Research Article
The Influence of Competency towards the Performance of Islamic Banking Industry
in Malaysia
Mohd Fodli Hamzah1, Muhammad Nasri Md. Hussain2, Ahmad Khilmy Abdul Rahim*3, Azizi Abu Bakar4
1,2,3,4Islamic Business School, College of Business, UniversitiUtara Malaysia
khilmy@uum.edu.my3
Article History: Received: 10 November 2020; Revised: 12 January 2021; Accepted: 27 January 2021; Published online: 05 April 2021
Abstract: The purpose of this study is to explore the influence of competency which comprises of technical and behavioral competency among the employees of Islamic banking towards the performance improvement of Islamic banking industry in Malaysia. The study needed to be conducted due to the unfavorable achievement of Islamic banking industry after three decades of its establishment. Islamic banking needs to be more aggressive in providing competent human capital in line with the development of Islamic banking industry. The study related to the Islamic banking has been widely conducted but the use of McClelland and Spencer & Spencer theories to examine the effect of technical and behavioral competency towards the performance improvement of Islamic banking industry in Malaysia is still limited. Therefore, the first objective of the study is to determine the influence of technical competency among the Islamic banking employees towards the performance improvement of Islamic banking industry in Malaysia. The second objective is to find out the influence of behavioral competency among the Islamic banking employees towards the performance improvement of Islamic banking industry in Malaysia. Quantitative approaches through self-administered questionnaire were adopted and analyzed by using SEM-PLS. The total number of respondents is 370, where cluster and random sampling is used to select the respondents from each branch of Islamic banks in Malaysia. The results showed that both variables technical competency (β = 0.317, t = 4.484 p < 0.05), and behavioral competency (β = 0.294, t = 3.594 p < 0.05) were significantly influencing the improvement Islamic banking industry performance. Finally, this study has significant implications to the relevant parties to provide competent and highly performance human capital to the Islamic banking industry in Malaysia. The recruitment should not merely base on the experience and educational level but also taking into highly consideration positive personal attributes, attitudes and values. This is because the career in Islamic banking is not merely a career but a responsibility and sincerity which both are required in every aspect of the working environment.
Keywords:Islamic Banking, Competency, Human Capital, Job Performance
1. Introduction
The purpose of the study is to examine the influence of technical and behavioral competencies among the Islamic banking staff towards the improvement of Islamic banking industry performance in Malaysia. This issue arises due to the performance of Islamic banking industry has yet to reach the target intended since its establishment three decades ago. Although the growth rate has been very encouraging, the target set by the BNM for 40% asset growth by the year 2020 for the Islamic banking industry is a long way to go (Shen, 2017). The growth rate for the bank even experienced a remarkable decline to a single digit which is from 24.2% in 2011 to 8.2% in 2016 (Shen, 2017). As of April 2019 as shown in table 1 below, the asset growth rate is still at 27% as compared to the target by year 2020 at 40% (BNM, 2019). This percentage marks the fact that Islamic banking industry needs to explore into new, more aggressive opportunities in all aspects, not only to Islamic finance users but also covering broader aspects in the community and to look into the capability of the staff in the effort to continue competing with the conventional banking industry (M. Ali, Z. Mohamed, 2015).
Table 1.Growth Rate and Market Share Islamic Bankingin Malaysia Year Total Assets
IFI
Average Growth rate (Annually)
Total Assets Banking Industry
Market Share IFI (Assets) 2013 419,548.67 14% 2,036,332.38 21% 2014 469,024.06 12% 2,219,371.33 21% 2015 526,328.75 12% 2,354,384.13 22% 2016 572,865.13 9% 2,443,576.63 23% 2017 642,716.83 12% 2,547,867.24 25% 2018 716,692.24 12% 2,697,336.79 27%
Mohd Fodli Hamzah, Muhammad Nasri Md. Hussain, Ahmad Khilmy Abdul Rahim*, Azizi Abu Bakar
April 2019
734,083.66 2.4% 2,720,811.72 27%
Source: BNM (2019)
Data from BNM (2019) (Table 2 and table 3) revealed that the market share for the individual financing and saving for the Islamic bank is still low as compared to the overall banking industry which is 32% and 17% respectively as at April 2020 (BNM, 2019). The average growth rate for individual financing has dropped to 11% in year 2018 as compared to 20% in year 2013. As at April 2019, the growth rate is only at 3% which is considered very low. The data can be seen in table 2 below.
