AL-IJARAH THUMMA AL-BAY FACILITY IN LABUAN CAR MARKETS: AN APPLICATION OF STRUCTURAL EQUATION MODEL

Abstract

This paper presents the factors affecting a bank customer’s selection of Al-Ijarah Thumma Al-Bay (hereafter AITAB) facility. The study is confined to car markets only in Labuan. A structural equation model analysis was conducted to examine the link between the patronage factors and the selection of AITAB. A total of 150 bank customers were approached to elicit their responses in regard to AITAB facility. Out of these customers, only 148 were managed to be usable and valid for the further analysis of data. It is first of its kind to recommend four factors of interest to determine the selection of AITAB. The findings indicate that ‘adherence to Shariah’, ‘financial counseling available’ and ‘car dealer relationship’ were found to be significant. On the other hand, ‘pricing of the product’ was found to be insignificant determinants. The study provides a latest insight into a thinking of AITAB facility, and provides information to branch managers of Islamic banking institutions for the better future planning of AITAB facility.