Islamic Investment 2

INVESTOR SELECTION TOWARDS SHARIAH AND NON-SHARIAH COMPLIANT INVESTMENT
FATIN SYAZWANI BINTI SAFIYUDDIN
UNIVERSITI UTARA MALAYSIA 2012
INVESTOR SELECTION TOWARDS SHARIAH AND NON-SHARIAH COMPLIANT INVESTMENT
FATIN SYAZWANI BINTI SAFIYUDDIN (201045)
THIS THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE BACHELOR OF ISLAMIC FINANCE AND BANKING (HONS)
ISLAMIC BUSINESS SCHOOL COLLEGE OF BUSINESS UNIVERSITI UTARA MALAYSIA 2012
SUPERVISOR DECLARATION
I, the undersigned, certified that Fatin Syazwani binti Safiyuddin (201045) candidate for the Bachelor of Islamic Finance and Banking has presented her thesis which is Investor Selection Towards Shariah and Non-Shariah Compliant Investment have been examined and accepted as a partial fulfillment of the requirements for the award of Bachelor of Islamic Finance and Banking with Honors.
____________________________ DR. SELAMAH BINTI MAAMOR Senior Lecturer /Supervisor Islamic Business School College Of Business Universiti Utara Malaysia
Date:
STUDENT DECLARATION
I agree and full responsible that this dissertation Investor Selection Towards Shariah and Non-Shariah Compliant Investment is fully done by me. I bear full responsibility for checking whether material submitted is subject to copyright or ownership right.
___________________________________________ FATIN SYAZWANI BINTI SAFIYUDDIN (201045) Bachelor of Islamic Finance and Banking (Hons) Islamic Business School College Of Business Universiti Utara Malaysia
Date:
PERMISSION TO USE
In presenting this research paper in partial fulfillment of the requirement of my Degree in Islamic Finance and Banking from Universiti Utara Malaysia, I agree that the University Library may make in freely available for inspection. I further agree that permission for copying of this research in any manner, in whole or in part, for scholarly may be granted by my supervisor or in their absence by the Dean of College of Business. It is understood that any copying or publication or use of this research or parts thereof for financial gain shall not be allowed without my written permission. It is also understood that due recognition shall be given to me and Universiti Utara Malaysia for any scholarly use which may be made of any material from my research. Requests for permission to copy or to make other use of materials in this research, in whole or in part, should be addressed to
Dean of College of Business Universiti Utara Malaysia 06010 Sintok Kedah DarulAman
ABSTRACT
The focus of this research is to study the investor selection towards shariah compliant investment (SCI) and non-shariah compliant investment (NSCI) which considers demographic background, current investment, knowledge and perception of the respondents. Such a study is important in order to know the literature review about the history of Islamic finance and SCI, decision making and selection towards SCI and NSCI, prohibition elements in SCI and criteria to determine the SCI. The research approach adopted in this dissertation includes descriptive and cross-tab analysis. The sample of this study is 100 staff in Universiti Utara Malaysia (UUM). The findings from this research provide evidence that professionals and management group prefer to invest in SCI. In addition, lack of knowledge and information are main factors that influence investor prefer in NSCI. Researcher also found that investors have a positive perception towards the advantages of SCI, the criteria and high confidence level in SCI, however, the consciousness to choose the SCI is still low. This dissertation recommends that the educational system should be restructured and aggressive promotion should be done. Keyword: Shariah Compliant Investment (SCI), Non-shariah Compliant Investment (NSCI)
PILIHAN PELABUR TERHADAP PELABURAN YANG PATUH DAN TIDAK PATUH SHARIAH ABSTRAK
Fokus kajian ini adalah untuk mengkaji pemilihan pelabur terhadap pelaburan yang patuh dan tidak patuh shariah dengan mengambil kira faktor demografi, pelaburan semasa, pengetahuan dan persepsi responden. Kajian ini juga melihat kepada kajian-kajian lepas dan telah diklasifikasikan dari aspek sejarah kewangan islam dan pelaburan patuh shariah, proses membuat keputusan dan pemilihan terhadap pelaburan patuh dan tidak patuh shariah, unsur-unsur larangan dalam pelaburan patuh shariah dan kriteria yang diambilkira untuk menentukan status patuh shariah.Penyelidik menggunakan kaedah diskriptif dan crosstab untuk menganalisis data yang telah diperolehi dari borang kaji selidik. Penyelidik telah mengambil 100 sampel yang melibatkan staf di Universiti Utara Malaysia. Kajian telah mendapati bahawa golongan profesional dan pengurusan memilih untuk melabur dalam pelaburan patuh shariah. Selain itu, kurang pengetahuan dan maklumat menyumbang kepada pemilihan pelabur terhadap pelaburan tidak patuh shariah. Penyelidik juga mendapati bahawa pelabur memberikan persepsi yang positif terhadap kebaikan pelaburan patuh shariah, kriteria untuk membuat pelaburan dan mempunyai keyakinan terhadap pelaburan patuh shariah namun, kesedaran mereka untuk memilih pelaburan patuh shariah masih rendah. Penyelidik memberi cadangan agar penstrukturan semula sistem pendidikan dan promosi yang lebih agresif untuk memberi kesedaran kepada pelabur terhadap pelaburan patuh shariah. Kata kunci:Pelaburan Patuh Shariah, Pelaburan Tidak Patuh Shariah
ACKNOWLEDGEMENT
Thanks to Allah for his blessing, so I could accomplish this academic research within the prescribed time. Countless thanks to my supervisor, Dr Selamah bt. Maamor for her opinions, guidances, encouragements and attentions throughout this academic research. For my beloved parents, Safiyuddin b. Hj. Yusof and Fazillah bt. Megat Said in terms of motivation and financial support in completing this academic research. Last but not least, thank you to the staff of Universiti Utara Malaysia for taking their precious time to answer the questionnaires and give an opportunity to me to complete this academic research. Thank you also goes to Mr. Zamri Salleh, Hani Nabilah bt. Mazlan Ali, Siti Rahmah Yunita Abdul Rahim, Abdul Malik Abdul Rahim, Muhammad Firdaus Hj. Othman and friends who have contributed directly or indirectly during conducting this academic research.
TABLE OF CONTENTS
PAGE Supervisor Declaration Student Declaration Permission to use Abstract Abstrak Acknowledgement Table of content List of table List of exhibit abbreviations CHAPTER 1 INTRODUCTION 1.1 1.2 1.3 1.4 1.5 1.6 Introduction Problem Statement Research Objectives Significance Of The Study Scope Of The Study Organisation Of Study 7 1 4 6 7 7 x xi i ii iii iv v vi vii ix List of
CHAPTER 2 LITERATURE REVIEW 2.1 2.2 2.3 2.4 2.5 2.6 Introduction History of Islamic Finance and SCI Decision Making and Selection Towards SCI and NSCI Prohibition of SCI The Criteria To Determine The SCI Conclusion 9 9 12 14 15 18
CHAPTER 3 RESEARCH METHODOLOGY 3.1 3.2 3.3 3.4 3.5 3.6 Introduction Questionnaire Design Sampling Technique Field Work Analysis Plan Conclusion 19 19 21 21 22 23
CHAPTER 4 RESULT FINDINGS 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 Introduction Demographics Background Current Investment Knowledge Perception Demographics Background, SCI and NSCI Current Investment, SCI and NSCI Knowledge, SCI and NSCI Perception, SCI and NSCI Conclusion 24 25 26 28 29 32 33 34 36 42
CHAPTER 5 CONCLUSION AND RECOMMENDATION 5.1 5.2 5.3 Introduction Summary Of Findings Policy Implication and Recommendation 44 44 46
REFERENCES APPENDIX
-1-1-
LIST OF TABLE
PAGE Table 1.1 Table 4.1 Table 4.2 Table 4.3 Table 4.5 Table 4.6 Table 4.7 Table 4.8 Table 4.9 Table4.10 Table 4.11 Table 4.12 Table 4.13 Table 4.14 Table 4.15 List of Shariah Compliant Stocks in Bursa Malaysia Demographics Background Current Investment Knowledge Towards Basic Islamic Principles and SCI Perception of Information Perception of The Advantages of SCI Perception of Criteria to Make Investment Confidence Towards SCI Demographics Background Towards SCI and NSCI Current Investment Towards SCI and NSCI Knowledge Towards SCI and NSCI Perception of Information Advantages of SCI Criteria to Make Investment Confidence Towards SCI and NSCI 5 25 27 28 30 30 31 32 33 34 35 36 38 40 42
LIST OF EXHIBIT
PAGE Exhibit 3.1 Schematic Diagram of Research Population. 21
LIST OF ABBREVIATIONS
KLSE KLSI MESDAQ NSCI SAC SC SCI UUM Kuala Lumpur Stock Exchange Kuala Lumpur Shariah Index Exchange of Securities Dealings & Automated Quotation Bhd Non-Shariah Compliant Investment Shariah Advisory Council Securities Commission Shariah Compliant Investment Universiti Utara Malaysia
CHAPTER 1 INTRODUCTION
1.1 INTRODUCTION The world is now approaching of the second decade of the 21st century. After mid 2008, the world was jolted by a new economic crisis and financial crisis. Effects are being felt primarily the United States (U.S.) and Europe. The decline in the global financial sector are more severe than the financial crisis that hit Asia in 1997. For this moment, U.S. fear the current crisis, while at the same time the country is struggling with a serious crisis in the money market. More financial institutions are affected by the credit crunch. Therefore, on 2nd October 2008, Russian President, Dmitry Medvedev in Russian-German Development Forum said that the best way to overcome this problem was to build a new economic system which enhance the principle of multi-polar world, the rule of law and concern with the common needs. It is clear now that the banks are responsible for the decline in system that impact the world financial crisis. As French President, Nicolas Sarkozy said that "Laissezfaire was dead". The banking crisis happened because many banks create money on its own without any collateral at a much higher rate plus an increased rate of real ability development of the economy which impact the existence of bubbles. Regarding of this issue, the Former Prime Minister, Tun Abdullah Ahmad Badawi also said that Islamic financial system has the strength to face the world economic situations that cannot be expected compared to the conventional financial system.
In Malaysia, Islamic finance industry has shown a rapid transformation in recent decades. It has grown into one of the competitive component of the financial system in Malaysia and become one of the drivers of growth and development of the economy. As stated by Syed Othman Al-Habshi (1992) Malaysia, as an Islamic country has the potential to make the Islamic investment as a source that can support economic growth.
With conventional and Islamic financial system operating in tandem, Malaysia continues to foster the expansion of this sector at local and abroad. Malaysia has emerged as a country that has the most comprehensive finance in the world, supported by all components required of a financial system of Islamic banking, takaful and Islamic money market and equity, based on its own legal system and comprehensive system.
Nor Mohamed Yakcop (1996) has described the concepts and theories of Islamic finance as practiced in Malaysia. As one of the founders of Islamic financial system in Malaysia and a vast experience in this field, he felt that the Islamic financial system that consists of a variety of products and instruments must be developed and explored. Moreover, Zaharuddin (2008) said that no doubt many of the names of renowned scholars, but not all can provide the right verdict, especially in the field of modern financial instruments due to the existence of modern-instrument is a thriving and foreign transactions as referred to in scripture and classical literature. This situation definitely needs contemporary research in the field of Islamic finance. Azizi (2009) also stated that Islamic financial market conditions in Malaysia are growing rapidly, many things can be done to improve the global
competitiveness of Islamic financial products to be an important complement to the conventional system as well as the need to increase awareness among investors about the presence of Islamic products.
However, the community in Malaysia especially Muslims are still not aware of the Islamic Finance Industry subsequently affect their selection towards non-shariah compliant investment. In fact, every mukallaf has responsibility for making a choice in the daily activities based on shariah. It should also be adopted in business transactions and investment by taking into account the significance of religious as a guideline to achieve al-falah which means happiness in this world and the hereafter.
We are very curious about how individual make the decision to invest especially as a muslims investor. Therefore, we choose to study about the selection towards shariah and non-shariah compliant investment (NSCI). We believe that demographics background, current investment, level of knowledge and perception are the main factors why muslims make decision in investing non-shariah compliant investment. For example, the muslims do not know the differences between islamic and conventional investment and the consequences when they use their money which come from non-shariah compliant investment.
We want to know how far the individuals aware the consequences if they invest and take the profit from non-shariah compliant investment subsequently they are willing to take the principal amount only in returns and the remainder they will donate it. Besides, they have low level of appreciation pertaining the value of Islam in seeking of wealth and property. This occurs through culture, influenced by family and friends without realizing the main goal for the creation of man is worship to Allah.
Therefore, we believe that the knowledge of Islamic transaction especially in Islamic investment should be explored and understood for common good. The problem statements are also stated in the next section in order to explain details why we prefer to study about this topic.
1.2 PROBLEM STATEMENT In Malaysia, economy continued to grow although at a moderate pace in the first quarter of 2011 due to unstable global economic conditions. In addition, second capital market master plan was also launched on 12 April 2011 in order to create new growth opportunities more diversified. In a report released by Bank Negara Malaysia, Islamic capital markets also give a positive growth from time to time. Besides, the Treasury Department of Malaysia also stated that Malaysia is a global leader in Islamic Fund Management Industry which is in the first seven month of 2011, there was another one Islamic Fund Management companies had been approved subsequently brought up total 16 companies in this year compared to 15 companies in 2010. Islamic Unit Trust Funds also rose up from 152 funds (RM 24 billion) in 2010 to 160 funds (RM 26.4 billion) in 2011. Islamic Wholesale Funds was increased to 24 funds in 2011 compared to 19 funds in 2010. Exchange Traded Funds (ETF) was also increased from RM 579 million in 2010 to RM626 million in 2011. As stated by 25 November 2011, there are 847 listed companies in main market of Bursa Malaysia Berhad and 88% of the securities are shariah-compliant investment (SCI). It represents two-thirds of Malaysias market capitalisation. Therefore, investors have many choices to an extensive selection of shariah compliant securities across diversified industries for broader and deeper investment portfolios. Yahya and Joni (2009) had analyze the growth of the shariah compliant stocks in Bursa Malaysia as shown in Table 1.1.
Table 1.1: Shariah Compliant Stocks in Bursa Malaysia