Table 2.Average Growth rate Individual Financing
Year Banking
Industry IFI Growth Rate Market Share
2013 1,225,656.20 283,527.57 20% 23% 2014 1,339,718.03 335,592.42 18% 25% 2015 1,445,104.67 389,837.48 16% 27% 2016 1,521,428.22 434,332.21 11% 29% 2017 1,584,340.46 478,953.90 10% 30% 2018 1,673,482.68 531,833.45 11% 32% 2019@April 1,682,457.09 545,316.44 3% 32% Source : (BNM. 2019)
Table 3 showed that the market share for individual saving was only at 20% in the year 2018. Meanwhile the growth rate has declined from 22% in year 2017 to 13% in year 2018.
Table 3. Average Growth rate Individual Saving
Year Industry IFI Growth Market Share
2013 545,153.99 63,036.60 7% 12% 2014 581,453.57 74,803.51 19% 13% 2015 612,075.73 87,890.41 17% 14% 2016 643,276.44 101,790.36 16% 16% 2017 668,447.35 124,445.12 22% 19% 2018 703,705.41 140,454.67 13% 20% 2019@April 724,709.31 158,806.03 13% 22% Source: (BNM. 2019)
Generally it can be concluded that the growth rate and the market share for individual financing and savings are still low as compared to the age of the Islamic banking that has reached more than three decades. The recorded data has given a clearer picture about the actual performance of the Islamic banking industry in Malaysia for the past 6 years. The need to explore the root cause is very crucial especially in relation to the human capital factors.Several studies and issues have been discussed in relation to the Islamic banking industry, (Selamat, 2012; Awan & Bukhari, 2011) such as the level of customer satisfaction (Saad, 2012; Khattak, 2010), service quality (Kamariah et al., 2013; Abedniya & Zaeim, 2011;Razzaque, 2014), Islamic banking performance (Imam & Kpodar, 2010), human resource (Dewa, 2012; Husna et al., 2012; Aman & Shukor, 2015), and also the perception towards Islamic banking (Loo, 2010; Aman, &Alqahtani, 2012). The study related to the exploration of the technical and behavioral competencies among the Islamic banking employees towards the improvement of Islamic banking industry’s performance are still insufficient. Thus, this study was carried out to fill the gap of the existing knowledge which is related to the Islamic banking industry.
2. Problem Statement
Human capital is the main source and the most important asset in helping and contributing to the success of an organization(Djalil, Sule, & Masbar, 2015). It is also the determining factor for the success and continuity of industrialization to compete and achieve the target determined by the stakeholders in an organization (Ahmad & Schroeder, 2003). In this regard, the progress made by the Islamic banking industry must be consistent with the development of human capital (Lamba, 2012). This definitely poses a great challenge to the Islamic banking industry especially in preparing the employees with competent, skillful and formidable Islamic values and
characteristics. The overall performance of the Islamic banking industry is closely related to the performance of the employees who provide quality services and treatment to customers (Loo, 2010; Aman, &Alqahtani, 2012; Saad, 2012; Khattak, 2010; Selamat, 2012; Awan&Bukhari, 2011; Kamariah et al., 2013; Abedniya&Zaeim, 2011; Razzaque, 2014). In the context of Islamic banking, the employees work performance should not merely measured based on the production, but it is multi-dimensional which should include the level of community acceptance and understanding as well as satisfaction of the Islamic banking system. Based on a study conducted by AIBIM in collaboration with ABM in 2017 the level of customer satisfaction in the banking industry in Malaysia is still below the global excellence index of 80%. The study found that the customer satisfaction index in 2017 was at the level of 74.3% which is an increase of only 6.1% compared to the index in 2013 which is 70.0% (AIBIM, 2017).
