Conceptualizing the Influence of Religiosity and Islamic Financial Knowledge on Islamic Financial Behaviours

Abstract

Studies of human behaviours have been conducted extensively and continuously in order to gain better understanding on how people make decisions. For Muslims, the behaviour must not deviate from the principles, demands, and standards set by Shari’ah. In the context of financial behaviour, Muslims are significantly influenced by their religious belief, particularly in distinguishing between halal (permissible) and haram (impermissible), as well as restrictions in financial dealings. Hence, Muslims are required to have a meticulous understanding of the subjects, as Shari’ah has established distinct guiding principles in financial arrangements. This paper aims to analyse the existing Islamic financial literacy literature by conceptualizing the influence of religiosity and Islamic financial knowledge on Muslim’s financial behaviours. A literature review has been undertaken for the conceptual development. The association between Islamic financial knowledge, religiosity, and Islamic financial behaviour has been established, laying the groundwork for future research. Islamic financial knowledge and religiosity have both been demonstrated to be significant in capturing Islamic financial behaviours and are therefore indispensable components of Islamic financial literacy. This paper expands the literature by increasing our understanding of Islamic financial literacy among Muslims. The findings of this study could offer the related bodies in financial knowledge and literacy like the Organisation for Economic Co-operation and Development (OECD) for international level and local agency in Malaysia like the Credit Counselling and Debt Management Agency (AKPK) with a new perspective on Muslims’ financial behaviour, by considering the role of religion and Islamic financial knowledge in order to develop effective and relevant strategies to improve financial literacy among Muslims.