Year The numbers of stock in Bursa Malaysia 757 796 812 885 906 963 1011 1029 991 980 The numbers of shariah compliant stocks 544 585 636 677 699 778 857 886 853 855 The numbers of shariah compliant in main board (KLSI) 278 319 364 395 436 477 508 521 513 522 The numbers of shariah compliant in secondary board 286 266 272 273 240 254 257 240 220 216 The numbers of shariah compliant in MESDAQ 9 23 47 65 125 120 117 Percentage of shariah compliant counter (%) 73 77 79 80 81 83 85 86 86 87
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
(Source: Yahya & Joni, 2009) Based on growth-promoting of the Islamic Investment has been shown, we are still wondering whether shariah-compliant investments is still not initiated by investors. We want to see in detail whether the education level of investor will make them more aware of shariahcompliant investments. In addition, we also wonder whether occupational impact for the selection of shariah or non-shariah compliant investment. Perhaps the professional and academician group are exposed about shariah-compliant investment or otherwise. We also want to see the relationship between monthly income of the investor with the selection of investment products. Moreover, probably lack of knowledge of the investor will influence them to choose non-shariah compliant investment. It is possible also lack of the basic knowledge regarding the principles of Islam itself make investor less concern with the selection of investment products. Investors may only see that shariah-compliant investment or halal in food and marriage aspects only and assume that the investment aspects as the different thing that should not be taken into consideration either it is shariah or non-shariah compliant investment. We are very curious whether the investor has a negative perception of
shariah compliant investment which is new in capital market compared to non-shariah compliant investment. Therefore, several research questions were identified based on discussion of problems and issues described above. This study will try to answer questions such as: a) Is there a relationship of demographics background of the investor that influence selection towards shariah compliant investment and non-shariah compliant investment? b) Is there a relationship of current investment of the investor that affect selection towards shariah compliant investment and non-shariah compliant investment? c) Is there a relationship of knowledge of the investor that influence selection towards shariah and non-shariah compliant investment? d) Is there a relationship of perception of the investor that influence selection towards shariah and non-shariah compliant investment? We are stated the objective of this study in the next section in order to make the study is in the line with the topic. 1.3 RESEARCH OBJECTIVES The objectives of this research are:
a) To study the relationship between the demographics background and the investor selection towards shariah compliant investment and non-shariah compliant investment. b) To study the relationship between current investment and the investor selection towards shariah compliant investment and non-shariah compliant investment. c) To study the relationship between knowledge and the investor selection towards shariah compliant investment and non-shariah compliant investment.
d) To study the relationship between perception and the investor selection towards shariah compliant investment and non-shariah compliant investment. 1.4 SIGNIFICANCE OF THE STUDY We believe that this study is important to identify the dominant factors that contribute to the selection of investors to the shariah compliant investment (SCI) and non-shariah compliant investment (NSCI). Through this study, we will get the factors that influence of the investor selection towards SCI and NSCI and the data will help the policy maker in order to make a better improvement. We sincerely hopes that it will increase the understanding of the shariah compliant investment thus bring awareness to the investor to choose shariah compliant investment. In addition, the findings of this research will help to enrich the study of Islamic finance especially in Islamic investment. Besides, this study is will be a source of reference for researcher in the future. However, the researcher has scope and limit the study because of several reasons as explained in the next section. 1.5SCOPE OF THE STUDY This study is about the investor selection towards shariah and non-shariah compliant investment. It only focusing on the demographics background, current investment, knowledge and perceptions that probably influence the investor towards shariah and nonshariah compliant investment. The population of this study involve only the staff in UUM. The study through observations and questionnaires distributed randomly to the staff in UUM only. 1.6 ORGANISATION OF STUDY This research report consisted of 5 chapter. Chapter 1 is introduction chapter which divided into 6 sections. The contents in chapter 1 is background about the global financial crisis and then,Islamic finance had been suggested to solve the crisis. The chapter also include the problem statement, objectives, significance and scope of study.
Chapter two is literature review which contains about the basic of terminologies and definition that will be easy to understand the contents. In addition, chapter two also explain where the works that have been done and related works published by other researchers in this field. The collection is from year 1992 until 2011. We also give some critics on behalf of her opinion. Chapter three about research methodology. The contents in this chapter is questionnaire design, sampling technique, field work, analysis plan and conclusion. The method using for this research also discussed in this chapter. Chapter four about the analysis of results and findings from the data collection. In this chapter, we use descriptive analysis and crosstab to analyse the result which use SPSS 16.0. Chapter five, we make a conclusion and give some recommendations regarding the investor selection towards shariah and non-shariah compliant investment.
CHAPTER 2 LITERATURE REVIEW
2.1 INTRODUCTION In this chapter, we have view previous research from other researchers regarding on the same topic which is Shariah Compliant Investment (SCI). Previous research focused their study on the SCI products, the prohibition elements in SCI products and the supervisory bodies that monitor the shariah listed company which is Shariah Advisory Council (SAC) of Securities Commission (SC). However, there is no studies found about the investor selection regarding the shariah and non-shariah compliant investment (NSCI). Most of the previous research focused their study in Malaysia. This chapter will be a guideline in order to make this research more accurate and avoiding bias. This chapter consists of 6 sections which is introduction, history of Islamic finance and SCI, decision making towards shariah and non-shariah compliant investment, prohibition in SCI and criteria to determine the SCI. The details about the history of Islamic finance and SCI will be explained in the next section. 2.2 HISTORY OF ISLAMIC FINANCE AND SCI Islamic finance has grown successfully since it first emerged in the 1970's and the core values in Islamic finance is prohibition to any activities which involve interest, gambling and speculative trading. Based on Akmal Hassan (2011), the existence of shariah-compliant investments in Malaysia date back more than four decades but it was only in the last eleven years that interest and investment in this sphere has really taken off. According to Rusniyati (2009), the development of Islamic financial system in Malaysia officially began with the establishment of Lembaga Tabung Haji in 1969. Even though it was established to meet the objectives of the Muslims community to save and invest for the
purpose of pertaining pilgrimage in Mecca, the existence of this agency shows that Malaysia is moving towards Islamic finance which provide the interest free transaction. Then, Maznah and Ain (2009) stated that the first Islamic banks namely Bank Islam Malaysia Berhad was established in 1983 developed the Islamic financial system in Malaysia. The development of Islamic financial system was expanded to the first Islamic insurance company which is Syarikat Takaful Malaysia Berhad in 1984, clarified by Nasir (2009). According to Fadhilah Mansor (2007), the development of Islamic finance followed with the developments in Islamic financial market that involve the money market and capital market. Islamic money market began in January 1994 and it was the first Islamic money market in the world at that time. According to Securities Commission websites, the Shariah Advisory Council was established in May 1996. Hashim Yahya (2002) also stated that the history started since August 1995 when Securities Commission and Islamic Instrument Study Group (KPII) are collaborated together in order to analyse the securities in KLSE which is now known as Bursa Malaysia. From that, the basic criteria and guidelines was succesfully designed to evaluate the listed securities whether it follow the shariah requirement or not. Then, Islamic Instrument Study Group was upgraded to Shariah Advisory Council of Securities Commission to announce the list of approved securities based on the Shariah principles in June 1997. It was because Islamic finance industry is a relatively new entrance to the world of finance and the operating principles differ from non-shariah compliant transaction or conventional finance which is traditionally practiced in the West.
Yahya and Joni (2009) stated that Islamic Stock Market refers to a market whether in the form of stock or on the counter market in which shares of the companys activities involved conducted in a manner that does not conflict with Islamics view and Shariah principles. He
also stated that Islamic stock market applying Islamic law in the stock market transaction in which the market is free from the elements of interest, uncertainty and gambling.
Besides, Yahya and Joni (2009) desribed that during the operational period of Islamic stock market in Malaysia, a number of Islamic stock indices have been introduced to provide the choices to the investor such as RHB Islamic Index (1996), Kuala Lumpur Shariah Index (1999), Dow Jones-RHB Islamic Malaysia Index (2005) to replace the RHB Islamic Index, FBM EMAS Shariah Index (2007) which replace the Kuala Lumpur Shariah Index and FBM Hijrah Shariah Index (2007).
Based on Yahya and Joni (2009), in order to evaluate the listed securities, the Shariah Advisory Council built the basic characteristics as a guideline. The characteristics based on primary and secondary sources. The primary sources which is refered by Shariah Advisory Council is Al-Quran and As-Sunnah. It is because, Islam encourages its followers to refer that sources to solve the problems in life. Shariah Advisory Council also use secondary sources to support their decision such as Ijma, Qiyas, Maslahah, Istihsan, Istishab, Sadd Zariah, Urf, Maqasid Syariah, Siyasah Syariiyah, Tawil, Istiqra and Talfiq which are approved by Islamic law.
In overall, the variety of shariah-compliant investment products are offered by banks and financial institution year by year. However, the investors are still not aware the existence of the products. It is probably due to negative assumptions towards shariah compliant investment. Therefore, the bank and financial institution should take the appropriate action in order to promote shariah compliant investment products and subsequently affect the investor selection towards shariah and non-shariah compliant investment.
2.3 DECISION MAKING TOWARDS SCI AND NSCI
After seeing the history of Islamic finance and shariah compliant investment, we continue to the factors that would influence an investor selection towards shariah and non-shariah compliant investment.
Several factors influence financial decision making. These factors, including past experience (Juliusson, Karlsson, & Garling, 2005), age and individual differences (Bruin, Parker, & Fischoff, 2007), belief in personal relevance (Acevedo, & Krueger, 2004), and an escalation of commitment, influence what choices people make. Understanding the factors that influence financial decision making process is important to understand what decisions are made. That is, the factors that influence the process may impact the outcomes.
In addition, according to Schmidt and Sevak (2006), from the earlier studies, it shows women invest their asset portfolios more conservatively than their male counterparts. Besides, womens investment has historically been lower than mens for several reasons, including social and various demographic concern.
Karthikeyan
(2001)
conducted research
on
Small
Investors
Perception
on
Post office Saving Schemes and found that there was significant difference among the four age groups, in the level of awareness for Kisan Vikas Patra (KVP), National Savings Scheme (NSS), and Deposit Scheme for Retired Employees (DSRE), and the Overall Score Confirmed that the level of awareness among investors in the old age group was higher than in those of young age group.
Other than demographics background, Syed Othman Al-Habshi (1992) stated the aspects of knowledge is a key factor to make an investment decision. It is shown from the perspective of history, Islam is a religion which is based on practical wisdom. In addition, Arab societies
have also been used to partnership contracts, the basic principles of contracts and business complications since the 8th century. They came to know the insurance contracts in ensuring sailing throughout the year. Then, Azizi (2009) added that they managed to do business as well as to set up various companies and make all trade agreements and in accordance with shariah compliant. However, everything is in history as Muslims currently faces two major dilemmas and that are lack of knowledge and secondly moral problems.
Syed Othman Al-Habshi (1992) also stated lack of knowledge among Muslims is seen as a major barrier to develop Islamic financial system. The Islamic products cannot be developed unless the existence of large numbers of scholars to think about this problem.
Based on Saharudin (2003), lack of expertise and knowledge in banking, takaful and shariah compliant securities are barriers in development of Islamic capital market today. This phenomenon occurs not only in Malaysia but also worldwide.
Nowadays, there is no doubt that there are various forms of literature debate on Islamic finance, especially in the aspects of shariah compliant securities investment but it is very limited. In the modern Islamic references on this problem is not found and deeply discussed and sometimes just a small topic in a book and magazine. This also can be seen in the writings of Syaban Muhammad Islam al-Burwary (2007) about Islamic Point of View in The Stock Exchange which explained the Islamic capital market industry but the explanation was still limited.
Many papers and studies discussed about Islamic financial matters which consist about shariah compliant investment, but the writing does not keep pace with the implementation as now in Malaysia exist of variety contemporary transactions and sometimes the fiqh hukm on that transaction does not specifically identified. Regarding of this issue, many people
wondered whether this investment lawful implementation in Islam and also valid. Therefore, the next section will explain details about the prohibition in shariah compliant investment.
2.4 PROHIBITION OF SHARIAH COMPLIANT INVESTMENT This subtopic is very important to clarify to understand deeply about the prohibition elements in shariah compliant investment. These prohibition elements have also been described in previous research such as Yahya and Joni (2009), Azizi (2009), Hussin Salamon (2009) and Hashim Yahya (2002). Therefore, we are very confident that this suptopic is very important to disclose. According to Hussin Salamon (2009), there are 7 prohibitions in shariah compliant investment and that are prohibition of al-tanajusy, prohibition of al-gharar, prohibition of tadlis al-aib, prohibition of al-ghabn al-fahisy, prohibition of al-ghalat, prohibition of riba and prohibition of maisir. The terms had been stated by Hussin Salamon (2009) will be detailed as below. Al-tanajusy or known as market manipulation which is normally occur in capital market especially in stock market. For example collusion between sellers and buyers who pretend to what to buy at higher prices with intention to deceive other buyers. Al-gharar means uncertainty or lack of knowledge regarding the subject matter or price in a contract of exchange. In fiqh literature term gharar is associated with risks and uncertainties in contractual agreements. For example, one is dealing with forward, futures and option trading such as a contract to buy or sell commodity and financial instrument at some date in the future. This transaction have the ambiguities or uncertainties and it is not comply with shariah principles. Tadlis al-aib is any methods employed to conceal the defects found in the goods sold in the contract of sale. Sales of goods, hire the handicapped should be returned and the contract is
made void by itself. This situation is still void even the seller do not know about the defect of the goods. Al-Ghabn means less. If any element of this done deliberately as a way of cheating to gain profit in a contract, it is forbidden in Islam whether it is done by the buyer or the seller of the contract. In conclusion, community especially investors are concern about the sources of income and in flows of money because we already have the alternative which choose the Islamic institution to deposit our money. Normally, people think of the lawful source of revenue came from work and effort without considering small matter such as where the money we saved and invested and how the transaction process. Many assumptions that we discussed in research and mass media about the Muslim community today lack of moral values but believe it or not the consequences of Muslim character because of the illegal sources of the income itself. How can we develop the pure hearts of Muslim while in their flowing blood from illegal sources and syubhah? 2.5 THE CRITERIA TO DETERMINE THE SCI After stating the prohibition of shariah compliant investment, we will explain about the criteria necessary for an investment to be classified as shariah compliant investment. These criteria determined by Shariah Advisory Council of Securities Commission to ensure that a company is meet the criteria and will be announced as a listed shariah compliant companies. As Mehdi Sadeghi (2008) stated that the selection of shariah compliant investment determined by the main activities of a financial institution or company in terms of products and services offered. Rationally, the main activity that provides opportunities to financial institution or companies subsequently distributed to shareholders in form of profits and dividend. Therefore, SAC will do a screening process based on qualitative and quantitative parameters.
The qualitative parameters use in order to evaluate the status of companies and to ensure that the companies do not involve in financial services based on riba (usury), gharar (uncertainty), maisir (gambling) and production in non-halal goods. Yahya and Joni (2009) described that the financial service based on riba as conducted by conventional financial institutions including commercial banks, finance companies and others. According to Muhammad Ayub (2007), riba means an increase, but it does not meant all things that increased considered as riba according to law jurisprudence. Based on Hashim Yahya (2002), riba has two categories which is riba al-Qurudh that occurs through debt or loan and riba al-Buyu that occurs in selling and buying transaction. In addition, Yahya and Joni (2009) mentioned that gharar normally occurs in conventional insurance and that is why the conventional insurance is prohibited in shariah compliant investment. Muhammad Ayub (2007) explained that gharar is refer to the uncertainty or hazard caused by lack of clarity regarding the subject matter or the price in a contract of exchange. A sale or any other business contract which entails an element of gharar is prohibited. According to Daud Bakar (2000), the jurists says that conventional contract is not allowed in the laws because such contracts involve the elements of uncertainty in terms of total premium and the amount of compensation received. Related to the conventional insurance issue, it contains the element of gharar in term of policyholder enters into a business deal in which his liability and the right both remain contingent. He losses the amount given as premium if the event of insurance does not occur, as in the case of general insurance. The insurer or company does not know how much he will owe to the insured. In many cases, an insured also does not know how much he will ultimately to the insurer. In life policies, a policyholder has generally to lose all premiums that he had paid if he cancels his policy within the first two or three years of the contract.
Furthermore, Yahya and Joni (2009) described that maisir such as casino and sport toto. Muhammad Ayub (2007) explained that maisir or qimar is like games of chance and it refers to easily available wealth or acquisition of wealth by chance, whether or not it deprives the others right. Last but not least, Yahya and Joni (2009) mentioned that provide non halal services or products such as pork, wine and carcass. The other prohibition elements are tobacco based products such as cigarettes, brokerage or trading securities that do not comply with shariah and other activities found that do not comply with shariah such as the practice of prostitution and immoral activities. Mehdi Sadeghi (2008) also stated that SAC considers the additional criteria for the company that involve in halal and non-halal elements such as public perception must be a good corporate image and the companys core activities give the maslahah (goodness in general) to the Muslims and state and the elements that do not comply with shariah is very small and involve umum al-balwa, urf, and the rights of Muslims who are accepted by Islam. Mehdi Sadeghi (2008) also stated that quantitative parameters are mainly used to determine the level of mixed contribution from halal and non-halal elements towards revenue and profits of the company. According to this parameter, if the contribution of non-halal elements exceed the benchmark, the company will not be classified as shariah compliant. The benchmark determined by Shariah Advisory Council of Securities Commission and further explained by Yahya and Joni (2009) is 5% to measure the level of mixed contributions from the activities that are clearly non-compliant shariah as usury, gambling, liquor and excessive entertainment. Then, 10% to measure the level of mixed contributions from activities involving umum al-balwa which is involve the most people and hard to avoid. For example interest income from fixed deposit account of conventional bank and tobacco-related activities. The benchmark cannot exceed 20% for rental receive from the activities which is not comply with shariah such as rental of premises used in gambling, liquor and pub. In
addition, 25% is used to measure the level of mixed contributions from the activities that are generally in line with shariah and have maslahah to the public, but there are other elements that may affect the status of shariah compliant activities such as operating hotels, share trading, brokerage that probably involve other activities not in line with shariah. In Malaysia, even though many studies in the Islamic finance and Islamic economics have been conducted, but there is no specifically concern about the selection of investor towards shariah and non-shariah compliant investment whereas it should be a pillar in an investment decision. Therefore, studies in this field is very important to know in order to increase the understanding about the criteria of the shariah compliant investment. Besides, this criteria will be a meaningful information to the investor in order to make an investment decision. This research could create a high personal building consequences from the exposure of the Islamic financial system especially in shariah compliant investment. 2.6 CONCLUSION Based on the literature review, shariah compliant investment which a part of Islamic Capital Market is a popular topic to discuss in the context of ilmiah compared to the other areas such as law, economic and social. However, the tendency of Islamic thinkers to discuss this issues are very limited. Mostly the presented written before this just like a legal arbiterand lead to the classical method based on the current environment. Therefore, refer back to the objective in chapter 1 which is to study the investor selection towards shariah and non-shariah compliant investment based on demographics background, current investment, knowledge and perception then the methodology that used in this research had been explained in Chapter 3.
CHAPTER 3 RESEARCH METHODOLOGY
3.1 INTRODUCTION The objective of this research is going to determine whether demographics background, current investment, knowledge and perception of investor have relationship with the investor selection towards shariah compliant investment (SCI) and non-shariah compliant investment (NSCI). In order to achieve the objective, we will use descriptive method to clarify the data collection and also use cross-tab method to analyze specifically about the findings. This chapter consists of 6 sections which are introduction, questionnaire design, sampling technique, field work, analysis plan and conclusion. We also collect data as a central part of study to gain a data. For the purpose of gaining the data, we had gathered the data through questionnaire. The questionnaire consists of four parts and that are demographics background, current investment, knowledge and perception. In sampling technique consist of the population of this research and details of sample uses. The details about the questionnaire design will be explain in the next section. 3.2QUESTIONNAIRE DESIGN According to Mohammad Najib Abdul Ghafar (1999), the questionnaire method is one of the most popular method among researchers as easily administered after the data was built. It is easily processed to analyse. It is appropriate because the respondents will have the opportunity and free to answer all the questions without any forcet. The questionnaires will be distributes to the sample as well as interviewing through face to face. A questionnaire is formalized set of question for eliciting information that will be given to 100 respondents. The respondent of this questionnaire is staffs in UUM. The questionnaire set consists 4 main sections which is demographics background, current investment, knowledge and perception.
The questions in the Section A asked about the demographics background of the respondents that include gender, age, marital status, race, education level, occupation, residence, monthly income and dependents. Then, in the Section B, the respondents will be asked about their current investment including the questions about the type of current investment whether it is shariah or non-shariah compliant investment, current investments institution, current percentage of SCI, sources of the investment, resources to invest, zakat payment and willingness for investment. Last but not least, in Section C, the respondents will be tested about the knowledge towards basic principles in Islam including the meaning of Islam, five pillars of Islam, faith pillars, prayer obligation, fasting obligation, zakat obligation and aurat obligation. The questions also ask about the basic knowledge in SCI principles such as the limitation of SCI, meaning of usury and gambling, obligation to invest in SCI, the prohibition of investment in tobacco and non-shariah compliant brokerage. Next, in Section D, the questions about the perception of respondents towards SCI. In this section, we use likert scale 1 (strongly disagree) to 5 (strongly agree) to know the perception of the investor towards shariah and non-shariah compliant investment. It consists of four parts such as part A about information, part B about the advantages of SCI, part C about the criteria to make an investment and part D about confidence level towards SCI. Please refer to the Appendix A for further details. After the questionnaire was developed, we had conducted the pilot test. A pilot test is conducted using a small of respondents with characteristic similar to the target populations. A set of 10 pretest questionnaires will be distribute to measure its reliability and validity before the actual numbers are distributed. The next section will explain about the research sampling. 3.3 SAMPLING TECHNIQUE In order to meet the objectives of this study, we get the total number of staff in Universiti Utara Malaysia (UUM) from Registrar Department of UUM. The total number of staff is
3102 from 36 departments in UUM. From this figure, we assume that only 50% of them are investors. Then, we target to collect the data from 150 respondents. However, because of time constraint and some other problems, we only get 100 respondents to answer the questionnaire and it is still appropriate according to Sekaran (2009), the rules of thumb for determine the sample size is larger than 30 and less than 500 are appropriate for most research in order to avoid the inaccurate and unreliable. The details about the research population will be explained in Exhibit 3.1 as below. Exhibit 3.1: Schematic diagram of research population
STAFF IN STAFF IN UUM UUM
9 SELECTED DEPARTMENTS 9 OF SELECTED IN UUM DEPARTMENTS IN UUM