Previous studies have touched on the importance of technical competency factors such as knowledge and skills. Study conducted by Siong-choy Chong & Kumar T.K.Fong, (2011) found that significant differences between Islamic and conventional banking lie in the competency factor. Customers enjoy dealing with conventional banking due to the insufficient knowledge of Islamic banking employees that are unable to provide good information in relation to Islamic banking products and services (Chong & Kumar T.K.Fong, 2011;Madun, 2013). Competency does not only refer to the capability and capacity in doing the tasks, but it covers the concept of positive behavior and attributes, attitude and personality (Vazirani, 2010).The theories put forward by David McClelland and Spencer & Spencer have stated that competency should not only be assessed based on knowledge and skills alone but competency should be combined with personal attitudes, traits and values that shape the internal personality of each employee also known as behavioral competencies (Spencer & Spencer, 1993).
McClelland (1998) has developed a theory that is used to challenge the traditional assessment criteria whereby academic performance as the main criteria to assess excellence performance of an individual. According to the theory, academic excellence alone is insufficient to justify the excellence performance. Indeed, academic excellence should, yet it is assessed based on the internal attitude within themselves. This will encourage one to do their best in every task they do. It was supported by the theory put forth by Spencer & Spencer (1993) which has classified competency into two (2) parts, namely technical competency and behavioral competency. Technical competency is a tangible external characteristic such as knowledge and skills required in performing the duties. Meanwhile, behavioral competency is the hidden internal competency such a self-concept, attributes and motives (Spencer & Spencer, 1993). Behavioral competency is the most important that will drive one’s capacity to improve himself or herself in whatever professions they are in. Behavioral competency is very significant and it needs to be shaped and molded individually.Spencer & Spencer’s theory (1993) reflects the concept of technical competency as a cube of ice in the middle of the sea whereby only a small part of the ice appears on the surface. Meanwhile, the larger part of the cube stays underneath and is not seen through naked eyes (Spencer & Spencer, 1993). Thus, in the context of career, the combination of both competencies can make an employee contribute more to the outcome and performance of the tasks assigned to him or her (Irawan, 2011; Jalil & Rahman, 2014).
Study Objective
1.1 The first objective of the study is to determine the influence of technical competency among the Islamic banking employees towards the Islamic banking industry’s performance in Malaysia.
1.2 The second objective is to find out the influence of technical competency among the Islamic banking employees towards the Islamic banking industry’s performance in Malaysia.
3. Literature Review
The terms competency and competence have been widely discussed by previous researchers(Moore & Cheng, 2006). Usually these competency terms refer to the ability and capability of an individual in performing a task or a job. However the term and definition of competency has undergone a new approach when Boyatzis (1982) in his book "The Competent Manager" has given a new definition of the term competency as an underlying characteristic of a person hidden in the character of a person who can be seen in the form of self-image, traits, motives and social roles as well as skills and knowledge which has a direct impact on the result of the work produced (Boyatzis, 2008)
Table 4.Definition of Competency from the Previous Researchers No Researcher Definition
The Influence of Competency Towards the Performance of Islamic Banking Industry iIn Malaysia
1 Dubois (1998) ―Competencies are those characteristics- knowledge, skills, mindsets, thought patterns, and the like-that, when used either singularly or in various combinations, result in successful performance‖.
2 Gilbert (1996) ―as the state of being competent refers to having the ability to consistently produce the results (the worthy outcomes of behavior) that are required for the most efficient and effective achievement of the larger organizational goals
3 Spencer and Spencer (1993)
―Competencies are skills & abilities-things you can do -acquired through work experience, life experience, study or training
4 Hornby and Thomas (1989)
―Competency is the ability to perform effectively the functions associated with management in a work situation.
