Validating Islamic Financial Literacy Instruments among MUM Generation: Rasch Analysis Approach

Islamic financial literacy is an emerging term which is increasingly used in research and policy. Though a study in this area is growing, there is a lack of an accepted method to measure Islamic financial literacy. This study aims to develop a valid and reliable instrument to access Islamic financial literacy among MUM (Muslim Urban Millennial) generations using Rasch analysis. A comprehensive literature review and a qualitative study were initially performed to identify the construct of Islamic financial literacy. A total of 109 respondents from MUM generation completed the 18-item instrument with multiple-choice questions. However, only 85 final sample out of 109 data measured after eliminating the person with the extreme score. The dimensionality of the items was evaluated using WINSTEPS 3.73. Results show that the measurements model is highly reliable with a reliability alpha of 0.87 and 0.96 for person and item, respectively. There is also six misfit item that needs to be reviewed or removed. Differential Item Functioning (DIF) analysis shows that three items have a bias between gender. Overall, the developed Islamic financial literacy scale is a validand reliable instrument to measure Islamic financial literacy in MUM generation. This measure lays a solid empirical and theoretical foundation for future research in Islamic financial literacy among the MUM generation.