SAMPLING FRAME
100 OF STAFF WILL BE STAFF 100 OF CHOOSE RANDOMLY WILL BE CHOOSE
RANDOMLY
SAMPLE
SUBJECT POPULATION
Sampling is
strategy
to
obtain information
about
a population of some
of
the
individuals who comprise the population (Mohd Najib Konting, 2004). According to Sekaran (2009), non-probability sampling technique refers to the elements do not have a known or predetermined chance of being selected as subjects. In addition to that, according to Malhotra (2006), probability sampling as a sampling procedure in which each element of the population has a fixed probabilities chance of being selected for the sample. 3.4 FIELD WORK The field work process consist of 5 steps include set up questionnaire, pilot test, editing questionnaire, and distribute the questionnaires. The first step began on September 2011 which have several sections related to the objective of the study. Then, the pilot test was conducted where 10 respondents with similar characteristics of the respondents was selected. The purpose is to test the understanding of the questionnaire. Then, we will make
modification based on the finding during the pilot test and the questionnaire will be tested again. Finally, the questionnaire will be distribute to the staff randomly in several departments starting on 31 October 2011. This step was conducted almost 1 month to accomplish all the questionnaire. The table below shows the timeline in field work process. Date September 2nd October 2011 11th October 2011 18th October 2011 31st October 2011 29th November 2011 3.5 ANALYSIS PLAN In overall, we use the descriptive analysis to know the frequency of demographics background, current investment, knowledge and perception to achieve the objectives of this study. In demographics background, there are 9 questions had been asked including gender, age, marital status, race, level of education, occupation, residence, monthly income and dependents. The descriptive analysis will show the frequency of the output. Because of only 100 respondents involved in this research, we do not show the percentage because it has similar figure with the frequency. In Section B, there are 8 questions about the current investment include the type of investment, investments institution, percentage of shariah compliant investment, purpose of the investment, sources, resources, zakat payment obligation and the percentage of willingness for investment. Then, in Section C, there are two parts which is knowledge towards basic Islamic principles and knowledge towards shariah compliant investment. In this part, we have to mark the answer first because some of the questions are wrong statement. In order to know the level of Description Set up questionnaire Pilot test Questionnaire editing Questionnaire testing Questionnaire distribution End of questionnaire distribution
knowledge of the respondent, we will identify the frequency of correct and wrong answer from the respondent. Last but not least, in Section D, there are four parts regarding the perception of the respondents such as information, the advantages of SCI, criteria to make an investment and confidence level. The likert scale from 1 (strongly disagree) to 5 (strongly agree) are given in this section. The frequency shows how many of respondents choose 1, 2, 3, 4 or 5. Furthermore, to analyze the relationship between demographics background of the investor, current investment, knowledge and perception towards shariah and non-shariah compliant investment, we use cross-tab method. We also use mean analysis to analyse the question in Section C and Section D to know the tendency of the investor towards shariah and nonshariah compliant investment. 3.6 CONCLUSION In conclusion, this research will analyze the investor selection towards shariah and nonshariah compliant investment which use the data of demographics background, current investment, knowledge and perception of the respondents. All the data will be analyze in SPSS 16.0 version and the statistical results will be discussed in Chapter 4.
CHAPTER 4 RESULT FINDINGS
4.1 INTRODUCTION The objective of this study is to study the relationship between demographics background, current investment, knowledge and perception of the investor selection towards shariah compliant investment (SCI) and non-shariah compliant investment (NSCI). The first objective will be analyzed by using descriptive methods while the second objective will be analyzed using cross-tab method to know the relationship between the demographics background, current investment, knowledge and perception towards shariah and non-shariah compliant investment. By using the methodology that we had explained in Chapter 3, the research objective achieved. Therefore, this chapter will elaborate in details the findings. This chapter is divided into two parts which are descriptive and cross-tab. In descriptive part consisted of demographics background, current investment, knowledge and perception. The cross-tab part consist of demographics background with shariah and non-shariah compliant investment, current investment with shariah and non-shariah compliant investment, knowledge with shariah and non-shariah compliant investment and perception with shariah and non-shariah compliant investment. The discussion is divided into 9 sections. The following section shows the descriptive analysis for analysis for demographics background including gender, age, marital status, race, level of education, occupation, residence, monthly income and dependents. The second section will discuss about the current investment and followed by the knowledge in third section. Then, section four about perception of the respondents. In section five, we make a conclusion and give some recommendations.
4.2 DEMOGRAPHICS BACKGROUND The respondents of this study are from Universiti Utara Malaysia (UUM) staff where 100 of staff was selected from the professional and management level, academicians and administration staff. The respondents from the data collection shows that most of respondent are female which are 76% compared to male only 24%. Most of the respondents age between 21-30 years old which are 44% and age between 51-60 years old is 6%. The staff in Universiti Utara Malaysia mostly married which is 79% while single is only 21%. Most of respondents are 48% in Master or PhD level and the least is 9% in STPM or Diploma level. Most of respondents work as administration staff which is 49% while 9% work as professional and management. Most of the respondents urban area in city which is 46%. Most respondents have monthly income less than RM2000 which is 43% and the least is more than RM8001 which 1%. Most of respondents have no dependents which 37% while dependents more than 10 is 4%.
Table 4.1: Demographics Background