5 Jacobs (1989) ―Competency is an observable skill or ability to complete a managerial task successfully.
6 Hogg B (1989) ―Competencies are the characteristics of a manager that lead to the demonstration of skills and abilities, which result in effective performance within an occupational area. Competency also embodies the capacity of transfer skills and abilities from one area to another. 7 Klemp (1980) ―an underlying characteristic of a person which results in effective
and/or superior performance on the job
Based on the definitions in table 4 above, among the important keywords for the term competency is an attribute or habits closely related to the success and performance improvement. There are no doubt competent individuals are able to excel in performing a task entrusted to them (Moore & Cheng, 2006). Competency is a set of knowledge, skills, and behaviors as well as traits and motives that must be possessed, valued, mastered, and actualized by employees in performing the tasks and responsibilities entrusted to them (Moore & Cheng, 2006). Spencer & Spencer (1993) has classified the term competency into two (2) sections namely technical competencies and behavioral competencies. According to Wilson (1995) technical competence can be applied as part of the technical skills and expertise. For example, an accountant possesses technical skills and expertise in analyzing and processing the data and is able to provide accurate and reliable financial reporting.
Based on the study conducted, technical competency is an external feature that can be seen and required in the field of employment. Knowledge and skills are the important elements in technical competency. Knowledge is refers to the level of information available by the individuals in a particular field or working environment. Meanwhile skills are the ability to perform tasks either physically or mentally. Both knowledge and skills are components that can be seen and developed through training programs (Vathanophas, Vichita; Thai-ngam, 2007). Competency also includes behavior and positive traits, attitudes and personalities (Vazirani, 2010). David McClelland (1998) has developed the term competency as a term used to challenge the traditional assessments criteria that have emphasized the assessment of higher academic qualification as a criterion for assessing the intelligence of an individual. McCelland has emphasized that one’s excellence is not merely assessed from mere academic excellence in fact, but also evaluated based on the inner attitude they have. This inner attitude will motivate the person to do their best in every action performed. Behavioral competencies are hidden internal competencies such as self-concept, traits and motives (Spencer & Spencer, 1993). Behavioral competency will drive one’s ability to improve performance in the field of employment. Based on Spencer & Spencer Theory (1993) both technical and behavior competency are a lump of ice in the middle of the sea of which a small portion of the ice cubes appear on the surface, while a large portion the iceberg is under the sea and invisible to the naked eye. Anyhow, what makes a big impact is the ice cubes that are under the ocean (Spencer & Spencer, 1993).
Employees who have sufficient knowledge in the field of employment are able to provide the best service quality to the customers (Quinn, Anderson, & Sydney, 1996). The tendency for the customers to liaise and perform the transactions is reflected by the factor of service quality rendered to them, especially by the front lines employees. This is evident following the study done by Awan&Bukhari (2011) on the tendency to choose the banking products and services among Islamic banking customers in Pakistan.The study outcome demonstrates that customers prioritize quality and treatment as their motivating factor for choosing the banking services compared to the other factors. In line with this study, the role of Islamic banking employees is crucial in instilling people’s awareness and understanding in the need to prioritize Islamic banking and to consider between religious motives and other criteria in the banking affairs.
Also, a good, courteous and professional treatment becomes the motivator to customers to liaise and perform transactions using the Islamic banking system. This means that other than good products and services, positive attitude and behavior are also able to draw the customers to deal with Islamic banking. From the study done by Omar (2012), he found that other than religion, the main criteria for selecting Islamic banking products is the confidence level of the customers towards the treatment given by the professional and ethical banking staff and the information delivered to them is clearly understood(Omar, 2012). To add, the role of Islamic banking is more than providing financial products but also encompassing the initiative of providing the actual Islamic economic spirit and promoting socio-economic fairness and showcasing good moral appearances among employees (Ahmed, 2012).
Under the Dual Banking Leverage Model (DBLM) surely there will be some confusion in the society even among the staff on the concept and operations of Islamic banking (Laldin, 2008). This can be seen from the various perceptions and negative assumptions of the society on Islamic banking. Additionally, the DBLM banking model adopts the existing conventional bank facilities including the system and the workforce under the same roof. It is undeniable that conventional banking has long started and it has various products, good infrastructure and professional employees. Thus, to compete with this conventional banking, the employees of Islamic banking should prepare themselves not only with the knowledge and skills, but also the capability and positive attitude and values to promote the Islamic products and services to the customers(Ali, 2013).
