Research by Cardiff University Business School and the Islamic Banking and Finance Centre UK (IBFC – UK) highlights key perceptions and expectations of Muslims, and offers a unique insight for the financial institutions wishing to develop products and services in the growing global sector of Islamic finance.
The main aim of the research project was to identify areas of concern among Muslims in the UK – particularly in Wales – around provision of financial services and Islamic banking.
It enabled researchers to gain an in-depth understanding of consumers’ experiences which guided discussion focusing on the following themes:
- Traditional banking patterns, including usage and motivations;
- Financial-need assessment – indicators for financial provision;
- Sharia-compliant banking – awareness, usage, motivators, barriers and gaps in provision;
- Inter-generational, family and community experiences; and
- The future of Islamic banking in the UK.
A number of banks, traditional and Islamic, have been providing Sharia-compliant products. Recent trends, however, suggest the development of Islamic banking remains somewhat limited and that the growth of the industry is being affected by a lack of understanding of the expectations of potential customers, both Muslims and non-Muslims.
An understanding of what UK Muslims expect and demand, and the extent to which they interpret and apply Sharia principles in banking and financial matters, therefore, remains a major issue for the Islamic banking industry to tackle in the future.
The study identified a strong demand for Islamic banking with financial products and services that are mindful of the Islamic ruling on not charging interest.
Lack of awareness is an issue which needs to be tackled through quality education and training for professionals in the industry as well as consumers. Although levels of awareness are low, aspirations for a fully transparent and socially responsible service provider, actively supporting local communities and businesses, run very high.
Consumers said they are looking for high-quality, trustworthy, affordable and convenient Sharia-compliant banking solutions that would meet their daily personal and business financial needs.
The research found consumers want financial institutions to employ staff who show empathy and have relevant product expertise.
Adoption of products and services, including switching from conventional to Islamic products, is likely to be high for service providers who make substantial efforts to meet these expectations.
The study calls for an industry-wide initiative looking at legal, social and economic factors affecting the establishment and promotion of Islamic financial service provision in line with key ethical principles of Islam.
It calls for a viable alternative financial system that not only observes the prohibitions of interest (riba), uncertainty in contracts (gharar) and gambling (maysir), but also delivers significant, positive social and economic benefits or outcomes, differing from the fundamental structure of conventional finance.
Other key recommendations include establishing industry-wide centres of excellence for Islamic rulings (fatwa), and for quality and assurance, as well as high-quality staff training and work-based learning schemes, emphasising relevant Islamic principles.
The study also recommends the development of innovative, socially responsible initiatives through funding local community projects, and creating mass awareness in association with local mosques, community centres, key spokespeople and Islamic finance experts from the industry.
The research concluded that further investigation is needed into Islamic financial consumption.
Principal investigators: Dr Ahmad Jamal, Cardiff University Business School – firstname.lastname@example.org and Akmal Hanuk, chief executive of the Islamic Banking and Finance Centre UK – email@example.com