Details Gender Female Male Age 21-30 31-40 41-50 51-60 Status Married Single Education SPM STPM/ Diploma Bachelor Degree Master/PhD 31 48 12 9 79 21 39 11 6 44 76 24 Frequency (n=100)
Occupation Administration staff Academicians Professional and Management Residence City Small Town Rural Monthly Income < RM2000 RM2001-RM4000 RM4001-RM6000 RM6001-RM8000 > RM8001 Dependents 0 1-5 6-10 >10 37 39 20 4 43 21 29 6 1 46 37 17 49 42 9
4.3 CURRENT INVESTMENT The section of current investment is the investments information of respondents in order to know which type of investment they used and preferred to use. The finding shows that most of respondent choose shariah compliant investment which are 68% and most of them choose bank to invest which is 64% compared to other financial institutions (26%). However, only 47% of the respondents confident that their investment percentage is 100% in shariah compliant investment. The purpose of the investment of the respondent mostly said that for retirement which is 80% and the least is for other purpose which is only 3%. Most of respondents got information from electronic or print media which is 70% while the least is from seminar and workshop only 8%. The resources of their investment mostly come from their saving or excessive income which is 50%. The finding of this study also found that only 43% of the respondent confident that their zakat was paid. In addition, respondents willings to invest below than 20% of their income. 84% of the
Table 4.2: Current Investment