A study was done by Siong-choy Chong & Agency, (2011) with regard to the customers’ assumptions on the service quality between the Islamic and conventional banking. The study revealed that, the employees’ competency level are very crucial to differentiate the service quality between the Islamic and conventional banks besides other factors such as service network and the diversity of products offered. The study found that the competency level of the Islamic banking employee is still low especially in relation to their knowledge about the product and services offered. This happens because of the shortage of staff who have good knowledge not only on the products and services, but also related to all aspects of Islamic banking products (Chong & Kumar T.K.Fong, 2011). In this regard, the study has highlighted the need for technical and behavioral competencies among the Islamic banking staff to ensure the bank is able to deliver a quality service and be competitive with conventional banking (Bakar, Azizi Abu.,2019).
The current challenging situation of the global financial market will reflect the higher risks to the financial institutions all over the world, including the Islamic banking industry in Malaysia. One of the greatest challenges that the Islamic banking institutions have today is to produce the products and services that are Shariah compliant and fulfills the social goals of the general public without affecting the competitiveness and profit for the long run (Dusuki & Bouheraoua, 2011). Kamarulzaman&Madun (2013) discovered that there are still Islamic banking staff especially those who directly liaise with their customers still lack the experience and knowledge, and they are unable to give a good treatment or explanation to their customers. Customers who frequently transact with Islamic banks to apply for a home loan or a vehicle loan may not fully understand the product, but they still receive the funding offer or otherwise (Madun, 2013, Zainol, 2008). Next, customers will assume that Islamic banking is similar to conventional banking with the only difference is their names. This very vague explanation gives a direct impact to the image of the entire organization of the bank and the society’s perception towards the product and service offered. Thus, the role and responsibility of Islamic banking staff would be more challenging if compared to the conventional counterpart. From the literature review, some hypotheses have been able to be developed as follows:
Hypothesis 1 (H1): There is a significant relationship between the technical competency and improved performance of Islamic banking employees in Malaysia
Hypothesis 1 (H0): There is no significant relationship between the technical competency and improved performance of Islamic banking employees in Malaysia
Hypothesis 2 (H1): There is a significant relationship between the behavioral competency and improved performance of Islamic banking employees in Malaysia
Hypothesis 2 (H0): There is no significant relationship between the behavioral competency and improved performance of Islamic banking employees in Malaysia
4. Research Methodology
A quantitative approach is used in this study. The study population involved the staff of Islamic commercial banks under the supervision of the Central Bank of Malaysia (BNM). According to the data issued by BNM the amount of the workforce in the Islamic banking sector as at 2017 was 9262. (BNM, 2018).The determination for the sample size was based on the sampling size table established by Krejciedan Morgan (1970). Based on the
The Influence of Competency Towards the Performance of Islamic Banking Industry iIn Malaysia
table, the recommended sample size is 370 for a population size of 9262. This is supported by Hair et al. (2007) who have suggested that the minimum sample size for a study is 30 and above. This opinion is supported by Roscoe (1975) who stated that the sample size between 30 and 500 was sufficient. Therefore, the sampling method of this study meets the criteria proposed by Krejcie& Morgan, (1970) and Hair et al. (2007). Cluster sampling technique has been used to collect data and distributequestionnaires to the respondents. The technique is suitable since the location and wide spreads of Islamic banking branches across Peninsular Malaysia as well as the difficulty to obtain information as banks are very careful in providing information to others. According to a report released by Association of Islamic Banking Institutions (AIBIM), there are 334 Islamic banking branches nationwide in Peninsular Malaysia as of the 4th quarter of 2018. The data collection was done on 15 October 2018 to 19 January 2019 using a questionnaire form with 5-point Likert Scale. A total of 380 questionnaires were distributed. However, a total of 10 questionnaire forms were separated because of the incomplete answers. Thus, the analysis in this study only involved 370 samples. The samples obtained were sufficient to be analysed in SEM-PLS.
