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1. Introduction
Islamic banks are gaining popularity not only in Muslim nations, but also in non-Muslim ones (Majeed and Zainab, 2017; Farooq and Zaheer, 2015). The Islamic finance industry has established financial institutions and products with the recognition of Shari’ah compliance funding. Diverse regions are nurturing Islamic banking as an alternative investment mode to cater for the bright prospect of engaging customers’ switching preferences. The industry took off in countries with large Muslim populations such as the Middle East and Asia. A comprehensive Islamic banking programme might boost the financial sector’s resilience and shock-resistance.
According to the Islamic Finance Development Report (2021), worldwide Islamic finance assets rose 14% to US$3.374tn from 2019 to 2020. By 2025, the Islamic financial business might be worth US$4.94tn. Malaysia, Indonesia and Brunei are growing their Islamic financial markets. Third in overall Islamic banking assets, Southeast Asia’s US$754bn in 2020 was 32.8% of the US$2.3tn total. Malaysia leads Southeast Asia for the second year. Bank Negara Malaysia (2020) has reported that the market share of Islamic banks in Malaysia showed solid growth from 22.7% in 2010 to 41% in 2020. Malaysia’s current trend has prompted commercial banks to operate in a dual banking system by having separate Islamic banking branches (Bank Negara Malaysia, 2022). As a result, their number of clients is rapidly expanding, encompassing a significant portion of both Muslims and non-Muslims.
Currently, Malaysia has 16 Islamic banks, of which 11 are local banks, whereas the other five are foreign banks (Amin et al., 2013). In addition, there are two foreign Islamic financial institutions. Malaysia is a multiracial country comprising 40% of non-Muslims, and traditionally, they have a prolonged preference and trust towards conventional banks (Amin et al., 2013). Over the years, Malaysian Islamic banks have widened the range of products and services in order to increase the number of non-Muslim customers (Ganesan et al., 2020), implying that Malaysians are open to diversity. Furthermore, literature published also focused on the area of non-Muslim withdrawal behaviour but not limited to Ahmad Razimi and Romle (2017), Omran et al. (2022), Saiti et al. (2022) and Grassa and Gazdar (2014).
Several researchers have used various theories to explain customers’ perceptions and satisfaction that influence switching behaviour from conventional banks...