Details Shariah Compliant Investment Non-Shariah Compliant Investment Not sure whether SCI or NSCI Institution-Bank Institution-Takaful Institution-Financial Institution Yes No Yes No Yes No Yes No Yes No Yes No 100% 80-99% 60-79% 40-59% 20-39% Yes No Yes No Yes No Yes No Yes No Yes No Yes No Yes No Yes No Electronic/ Media Print Seminar/ Workshop Friends and Relatives Saving/ Excess Income Loan Monthly Income Others Yes No Not sure <20% 21-30% 31-40% Frequency (n=100) 68 32 5 95 30 70 64 36 44 56 26 74 47 5 15 25 8 80 20 53 47 31 69 7 93 24 76 6 94 57 43 4 96 3 97 70 8 22 50 7 42 1 43 25 32 84 9 7
Percentage of SCI
Purpose-Retirement Purpose-Children Education Purpose-Land, Property Purpose-Business Capital Purpose-Financial Freedom Purpose-Protect from Inflation Purpose-Dividend Purpose-Not sure Purpose-Others Sources of Information
Resources
Zakat payment
Willingness to invest
4.4 KNOWLEDGE This section shows the level of respondents knowledge towards basic principles of Islam and knowledge about the basic principles of SCI. We had marks the questionnaire first in order to know the correct and wrong answers given by respondents. The highest mean shows the failure of respondents to answer correctly. Based on the Table 4.3, the report found that most of respondents cannot answer the question about the meaning of gambling correctly (mean 1.85). Moreover, all the respondents correctly answered the question about 5 pillars of Islam, fasting obligation and aurat obligation (mean 1.00). Table 4.3: Knowledge Towards Basic Principles in Islam and SCI
NO ITEM
Frequency (n=100)
MEAN
1 Gambling is the interest rate is guaranteed for an investment made
Correct Wrong Not sure
25 65 10 16 84 0 36 64 70 11 19 72 28 84 8 8 1.24 1.28 1.49 1.64 1.84 1.85
2 Usury is a bet to get a profit
3 The fifth pillar of Faith is pilgrimage
Correct Wrong
4 Production and sale of tobacco products is not allowed in Islam 5 Islam means peaceful
Correct Wrong Not sure Correct Wrong
Brokerage and trading of securities are not prohibited in the Islamic shariah compliant
Shariahcompliant investments arenot limited to Muslims only
Correct Wrong Not sure Correct Wrong Correct Wrong
91 3 6 86 1.14 14 97 1.03 3 99 1.01 1 100 1.00 0 100 0 100 0 1.00 1.00 1.15
Muslims must pray 17 rakaat per day
9 Muslims are encouraged to help the poor through zakat 10 Muslims must choose shariahcompliant investment 11 Muslims fasting during Ramadhan
Correct Wrong Correct Wrong
12
Muslims who have reached puberty mustcover his/ her aurat
Correct Wrong Correct
13 There are 5 pillars of Islam
Wrong
4.5 PERCEPTION This sections consists of four parts which are information towards basic Islamic principles, advantages of shariah compliant investment, criteria to make investment and confidence towards shariah compliant investment. The details of information as below. A) INFORMATION Table 4.4shows the level of information towards shariah compliant investment. There are 3 questions asked. The result found that most of the respondents do not have much information about shariah compliant investment because the tendency of them in choosing disagree according to likert scale given. The highest mean shows that the respondents have a lot of information of the items asked. Most of the respondents have adequate information about SCI which represent the mean
2.96. Moreover, most of respondents have adequate information regarding the differences between SCI and NSCI which represent the mean (2.84). Most of respondents have adequate information on elements do not comply with shariah (mean 2.76). Table 4.4: Perception of Information
No 1 2 Items I have a lot of information about SCI I have a lot of information about the differences between SCI and NSCI I have a lot of information on elements that do not comply with shariah 1 2 3 4 5 MEAN
15 15 16
21 30 29
31 25 25
19 16 23
14 14 7
2.96 2.84 2.76
*n=100 B) ADVANTAGES OF SCI Table 4.5 shows the level of advantages towards shariah compliant investment. There are 7 questions asked. The highest mean shows that the respondents agree with the items asked to them. Most of respondents are strongly agree when asked whether SCI is free from the interest (mean 4.58). The least of respondents agree about the statement of SCI can reduce the unemployment rate with represent the mean (3.82). Table 4.5: Perception of the Advantages of SCI
No 1 2 3 4 5 6 7 Items 1 0 0 0 6 0 0 6 2 0 0 7 0 7 11 0 3 7 1 1 5 3 9 27 4 28 42 27 32 42 39 40 5 65 57 65 57 48 41 27 MEAN 4.58 4.56 4.50 4.34 4.31 4.10 3.82
SCI is free from the interest SCI could help economic growth SCI can increase social welfare SCI can increase the norms of personal and family SCI guarantees a safe investment SCI will diversify the financial portfolio SCI can reduce the unemployment rate *n=100
C) CRITERIA TO MAKE INVESTMENT The study also tries to identify the most important criteria that convince the respondents to take into their consideration in making an investment. The result found that most of the respondents would choose only a safe investment which mean 4.42. Another criteria of concern is respondents would prefer SCI products only which mean 4.41. The criteria that are rarely given attention is respondents would select investment based on advertising only which mean 2.37 and respondents would invest if they are pressured by family which mean 2.28. The details show in Table 4.6 as below. Table 4.6 : Perception of Criteria To Make Investment
No 1 2 3 Items 1 0 0 0 0 2 0 8 6 4 3 15 4 7 22 4 28 27 33 23 5 57 61 54 51 MEAN 4.42 4.41 4.35 4.21
4 5
7 8 9
10 11 12 13
I will choose only a safe investment I would prefer SCI products only I will choose the financial institution that has a good image and performance only I will choose investments that provide high returns only I will choose the FI / investment company that has been approved by the Securities Commission Shariah Advisory Council only I will choose the investment of institutional services quickly and efficiently only I will invest only if there is extra money I will diversify my investment products I will choose the financial institution serving customers with a friendly and good manner only I will choose a low-risk investment I will select investments based on the views of my friends and family I will select investments based on advertising only I will invest if pressured by family *n=100
12
12
30
46
4.10
0 6 3
1 4 10
31 20 18
26 36 41
42 34 28
4.09 3.88 3.81
9 6 20 28 39
20 19 24 27 18
13 34 21 28 24
29 14 18 14 14
29 27 17 3 5
3.49 3.37 2.88 2.37 2.28
D) CONFIDENCE TOWARDS SCI This section explains about confidence level of the respondents towards shariah and nonshariah compliant investment. There are four questions asked. According to this table, most of the respondents are strongly agree with the statement of SCI is stronger in the market which mean 4.00. Besides, most of the respondents have high confidence in SCI in the market today which mean 3.98. Another report found that most of the respondents are strongly agree to accept lower returns as long as SCI which mean 3.63. The least of respondents disagree with the statement ensuring that SCI returns to be gained must be equal to the NSCI returns which mean 2.81. Table 4.7 : Confidence Towards SCI
No 1 2 3 4 Items 1 0 2 11 3 16 4 35 5 38 4.00 4 2 15 19 6 23 29 26 46 30 3.98 3.63 MEAN
For me, SCI is stronger in the market I have high confidence in SCI in the market today I am willing to accept lower returns as long as SCI I will ensure that SCI returns to be gained must be equal to the NSCI returns *n=100
23
22
20
21
14
2.81
4.6 DEMOGRAPHICS BACKGROUND, SCI AND NSCI This sections explains about the demographics background of the respondents towards shariah and non-shariah compliant investment. According to the Table 4.9, it shows thatmost of respondentswhich invest in SCI are Master or PhD holders (41%), are working as anadministration staff (54%) and having monthly income below than RM2000 (44%). Meanwhile, most of respondents which invest in NSCI are Master or PhD holders (63%), are working as an academicians (63%) and having monthly income between RM4001-RM6000 (47%).
Table 4.8: Demographics Background Towards SCI and NSCI