5. Research Findings
Descriptive Analysis of Respondents’ Profile
The first stage of data analysis involved a preliminary analysis, which was descriptive analysis of respondents' profiles. At this stage, the data was evaluated using SPSS software version 23. Then, the process of data filtering involves feedback testing, incomplete data management, deviation testing and normalization. Based on the data collected, majority of respondents, 89.2 per cent, are employed at local Islamic banks. 40 people or 10.8% work at Foreign Bank Islam. The categories of local Islamic banks and foreign Islamic banks are based on the categories established by BNM.In terms of gender and age distribution, 60.5% of the respondents were female employee while the remaining 39.5% were male. In terms of the age group of respondents, the majority of respondents were 31 to 45 years old. There were also respondents who were less than 30 years old or 19.7%. Meanwhile, respondents over the age of 46 were 14.3%. The remaining respondents were less than 25 years old or at 8.2%. In conclusion, the respondents in this study are those who are mature and capable of making decisions.
The summary of demographic respondents presented in table 5 below. Looking at the level of education, the majority of respondents had a diploma or 32.7%. Respondents with a bachelor's degree were 105 or 28.4% and Master's degrees were 51 or 13.8%. Interestingly, there were 3 respondents with PhD qualification, equivalent to 0.8%. The rest are those with STPM and below. The insights can be found in table 3 below. It can be concluded that the average education level of the respondents is good.The majority or 71.9 percent of respondents have worked in the banking industry for more than 5 years. It was indicated that most of the respondents have vast experiences in the banking industry either in Islamic banking or conventional banking. Meanwhile 57.6% respondents have worked in Islamic banks for more than 5 years. The rest are those with 1 to 5 year of experiences in the Islamic banking industry. In conclusion, most of the employees have experience in the banking industry and the Islamic banking industry for more than 5 years.
In terms of the job distribution, 32.7% of the respondents who participated in this survey were tellers. Meanwhile, 27% and 24.3% were customer service and operations staff respectively. 7.3% were branch managers and the remaining 8.6% were other staff. There was 50.8% of respondents had previously worked in conventional banks, while 49.2% had started their banking career in Islamic banks. This indicates that there are Islamic banking staff who have worked in conventional banks before they are selected or opted into Islamic banking. These facts can be attributed to their migration motives either due to financial (monetary) factors or the consciousness factor to jointly develop the Islamic banking industry. In terms of religious distribution, 4.9% of the respondents were non-Muslims while 95.1% were Muslim. This shows that the Islamic banking staff is made up of not only Muslims but also non-Muslims. Table 7 gives an overview of the overall study findings.
Table 5.The summary of respondents demographic
Demographic Frequency Percentage
Are You A Muslim
Yes 352 95.1
No 18 4.9
Experiences Working In Conventional Bank
No 182 49.2
Current Position
Manager 27 7.3
Customer Service Officers 100 27
Teller 121 32.7 Operation Officers 90 24.3 Others 32 8.6 0 < 1 years 20 5.4 1 years - 3 years 41 11.1 3 years - 5 years 43 11.6 > 5 years 266 71.9
Experience in Islamic Banking
< 1 years 44 11.9 1 years - 3 years 73 19.7 3 years - 5 years 40 10.8 > 5 years 213 57.6 Education Level PhD 3 0.8 Master Degree 51 13.8 Bachelor 105 28.4 Diploma 121 32.7 STP/ SPM and below 90 31.5
Gender and Age
Male 146 39.5 Female 224 60.5 < 25 30 8.2 26 - 30 73 19.7 31 - 35 105 28.4 36 - 45 109 29.5 >46 53 14.3
Respondent Acceptance Level Analysis
The acceptance level analysis on the variables was conducted by using the scale of 5 Likert questionnaire forms. The result from the analysis has shown the average acceptance level for the variables was high (4.11 until 4.54). For the standard deviation level for each variables was also high (6.34 until 6.71). The result obtained from the analysis is something interesting to explore since the interrelated between the independent and dependent variables are theoretical and conceptual. The following table shows the average acceptance level and standard deviation for each variable under study.
