Community’s Potential and Preferences for Islamic Banking : the Case of Indonesia

Abstract

Islamic Banking is an increasingly important part of the Indonesian economy and finance. The competition between conventional and Islamic banks and customer demographic factors affect the performance of Islamic Banking. The purpose of this study was to analyze the potential and preferences of the community towards Islamic banking in terms of a demographic perspective consisting of four factors, namely age, income, education, and occupation. The potential and preferences of the community are proxied by the ownership of Islamic banking accounts. The study uses a sample of 620 questionnaires. The methodological approach is binary logistics regression or multinomial logistic linear regression using IBM SPSS statistics 25 software. The dependent variable (Y) is the probability of people who have an account in Islamic banking as a proxy to measure the potential and preference of Islamic banking. The independent variable (X) is several factors that affect account ownership in Islamic Banking like age, education, occupation, and income. The paper’s findings show that respondents in the segment aged less than 40 years old, in middle education, and working as entrepreneurs have a lower and significant probability of having an account in Islamic banking than respondents aged more than 40 years old, highly educated, and working in the company. There is no significant difference in the probability of account ownership in Islamic banking.