NO ITEM SCI NSCI
n=68
%
14.8 11.76 32.35 41.18 13.24 32.35 54.41 44.12 27.94 20.59 5.88 1.47
n=32
2 1 9 20 0 20 12 13 2 15 2 0
%
6.25 3.13 28.13 62.5 0 62.5 37.5 40.62 6.25 46.88 6.25 0
1 Level of Education
SPM STPM/ Diploma Bachelor Degree Master/ PhD
10 8 22 28 9 22 37 30 19 14 4 1
2 Occupation
Professional and Management Academicians Administration Staff
<RM2000 RM2001-RM4000 Monthly Income RM4001-RM6000 RM6001-RM8000 >RM8001
4.7 CURRENT INVESTMENT, SCI AND NSCI This section shows the current investment information of the respondents towards shariah and non-shariah compliant investment. Table 4.9 shows that most of the respondents which invest in SCI are choosing insurance or takaful companies as an investment institution (59%), 69% are confident that their percentage of SCI is 100%. Besides, they gain knowledge about their investment from electronic or print media (62%) and confidents that their zakat was paid (49%). While in NSCI, most of respondents are choosing bank as an investment institution (84%) and 47% confident that their percentage of SCI is only 40-59%. Moreover, they gain knowledge about their investment from electronic and print media (88%) and confidents that their zakat was paid (31%).
Table 4.9: Current Investment Towards SCI AND NSCI

NO ITEM SCI NSCI
n=68
%
54.41 45.59 58.82 41.18 30.88 69.12 69.12 7.35 8.82 14.7 0 61.76 30.88 7.35 48.53 27.94 23.53
n=32
27 5 4 28 5 27 0 0 9 15 8 28 1 3 10 6 16
%
84.38 15.63 12.5 87.5 15.63 84.38 0 0 28.13 46.88 25 87.5 3.13 9.38 31.25 18.75 50
Bank
Yes No Yes No Yes No
37 31 40 28 21 47 47 5 6 10 0 42 21 5 33 19 16
Investment Institution
Insurance companies/ takaful
Financial Institution 2 100% 80-99% Percentage SCI 60-79% 40-59% 20-39% 3 Sources Electronic media/ print Friends and Relatives Seminar/ workshop 4 Zakat Yes No Not sure 4.8KNOWLEDGE, SCI AND NSCI
This section shows the level of respondents knowledge towards basic princples of Islam and knowledge about the basic principles of SCI in order to know whether the level of knowledge affecting their choice in making investment. Table 4.10 shows that most of respondents which invest in SCI are wrongly answer about the meaning of gambling (60%) and 81% are wrongly answer about the meaning of usury. While most respondents which invest in NSCI are wrongly answer about the meaning of gambling (75%) and 91% are wrongly answer the meaning of usury and the pillar of faith.
All the respondents which invest in SCI and NSCI are correctly answer the question about fasting obligation, aurat obligation and five pillars of Islam. Table 4.10: Knowledge Towards SCI and NSCI
NO ITEM
SCI
NSCI
n=68
% 29.41 60.3 10.29 19.12 80.88 0 48.53 51.47 61.76 10.29 27.94 64.71 35.29 82.35 5.88 11.76 86.76 4.41 8.82 79.41 20.59 0 95.59
n=32 5 24 3 3 29 0 3 29 28 4 0 28 4 28 4 0 32 0 0 32 0 0 32
% 15.63 75 9.38 9.38 90.63 0 9.38 90.63 87.5 12.5 0 87.5 12.5 87.5 12.5 0 100 0 0 100 0 0 100
1 Gambling is the interest rate is guaranteed for an investment made
20 41 7 13 55 0 33 35 42 7 19 44 24 56 4 8 59 3 6 54 14 0 65
2 Usury is a bet to get a profit
3 The fifth pillar of Faith is pilgrimage
Correct Wrong
4 Production and sale of tobacco products is not allowed in Islam 5 Islam means peace
Brokerage and trading of securities are not prohibited in the Islamic shariah compliant
Correct Wrong Not sure Correct
7 Shariah-compliant investments are not limited to Muslims only 8 Muslims must pray 17 rakaat per day
Wrong Not sure Correct Wrong Not sure
Muslims are encouraged to help the
Correct
poor through zakat
Wrong Not sure
3 0 68 0 0 68 0 68 0 68 0
4.42 0 100 0 0 100 0 100 0 100 0
0 0 31 1 0 32 0 32 0 32 0
0 0 96.88 3.13 0 100 0 100 0 100 0
10 Muslims must choose shariahcompliant investment 11 Muslims fasting during Ramadhan
12
Muslims who have reached puberty mustcover his/ her aurat
Correct Wrong Correct
13 There are 5 pillars of Islam
Wrong
4.9 PERCEPTION, SCI AND NSCI This section consists of four parts which is perception of the information, perception of the advantages of shariah compliant investment, perception of the criteria to make investment and perception of the confidence towards shariah compliant investment. A) INFORMATION This section shows the perception in the level of information towards shariah compliant investment. The result found that most of the respondents do not have much information about shariah compliant investment because the tendency of them in choosing near to strongly disagree according to likert scale given. Most of respondents which invest in SCI, 33% are in the third level in terms of information towards SCI, 28% are near to strongly disagree in terms of the differences between SCI and NSCI. Moreover, 26% are near to strongly disagree towards information on elements that do not comply with shariah.
While most of the respondents which invest in NSCI, 34% are near to strongly disagree towards the information about SCI, the differences between SCI and NSCI (34%) and the elements that do not comply with shariah (34%). Table 4.11: Perception of Information
No 1 Items 1 SCI n=68 % NSCI n=32 % SCI n=68 % NSCI n=32 % SCI n=68 % n=32 %
9 13.24 6 18.75 9 13.24
2
10 14.71 11 34.38 19 27.94
3
23 33.82 8 25 17 25
4
14 20.59 5 15.63 11 16.18
5
12 17.65 2 6.25 12 17.65
I have a lot of information about SCI
I have a lot of information about the differences between shariah and nonshariah compliant investment
6 18.75 10 14.71 6 18.75
11 34.38 18 26.47 11 34.38
8 25 17 25 8 25
5 15.63 17 25 6 18.75
2 6.25 6 18.75 1 3.13
I have a lot of information on elements that do not comply with shariah NSCI
B) ADVANTAGES OF SCI This section shows the perception of the advantages towards shariah compliant investment in order to know whether the perception affecting the respondents choice towards SCI and NSCI. Based on the Table 4.12, most of the respondents which invest in SCI, 69% are strongly agree that SCI is free from the interest, 56% are strongly agree that SCI could help economic growth and 65% are strongly agree that SCI can increase social welfare. Furthermore, most of respondents which invest in SCI are strongly agree that SCI can increase the norms of personal and family (57%) and guarantees a safe investment (50%). They also strongly agree that SCI will diversify the financial portfolio (43%) and 38% are in the third level in terms of SCI can reduce the unemployment rate.
Meanwhile, most of respondents which invest in NSCI, 56% are strongly agree that SCI is free from the interest, 59% are strongly agree that SCI could help economic growth and 65% are strongly agree that SCI can increase social welfare. Moreover, most of respondents which invest in NSCI are strongly agree that SCI can increase the norms of personal and family (56%) and near to strongly agree in terms of guarantees a safe investment (47%). They also near to stronglyagree that SCI will diversify the financial portfolio (53%) and SCI can reduce the unemployment rate (56%). Table 4.12: Advantages of SCI
No 1 Items 1 SCI n=68 % NSCI n=32 % SCI n=68 % NSCI n=32 % 3
0 0 0 0 0 0 0 0 0 0 0 0 6 8.82 0 0 0 0 0 0
2
0 0 0 0 0 0 0 0 6 8.82 1 3.13 0 0 0 0 4 5.88 3 9.38
3
7 10.29 0 0 1 1.47 0 0 1 1.47 0 0 5 7.35 0 0 3 4.41 0 0
4
14 20.59 14 43.75 29 42.65 13 40.63 17 25 10 31.25 18 26.47 14 43.75 27 39.71 15 46.88
5
47 69.12 18 56.25 38 55.88 19 59.38 44 64.71 21 65.63 39 57.35 18 56.25 34 50 14 43.75
SCI is free from the interest
SCI could help economic growth
SCI can increase social welfare
SCI n=68 % NSCI n=32 %
SCI can increase the norms of personal and family
SCI guarantees a safe investment
SCI n=68 % NSCI n=32 % SCI n=68 % NSCI n=32 %
SCI will diversify the financial portfolio
0 0 0 0 3 4.41 3 9.38
8 11.76 3 9.38 0 0 0 0
9 13.24 0 0 26 38.24 1 3.13
22 32.35 17 53.13 22 32.35 18 56.25
29 42.65 12 37.5 17 25 10 31.25
SCI can reduce the unemployment rate
C) CRITERIA TO MAKE INVESTMENT This section details the perception of the criteria to make an investment in order to know whether the perception of the criteria to make investment affect the selection of the respondents towards SCI and NSCI. According to the Table 4.13, most of the respondents which invest in SCI, 58% are strongly agree that they will choose only a safe investment and 71% are strongly agree that they will prefer SCI products only. Besides, most of respondents which invest in SCI, 51% are strongly agree that the criteria should be concern is the good image and performance of the financial institution and the investments that provide high returns only. Most of respondents which invest in SCI are strongly disagree that they will invest if they have been pressured by family (32%). While most of respondents which invest in NSCI, 53% are strongly agree that they will choose only a safe investment, prefer SCI products only (41%) and choose the good image and performance of the financial institution (59%). Furthermore, most of respondents which invest in NSCI, 50% are strongly agree that they will choose the investments that provide high returns only and most of respondents are strongly disagree that they will invest if they have been pressured by family (53%).
Table 4.13: Criteria For Making Investment Items