Table 6.Summary of Respondent Acceptable and Standard Deviation Level on the variables Variables Average Acceptance Level Average Standard Deviation
Improvement performance 4.11 0.642
Technical Competency 4.12 0.634
The Influence of Competency Towards the Performance of Islamic Banking Industry iIn Malaysia
Model Measurement
The measurement for the reliability and validity of the model are measured through four analyses namely internal consistency, indicator reliability, convergent validity, and discriminant validity. According to Hair et al. (2017), the measurement of internal reliability is based on the correlation between items in the variables under study. The value of a variable set for reliability is 0.7 (Nunally& Bernstein, 1994) for both alpha Cronbach and composite reliability.Internal consistency reliability to the model should be more than 0.7 (Hair, Hult, Ringle, & Sarstedt, 2014). The measurement model for internal consistency is satisfactory as shown in Table 7 below. The composite ratio (CR) value for the technical competency is 0.920 and the CR for the behavioral competency is 0.957. Overall the result shows that all variables have a high value for the internal consistency reliability which were exceeded 0.7.
Table 7.The Measurement Model for Internal Consistency
Item Cronbach Alpha Composite Ratio
Technical Competency 0.952 0.920
Behavioral Competency 0.895 0.957
For the indicator reliability, the construct validity can be measured by looking at how far an indicator relates to other indicators in the same construct. The factor loading of the constructs is between 0.661 and 0.809.The value of the factor loading less than 0.70 is retained and not considered for removal as it does not give any significant effect to the extracted variance average values and the composite reliability. The result showed that extracted variance average values for the constructs have exceeded 0.50. The convergent validity is measured through the AVE value. To measure the convergent validity, the AVE value for every construct needs to be more than 0.50. Table 8 showed the AVE value for each construct is between 0.512 and 0.598. This illustrates the AVE value for the constructs have exceeded 0.50 and the convergent validity for this study is also at the satisfactory level. Table 1 shows the outcome of the convergent validity test.
Table 8.Convergent Validity Test
Cronbach's Alpha Rho_A Composite Reliability Average Variance Extracted (AVE) Technical Competency 0.904 0.906 0.920 0.512 Behavioral Competency 0.952 0.953 0.957 0.598
Job performance improvement 0.913 0.914 0.926 0.513
The discriminant validity is also obtained through the HTMT value. The Heterotrait-Monotrait (HTMT) is the ratio employed to obtain the discriminant validity in PLS 3 (Henseler et al., 2015). As explained in Table 9, the discriminant validity in the study construct stays under the value determined which is 0.90. If the HTMT value is 0.90 or greater than 0.90 (Gold et al., 2001), this value shows the existence of the discriminant validity value. Table 2 shows the finding of the discriminant validity. The HTMT value for every variable is less than 0.90 and this shows that all variables have fulfilled the discriminant validity criteria determined (Barclay, Higgins & Thompson 1995; Henseler, Ringle&Sinkovics 2009).
Table 9.Discriminant Validity Test Technical Competency Behavioral Competency Job performance improvement Discriminant Validity
Technical Competency Yes
Behavioral Competency 0.871 Yes
Job performance improvement 0.797 0.789 Yes
The outcome of the two discriminant validity analyses has proven that there is no collinearity issue between the study item, and all the items have been confirmed to measure the supposed constructs. All in all, all questionnaire items used have fulfilled the criteria determined to obtain the study items’ validity and reliability.
Result for Hypothesis Test
Through the structured model, every relationship for the path coefficient explains about the hypothesis developed, be it supported or otherwise.The SmartPLS bootstrapping algorithm software has been adopted to test the significant and t-statistics levels for all the variables. Based on the outcome, it was found that the technical competency has a significant relationship towards the improvement of Islamic banking industry performance. The result has been tabulated in Table 10 whereby hypothesis 1 and hypothesis 2 have a significant relationship towards the improvement of Islamic banking industry improvement.
Table 10.Path Coefficient Model
Hypothesis Relationship Path
Coefficient
t- Value p-Value Result
H1 There is a significant relationship between the technical competency and performance improvement of Islamic banking industryin Malaysia
0.317 4.484 0.000 Supported
H2 There is a significant relationship between the behavioral competency and performance improvement of Islamic banking industryin Malaysia
0.294 3.592 0.000 Supported
6. Discussion
This study successfully found a relationship between technical and behavioral competency towards the performance improvement of the banking industry in Malaysia. Thus, the discovery of this significant relationship has strengthened the theoretical statement, especially in relation to the Islamic banking employees in Malaysia. The results of this finding also mean that the combination of these two competencies needs special attention to ensure the improvement of the work performance of Islamic banking staff in Malaysia and further improve the performance of the Islamic banking industry.
