Islamic Values and Muslims Financial Behavior among Malaysians and Indonesians

Abstract

Muslims are the largest population worldwide and have strong bargaining power in the world economy. Muslims have guidelines on how they should live accordingly, and the guideline provides a path for Muslims to embrace horizontal and vertical worship in daily life, including on financial matters. However, the current evidence shows that the behavior of Muslims has fallen apart from Islamic values. Muslims tend to follow the Islamic guidelines on religious worship in the five pillars of Islam. Likewise, when concerning the daily muamalah, which is also part of worship, they tend to focus more on fulling the basic rules, particularly in food consumption. Besides food consumption, Muslims tend to neglect the rules and guidance of Islam, in particular financial matters. Indonesia and Malaysia, are two Muslim-majority countries in South East Asia, with a large Muslim population and also the Religious Affairs Institutions that manage the practice of Islam. Thus, this paper aims to explore the impact of Islamic values on Muslim financial behavior in Indonesia and Malaysia. This research is associative quantitative research utilizing. This research applies structural equation modeling (SEM) with PLS approach of SmartPLS software version 4.0.9.8. 427 data were collected using a closed questionnaire distributed to respondents who t the research criteria from Malaysia and Indonesia. The result postulates insignificant differences in Islamic values among the two countries. Both countries are supporting the development of Shariah in Islamic Banking and Finance. Nonetheless, there are still concerns about consumers' financial behavior toward Islamic financial products in both countries. It is worth noting that this research should interpreted in light of certain limitations. The substantial gap in the size of the sample respondents for both countries may affect the result of the survey findings. Since the research is purely quantitative and focused on the individual financial behavior of Malaysia and Indonesia, which are reasonably similar in culture and race, researchers propose an in-depth study with a qualitative approach to further explore other determinants of Islamic values and financial management behavior