No Items 1 I will choose only a safe investment 1 0 SCI n=68 0 % 0 NSCI n=32 0 % 0 SCI I would prefer SCI products only n=68 0 % 0 NSCI n=32 0 % 0 SCI I will choose the financial institution n=68 that has a good image and performance only 0 % 0 NSCI n=32 0 % 0 SCI I will choose investments that provide high n=68 returns only 0 % 0 NSCI n=32 0 % 0 SCI I will choose the n=68 financial institution / investment company that 0 % has been approved by 0 NSCI the Securities Commission Shariah Advisory n=32 Council only 0 % 0 SCI I will choose the investment of institutional n=68 services quickly and efficiently only 0 % 0 NSCI n=32 0 % 4 SCI I will invest only if there is extra money n=68 5.88 % 2 NSCI n=32 6.25 % 2 SCI I will diversify my investment products n=68 2.94 % 1 NSCI n=32 3.13 % 8 SCI I will choose the financial institution serving n=68 customers with a friendly only. 11.76 % 2
0 0 0 0 1 1.47 7 21.88 6 8.82 0 0 4 5.88 0 0 6 8.82 6 18.75 1 1.47 0 0 4 5.88 0 0 5 7.35 5 15.63 8 11.76
3
15 22.06 0 0 4 5.88 0 0 7 10.29 0 0 19 27.94 3 9.38 7 10.29 5 15.63 23 33.82 8 25 17 25 3 9.38 12 17.65 6 18.75 7 10.29
4
13 19.12 15 46.88 15 22.06 12 37.5 20 29.41 13 40.63 10 14.71 13 40.63 18 26.47 12 37.5 20 29.41 6 18.75 18 26.47 18 56.25 29 42.65 12 37.5 20 29.41
5
40 58.82 17 53.13 48 70.59 13 40.63 35 51.47 19 59.38 35 51.47 16 50 37 54.41 9 28.13 24 35.29 18 56.25 25 36.76 9 9.38 20 29.41 8 25 25 36.76
10
I will choose a low-risk investment
11
I will select investments based on the views of my friends and family
12
I will select investments based on advertising only
13
I will invest if pressured by family
NSCI n=32 % SCI n=68 % NSCI n=32 % SCI n=68 % NSCI n=32 % SCI n=68 % NSCI n=32 % SCI n=68 % NSCI n=32 %
1 3.13 3 4.41 3 9.38 11 16.18 9 28.13 15 22.06 13 40.63 22 32.35 17 53.13
12 37.5 7 10.29 12 37.5 18 26.47 6 18.75 20 29.41 7 21.88 13 19.12 5 15.63
6 18.75 34 50 0 0 15 0.22 6 18.75 25 36.76 3 9.38 21 30.88 3 9.38
9 28.13 9 13.24 5 15.63 11 16.18 7 21.88 5 7.35 9 28.13 7 10.29 7 21.88
4 12.5 15 22.06 12 37.5 13 19.12 4 12.5 3 4.41 0 0 5 7.35 0 0
D) CONFIDENCE TOWARDS SCI This section shows the perception in the level of confidence towards shariah compliant investment. According to the Table 4.14, most of the respondents which invest in SCI are strongly agree that SCI is stronger in the market (40%) and 41% and are strongly agree that they have high confidence in SCI in the market today.Besides, 32% are strongly agree that they are willing to accept lower returns as long as SCI. 29% are in the third level in terms of ensuring the SCI returns to be gained must be equal to the NSCI returns. While most of the respondents which invest in NSCI, 34% are strongly agree that SCI is stronger in the market, 56% are strongly agree that they have high confidence in SCI in the market today and 31% are near to strongly disagree that they are willing to accept lower returns as long as SCI. Besides, 44% of the respondents are near to strongly agree that they will ensure the SCI returns to be gained must be equal to the NSCI returns.
Table 4.14: Confidence Towards SCI

No 1 Items 1 SCI n=68 % NSCI n=32 % SCI n=68 % NSCI n=32 % SCI n=68 % NSCI n=32 % SCI n=68 % NSCI n=32 %
0 0 0 0 1 1.47 3 9.38 0 0 2 6.25 18 26.47 5 15.63
2
6 8.82 5 15.63 13 19.12 2 6.25 9 13.24 10 31.25 19 27.94 3 9.38
3
10 14.71 6 18.75 6 8.82 0 0 17 25 6 18.75 20 29.41 0 0
4
25 36.76 10 14.71 20 29.41 9 28.13 20 29.41 6 18.75 7 10.29 14 43.75
5
27 39.71 11 34.38 28 41.18 18 56.25 22 32.35 8 25 4 5.88 10 31.25
For me, shariah compliant investments is stronger in the market
I have high confidence in Shariah compliant investments in the market today I am willing to accept lower returns as long as Shariah compliant investment I will ensure that SCI returns to be gained must be equal to the NSCI returns
4.10 CONCLUSION As a conclusion, there are 100 respondents. All respondents were
testedquestionnaires on 3 sections which is current investment, knowledge towards basic Islamic principles and SCI principles and perception. Overall, most of respondents choose to invest in bank and gain the information from electronic media or print. Besides, respondents are lack of knowledge towards SCI principles and they cannot answer the questions about basic principles of Islam correctly. However, most of the respondents admit the advantages of SCI and they have high confidence level towards SCI. Besides, from the cross-tab analysis, it shows that most of respondents which invest in SCI are having the highest level of education and they are choosing insurance or takaful companies as an investment institution. Furthermore, most of respondents
which invest in SCI and NSCI gain the information from electronic and print media and they are lack of knowledge and information towards SCI. Most of respondents which invest in SCI are strongly agree that they will prefer SCI products only while the respondents which invest in NSCI are strongly agree that they will choose the financial institution that has good image and performance only.Finally, all the findings will be concluded and some policy implication also suggestion details regarding this topic had been described in Chapter 5.
CHAPTER 5 CONCLUSION AND RECOMMENDATION

