and Naser (2002) UAE Customer service was found to be based on the delivered quality
service and customers’ experience with the service delivery process.
Demographic differences, that is, education levels and income
levels, were reported as important factors in determining the way
customers expressed their satisfaction with the bank
Hossain and Leo (2009) Qatar The five most important factors that influenced customer
perception on quality services were: Infrastructure facilities
(parking, ATM), banks network and convenience business hours,
reputation of the bank, confidentiality of accounts and transactions,
different income earning options and providing prompt information
to customers. No demographic variables were investigated
Table AI. Bizri (2014) Lebanon The five most important factors identified were: trust and
Selected studies from compliance with Sharia, customers’ familiarity with Islamic modes
the MENA region that of finance, cost of financing, accessibility of Islamic banks and
investigated factors
influencing Islamic
banking (continued )
Author(s) Country Factors that influence Islamic banking; finding(s)
Islamic
banking
quality of services offered. Demographic variables were preferences in
investigated where religion, age and employment status were able
to predict group membership for the Islamic bank clients with high UAE
significance
Abou-Youssef et al. (2015) Egypt Religiosity had an impact on consumer attitudes towards Islamic
banking. Demographic variables were investigated. Significant 65

differences were reported between: age and religiosity, gender and
religiosity, and finally between income and religiosity. The younger
ages were reported to be average in religiosity while the older ages
were more religious. Females were reported to agree and were more
neutral regarding religiosity
Souiden and Rani (2015) Tunisia Beliefs in Islamic religion and fear of divine punishment were
reported to motivate individuals to develop a positive attitude
toward Islamic banks. However, upon testing an alternative model,
religiosity was reported to have an indirect effect on purchase
intentions of Islamic bank services via attitude towards Islamic
banks. No demographic variables were investigated
Al-Tamimi and Al-Amiri UAE The relationship between service quality and SERVQUAL was
(2003) positive and significant. Empathy and tangibility were the most
important factors. Significant differences were reported on: service
quality and age; service quality and education levels; and service
quality and number of years as a bank customer
Al-Tamimi et al. (2009) UAE Islamic bank customers were not satisfied with the quality of
products and services. Customers had a positive image with Islamic
banks. Bank products were the first important factor in selection of
an Islamic bank, followed by service quality, then religion. Gender,
education, and duration of the relationship had a significance
difference on the way customers’ perceived Islamic banks
Hassan Al-Tamimi and UAE A financial level lower than the needed level was reported. Income,
Anood Bin Kalli (2009) education level, work place activity were reported to affect financial
literacy. Gender had a significant difference on financial literacy
levels. Religiosity was reported to have an influencing effect on
investment decisions
Kassim and Souiden (2007) UAE A significant relationship was reported between: image and quality
of services; image and satisfaction; image and retention; quality
services and satisfaction; quality and retention; and satisfaction and
retention. Satisfaction had a direct effect on retention; image had a
positive effect on quality, satisfaction and retention. However, the
relationship between service quality and service retention was
insignificant
Sayani and Miniaoui (2013) UAE Bank reputation and expectation of profit on deposits had no
influence on selection of an Islamic bank. Religiosity had an
influence on the selection of Islamic banks
Abduh and Othman (2014) UAE The five most Important factors that influenced Islamic banking
were: fast and efficient services, friendly personnel, Sharia
compliance banking products, location of ATM’s, and variety
of banking products and services. No demographic variables
were investigated Table AI.
IJBM Reliability
36,1 Construct Attributes score
Awareness on Islamic bank (AIBPS1) Islamic banks have not done enough marketing of 0.61
products and services (AIBPS) their products and services
(AIBPS2) I have not yet heard about Islamic banks in the 0.708
UAE
66 (AIBPS3) I do not know about the difference between Islamic 0.718

