The Islamic Vehicle Financing Market in Malaysia: Identification of Factors Influencing Price Sensitivity

Jan Werner


In recent years, Islamic finance has gained increasing attention by financial corporations in countries that are marked by a considerable Muslim population. In conjunction, Malaysia’s Islamic vehicle finance market has experienced a period of rapid growth and is now maturely coexisting besides conventional vehicle financing. Nonetheless, corporations question in how far it is viable to charge a price premium for Islamic products to compensate the additional effort required. As little research is in existence about the price sensitivity of customers towards these product offerings, this study aims to examine factors that influence the price sensitivity in the Islamic vehicle financing market. Potential influencing factors were identified in literature covering Islamic banking and a model is subsequently tested by an experimental survey that was distributed within Malaysia. The study concludes that not only the belongingness to Islam is influential, but also the way of practicing the religion and the knowledge about Islamic finance. The awareness of the specific Islamic vehicle financing product makes customers less price sensitive as well as the marital status. The results of this study are beneficial to corporation who perform pricing decisions according to specific customer segments.

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