5.1 INTRODUCTION This chapter will conclude this study from chapter 1 to chapter 4 and subsequently further to policy implication. The objective of this paper is to study the relationship between demographics background, current investment, knowledge and perception of the investor selection towards shariah and non-shariah compliant investment. From the previous research, many of researchers only discussed about the criteria to determine the status of shariah compliant investment without considering the investor selection towards shariah and nonshariah compliant investment. Therefore, we are very interested in understanding the factors that influence the selection of the investor towards shariah and non-shariah compliant investment. To study the selection of the investor, we used descriptive analysis and cross-tab as explained in the chapter 3 and the details of findings in chapter 4. Besides, this chapter will also suggests the recommendation to the policy maker and
financial institution in order to enhance the investor selection towards shariah compliant investment. The next section will discuss about the summary of findings. 5.2 SUMMARY OF FINDINGS The findings in chapter 4 shows that, the respondents which have high level of education are more exposed to the investment. However, most of them invested in non-shariah compliant investment. Besides, the findings also shows that most of respondents are not alert whether the zakat from their investment were paid or not. According to the result, only 48.5% of the respondents who invest in shariah compliant investment confident that their zakat were paid. According to the findings, most of the respondents are lack of knowledge in basic principles of Islam and shariah compliant investment principles. Most of respondents are unable to
answer correctly about the pillars of faith, meaning of Islam, prayer obligation, zakat and the obligation to choose the shariah compliant investment. The report shows that all respondents can answer the fasting obligation, aurat obligation and five pillars of Islam correctly. It means that the respondents only alert the things that occur around them. The respondents also cannot understand the correct meaning of gambling and usury. It means that the respondents do not know the meaning or difference of these two terms. Moreover, the respondents are still confused about the investment in the production and sale of tobacco products. From this finding, it also shows that most of the respondents who are wrongly answered the questions about the definition of gambling,usury and others invested in nonshariah compliant investment. In other words, lack of knowledge of the respondents affect their decision in making investment. Probably, the respondents only think that investment is not a part of ibadah and therefore they do not care whether the investment is comply with shariah or not, instead of food that always all people realize to choose only the halal food. In addition, the findings show that most of respondents are confused regarding the information of shariah compliant investment, the difference between shariah and non-shariah compliant investment and the elements that do not comply with shariah. It means, even though they choose shariah compliant investment, it is not the decision that come from their pure heart. According to the findings, most of respondents realize the advantages of shariah compliant investment is free from interest. Besides, shariah compliant investment could help the economic growth and shariah compliant investment can enhance the social welfare. It means that this is the best time to promote shariah compliant investment in this area. The findings shows that safe investment is most priority in making an investment.
Rationally, safe investment is important to attract the investor to invest. The second criteria is the respondents prefer shariah compliant investment. It means that the shariah compliant
investment is acceptable nowadays. The respondents also choose the financial institution that has a good image and performance only. This criteria is important in order to reduce the risk of loss. According to the findings, most of respondents agree about shariah compliant investment is more stronger in the market and they are highly confidence in shariah compliant investment in the market today. It means, the respondents realize about shariah compliant investment is the best way to solve the financial crisis in the middle of 2008. For overall evaluation, there is a relationship between demographics background, current investment, knowledge and perception towards shariah and non-shariah compliant investment. The objectives of this study are successfully achieved. 5.2 POLICY IMPLICATION AND RECOMMENDATION Based on the findings of this research, an improvement should be implemented in order to increase the investor awareness towards shariah and non-shariah compliant investment. It is important to build a free-interest financial system especially in investment. Here are some of the recommendation that should be considered by government as a policy regulator and other financial institution. First, a transformation for educational system should be implemented. Apart from providing academic instruction through educational syllabus, other curriculum in religious aspects need to be increased. This is important because as seen in chapter 4, most of respondents who are higher educational level invested in non-shariah compliant investment. It means that even though they are excellent in studies in their field, they are still lack in terms of religious knowledge. Therefore, a new syillabus should be restuctured in order to build not only an expert person in their field only but also meet the demands of their religious and subsequently make them are very aware about the investment product selection before they invest. Besides, most of respondents are still unable to answer the question relating to the basic Islamic
principles. If the educational syllabus is not emphasized about the demands of religious, awareness and knowledge of the religion of Islam itself getting lost subsequently the investor will be greedy to generate the income without identifying the sources of money is permissible in Islam. Furthermore, the other suggestion is to provide more information towards shariah and nonshariah compliant investment. Based on findings, most of respondents are lack of information. Therefore, to overcome this problem, information about shariah compliant investment should be given to public, especially to muslims. Electronic media is the best way to promote the shariah compliant investment because from the findings, most of respondents got information from that medium. Next, the continuous promotion should be done. As we know, promotion is the best way to introduce the new products in order to increase the information about shariah compliant investment. The promotion can be done from time to time in the places that visited by many people such as shopping centers, colleges, goverment offices, non-govermental organizations and others. The information also should be provided by an easy access system and one regulation company will monitor the system to make the information can be spread quickly and accurately. In addition, this study found that most of respondent realize about the advantages of shariah compliant investment but their selection of non-shariah compliant investment is still high. Therefore, the financial instituion and banking sector which offer shariah compliant investment products should make a program such as seminar or workshop to explain about the importance of shariah compliant investment deeply. The financial institution and bank need to make a better plan of action to promote shariah compliant investment product is not offered for fun but it is an alternative to provide an opportunity to generate the income in Islamic way. This step is in line with a goal of Islam is not only to have the wealth but simply having the wealth to ummah. Moreover, investors should realize that even though shariah
compliant investment sometimes offer the low return investment, it is considered as a jihad if they are willing to invest in shariah compliant investment with the intention to help the growth of shariah compliant investment.
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INVESTOR SELECTION TOWARDS SHARIAH AND NON-SHARIAH COMPLIANT INVESTMENT

FATIN SYAZWANI BINTI SAFIYUDDIN

UNIVERSITI UTARA MALAYSIA 2012

INVESTOR SELECTION TOWARDS SHARIAH AND NON-SHARIAH COMPLIANT INVESTMENT

FATIN SYAZWANI BINTI SAFIYUDDIN (201045)

ISLAMIC BUSINESS SCHOOL COLLEGE OF BUSINESS UNIVERSITI UTARA MALAYSIA 2012

Table 1.1: Shariah Compliant Stocks in Bursa Malaysia

CHAPTER 2 LITERATURE REVIEW

2.3 DECISION MAKING TOWARDS SCI AND NSCI

CHAPTER 3 RESEARCH METHODOLOGY

STAFF IN STAFF IN UUM UUM

9 SELECTED DEPARTMENTS 9 OF SELECTED IN UUM DEPARTMENTS IN UUM

100 OF STAFF WILL BE STAFF 100 OF CHOOSE RANDOMLY WILL BE CHOOSE

CHAPTER 4 RESULT FINDINGS

Table 4.1: Demographics Background

Table 4.2: Current Investment

1 Gambling is the interest rate is guaranteed for an investment made

Correct Wrong Not sure

25 65 10 16 84 0 36 64 70 11 19 72 28 84 8 8 1.24 1.28 1.49 1.64 1.84 1.85

2 Usury is a bet to get a profit

Correct Wrong Not sure

3 The fifth pillar of Faith is pilgrimage

Correct Wrong Not sure Correct Wrong

Correct Wrong Not sure

Shariahcompliant investments arenot limited to Muslims only

Correct Wrong Not sure Correct Wrong Correct Wrong

Muslims must pray 17 rakaat per day

Correct Wrong Correct Wrong

Muslims who have reached puberty mustcover his/ her aurat

Correct Wrong Correct

13 There are 5 pillars of Islam

2.96 2.84 2.76

4.09 3.88 3.81

3.49 3.37 2.88 2.37 2.28

Table 4.8: Demographics Background Towards SCI and NSCI

SPM STPM/ Diploma Bachelor Degree Master/ PhD

Professional and Management Academicians Administration Staff

<RM2000 RM2001-RM4000 Monthly Income RM4001-RM6000 RM6001-RM8000 >RM8001

Table 4.9: Current Investment Towards SCI AND NSCI

Yes No Yes No Yes No

Insurance companies/ takaful

1 Gambling is the interest rate is guaranteed for an investment made

Correct Wrong Not sure

2 Usury is a bet to get a profit

Correct Wrong Not sure

3 The fifth pillar of Faith is pilgrimage

Correct Wrong Not sure Correct Wrong

Correct Wrong Not sure Correct

Wrong Not sure Correct Wrong Not sure

Muslims are encouraged to help the

poor through zakat

Wrong Not sure

4.42 0 100 0 0 100 0 100 0 100 0

0 0 96.88 3.13 0 100 0 100 0 100 0

10 Muslims must choose shariahcompliant investment 11 Muslims fasting during Ramadhan

Correct Wrong Not sure Correct Wrong

Muslims who have reached puberty mustcover his/ her aurat

Correct Wrong Correct

13 There are 5 pillars of Islam

I have a lot of information about SCI

6 18.75 10 14.71 6 18.75

11 34.38 18 26.47 11 34.38

2 6.25 6 18.75 1 3.13

SCI is free from the interest