The Applicability of Target Costing Approach in Pricing Banking Services: A Field Study of Islamic Banks in Libya

Abstract

This study aimed to examine the applicability of the target costing approach in pricing banking services, as applied to Islamic banks operating in Libya. It sought to identify the availability of the requirements for applying the method, the banks’ awareness of its benefits, and the obstacles and difficulties that may limit its applicability. The study adopted a descriptive-analytical approach and used a questionnaire as the primary data collection instrument. The study population consisted of 68 employees working in the Islamic banks under study, from which a sample of 59 respondents was selected, and 50 questionnaires were retrieved. To analyze the data and test the study hypotheses, a set of descriptive and inferential statistical methods appropriate to the nature of the data and the objectives of the study was employed. The results showed that the applicability of the target costing method was at a moderate level, while the availability of the requirements for its application and the banks’ awareness of its benefits were high. The level of obstacles and difficulties was moderate. The hypothesis testing results also indicated statistically significant results regarding the applicability of the approach, the availability of its requirements, and awareness of its benefits, whereas no statistically significant results were found for the obstacles and difficulties according to the test used. The study recommended encouraging Libyan Islamic banks to adopt the target costing approach, develop accounting and administrative information systems, train employees, and enhance integration among departments, while considering the specific characteristics of Islamic banking services and Sharia requirements. It also recommended conducting further applied studies to examine the impact of the approach on profitability, service quality, competitive advantage, and banking performance efficiency.