and Conventional banks
(AIBPS4) I have limited knowledge about Islamic banks’ 0.679
products and services
Level of Islamic financial literacy (LIFL1) Islamic finance does not involve in speculation and 0.658
(LIFL) uncertain transactions
(LIFL2) Islamic banks invest in ethical industries and 0.54
promote social harmony
(LIFL3) Islamic banks engage in economically and socially 0.628
beneficial projects
(LIFL4) Islamic banks use fairer financing modes that 0.63
enhance investment and risk sharing
Awareness on Islamic financial (AIFSM1) People believe Islamic banks are more expensive 0.723
services marketing (AIFSM) than conventional banks
(AIFSM2) People believe that Islamic banks in the UAE 0.724
suffer from poor service quality
(AIFSM3) Islamic banks do not explain enough about their 0.723
distinctive features
(AIFSM4) People are not convinced about the authenticity of 0.724
the products of Islamic banks
Reputation of Islamic banks (Reputation1) I believe that most of the staff in Islamic banks 0.635
(Reputation) are trained for conventional banks
(Reputation2) Staff in Islamic banks cannot fully explain 0.611
their products to the customer
(Reputation3) There are no enough credible institutions 0.621
offering Islamic finance courses in UAE
(Reputation4) The lack of well trained staff in Islamic banks 0.638
has a negative impact on their service
(Reputation5) The availability of qualified staff in Islamic 0.612
finance would greatly enhance performance
Adoption of Islamic banking (Adoption1) There is a high potential for Islamic finance in 0.691
products and services (Adoption) the UAE given its Religion and Economy
(Adoption2) Some customers of conventional banks would 0.689
switch their accounts if Islamic banks in the UAE would
offer similar services
(Adoption3) I would not use conventional banks if there 0.691
were no Islamic banks in UAE
(Adoption4) I believe if Islamic banks improved their 0.689
services they would dominate the market in UAE
Religion (Religion1) The biggest motive for me choosing an Islamic 0.503
bank is religion
(Religion2) As a Muslim I prefer an Islamic bank to 0.529
Table AII.
Measurement conventional bank everything else being equal
constructs and their Notes: AIBPS, Awareness on Islamic banks products and services; LIFL, level of Islamic financial literacy;
Cronbach’s α AIFSM, Awareness on Islamic financial services marketing; Adoption, adoption of Islamic banking products
reliability scores and services; Religion, Islam
About the authors Islamic
Dr Mohammed Hersi Warsame received his PhD Degree in Banking and Finance from the Durham banking
University, UK. Dr Warsame also holds two prestigious professional qualifications, namely, Chartered
Certified Accountant (ACCA) and Certified Islamic Professional Accountant (CIPA). Dr Warsame is preferences in
currently a Faculty Member, and the current Chairman of Department of Finance at the University of UAE
Sharjah, UAE. Dr Mohammed Hersi Warsame is the corresponding author and can be contacted at:
mhwarsame5@hotmail.com
Edward Mugambi Ireri is the Senior Research Scientist and Director at Smart Health EQAS Consultants 67
Limited company with over ten years of experience. His main interests are in multi-disciplinary research
collaborations, survey analysis, SEM, and CB-SEM modeling. Edward Mugambi Ireri is currently a
Researcher at the University of Kabianga, Kenya.
For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com

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International Journal of Bank Marketing

Moderation effect on Islamic banking preferences in UAE

*Related content and download information correct at time of download.

United Arab Emirates, and

1.1 Purpose of the study

42 socio-economic(s) factors on the adoption of Islamic banking products and services in

1.2 Hypothetical model

2. Literature review: moderation testing

44 levels of financial literacy of an individual would be influenced greatly by a combination of

3.1 Measuring the adoption of Islamic banking products and services

3.4 Measuring Islamic financial services marketing

3.5 Measuring reputation of an Islamic bank

3.6 Measuring religion

4. Data analysis and results

Frequency Percent Frequency Percent

Age Employment status

strategy of Table II. 49

4.3 Moderation testing

Fit Index combination Combinational rules UAE model indices

Reputation ← AIBPS 0.226 0.038 5.901 o0.001

Awareness on Islamic (=0.83) Adoption of Islamic

Reputation ← AIBPS 0.266 o0.001 0.141 0.034 −1.539

0.363 0.001 0.319

52 Adoption ← LIFL 0.303 0.001 0.283 0.05 −0.117

Adoption ← LIFL 0.738 o0.001 0.444 o 0.001 −1.314 53

unemployed compared to the unskilled laborers. Nevertheless, religion had a highly

54 Adoption ← LIFL 0.395 0.158 0.188 0.088 0.686

relationship between awareness of Islamic financial services and marketing on bank 57

7. Practical implications for the UAE Islamic banking sector

9. Limitation of the study

62 Marketing, Vol. 20 No. 4, pp. 146-160.

media advertising, external appearance of the bank, and

banking. Demographic variables were investigated. Significant 65

66 (AIBPS3) I do not know about the difference between Islamic 0.718

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