Are Muslims Practising Moderation in Their Financial Decisions?

Abstract

Statistics and a survey of the literature revealed the existence of a massive problem in the financial prudence of Malaysians, including Muslims. One glaringly prominent aspect is the absence of a spiritual/religious interventionist approach in exploring the lack of consumer awareness that led to the present situation. Instead of attempting to solve the problem through brute economic policies, a wasatiyyah-oriented approach is warranted for informing consumers of their religious obligation to avoid profligate spending and adopt moderation in financial matters. Hence, the objective of this study is to examine the practice of moderation (the concept of wasatiyyah) among Muslims consumers in their financial decision-making. Primary data were collected through a self-administrated survey on a selected group of Muslim consumers. A relevant statistical software was employed to perform exploratory-factor analysis (EFA) through principal-component analysis (PCA), confirmatory factor analysis (CFA), and structural equation modelling (SEM) on the collected data. The findings demonstrated that moderation (wasatiyyah) partially mediates the relationship between materialism and financial decisions. Consequently, Muslim consumers who practice moderation while making their financial decisions are more conscious of their credit management and thus spend according to their means.

Investigating the Factors of Consumers’ Purchase Intention Towards Life Insurance in Bangladesh: An Application of the Theory of Reasoned Action

“…Financial literacy is imperative for sound financial decision making (Lusardi et al, 2010;Ramlee et al, 2019). Theoretically, financial literacy refers to an efficient financial plan that is reflected in an individual's saving, maintenance, and proper distribution of wealth for the later stage of life (Lusardi & Mitchell, 2008 ;Mahdzan & Victorian, 2013).…”

Pathway to Financial Well-being: A review on the role of psychological factors

“…In addition, there are some exciting studies that focus on a particular group of respondents such as college students (Fazli Sabri et al, 2012), young employees (Abdullah et al, 2019;Mokhtar & Husniyah, 2017;Sabri & Zakaria, 2015), single mothers (Yuliandi et al, 2018), and Muslim individuals (Ramlee et al, 2019). Targeting respondents of a specific group will enable researchers to learn about the group's particular issues.…”

“…These studies have the advantage of enabling researchers to arrive at an appropriate solution or action tailored to the respondent group. For example, the study by Ramlee et al (2019) about Malaysian Muslims found that the Muslims who practice moderation (Wasatiyyah) in their life will increase their financial well-being. The latest research was done by (Mahdzan et al, 2019) also shows a significant impact on financial well-being.…”

“…Of significance to mainstream research, the study of financial well-being in Malaysia always puts the psychological variable as one of many that may influence financial well-being. There are 11 types of psychological variables found in financial well-being studies, including financial stress (Mahdzan et al, 2019;Mokhtar & Husniyah, 2017;Narges & Laily, 2011;Sabri et al, 2013;Yuliandi et al, 2018;Zaiton et al, 2018), self-efficacy (Sabri et al, 2020), self-copying (Sabri et al, 2020;Yuliandi et al, 2018), locus of control (Mahdzan et al, 2019;Mokhtar & Husniyah, 2017), financial decision making (Mahdzan et al, 2019), attitude towards money (Abdullah et al, 2019;Sabri & Zakaria, 2015), financial risk tolerance (Husniyah & Fazilah, 2011), self-esteem (Sabri & Zakaria, 2015), self-worth (Husniyah & Fazilah, 2011), childhood consumer experience (Fazli Sabri et al, 2012), and Islamic moderation practice (wasatiyyah) (Ramlee et al, 2019). Among these variables, financial stress is the most frequently used and has a significant negative result on financial well-being.…”

“…However, the majority of psychological variables are derived from the western perspective, and only one researcher was found who uses the Islamic psychological variable in their study. The study by (Ramlee et al, 2019) introduced the concept of Islamic moderating practice (wasatiyyah) as a potential psychological variable that may improve Muslims' financial decisions. The result demonstrates that the Islamic concept of moderation (wasatiyyah) helps Muslims make the right decisions in their finances.…”