Technical competency entails the aspect of knowledge and skills that can be developed and formed through a systematic and comprehensive training program. It interconnects with employees’ capacity to carry out tasks using certain knowledge and skills. A lot of the findings from past studies show a significant relationship between technical competency and work performance. This finding is consistent with the studies previously done in various fields and industries. (Quinn, Anderson, & Sydney, 1996; SiewHoong, Angela Lee and Tong-Ming, 2013;Fallis, 2013;Kagaari&Munene, 2007; Hashim, 2008; Firdaus, Abdullah, Rahim, &Rahman, 2007). The finding is also consistent with the theory stated by McClelland and Spenser & Spencer where the factor of knowledge and skills of Islamic banking employees in Malaysia are really helpful in improving the performance of the Islamic banking industry in Malaysia. Thus, the stress on both technical and behavioral competency among the Islamic banking employees are very much needed to ensure the Islamic banking continues to progress and able to compete with the conventional banking.
According to Firdaus et al.(2007) experience and level of education are among the factors that influence an Islamic banking employee’s to improve their knowledge and skills. Nonetheless, the need for increased knowledge and skills must be ongoing and must be developed together with the improvement of behavioral competency. Behavioral competency encompasses an individual’s attitude and personal values. It is an outcome formed within the inner self and it is very important to shape one’s personality. The study finding shows that the behavioral competency of Islamic banking employees has a significant relationship with the increased performance of Islamic banking in Malaysia. A lot of studies are consistent with the findings from this study. Among them are Hettiarachchi&Jayarathna, (2014); Nafei, (2014); Rehman&Masood, (2012); Sousa & Coelho, (2011); Judge, (1991). The formation of attitude, attributes and personal values is able to reflect the values and work culture demanded in Islam.
7. Conclusion
The Influence of Competency Towards the Performance of Islamic Banking Industry iIn Malaysia
First of all, from the theoretical point of view, this study has added to the evidence that improved performance does not only depend on the skills, experiences and knowledge alone.
They have to be combined with behavioral competency that encompasses the attitude, attributes and positive personal integrity. Thus, this study is timely and required so that it will be in tandem with the development of the Islamic banking system. The finding showed that the aspects of technical and behavioral competencies should be integrated to ensure a better outcome on the improved performance of the Islamic banking industry in Malaysia. The finding is consistent with the fundamental theory of this study.
Experience and qualification only is not sufficient and must come together with the behavioral competency comprising attributes, attitude and personality. The contribution of the study is important and should be seen in a positive light to ensure that the Islamic banking industry is on the right track and fulfills Shari’a requirements.
Thus, an approach that leans towards religion must be improved and emphasized by the management and stakeholders. Last but not least, the success behind the development of the Islamic banking industry cannot only be seen through the profits it can make, but an emphasis must be given to the formation of human capital, people who can really understand and apply the concept of Islamic banking. The study can become a guidance to the stakeholders in the Islamic banking industry so that a drastic action can be taken to ensure the development of effective and innovative human capital intandem with the rapid development of Islamic banking industry. For the management, the results of the study showed that the improvement of the work performance of Islamic banking employees should include both aspects of competency; technical and behavioral competencies. The mindset should be changed with regard to the usage of the terms competencies especially to measure the performance of the employees. The measurement of the performance should cover both the technical and behavioral competency instead of focusing on the technical competency only. This means that staff are not only seen in terms of knowledge and experience alone, but also the inner self development such as attitude, attribute and positive personality should be considered too. A career in Islamic banking is not just merely a career, in fact it is a responsibility as a Muslim. Finally, the successful development of the Islamic banking industryshould not be seen only in terms of profit alone but rather the priority should emphasis on the human capital formation who truly appreciate the concept of Islamic banking.
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