Islamic banking and customers' preferences: the case of the UK

Abstract

Purpose -Islamic banking is an increasingly important factor in the UK financial environment. With Islamic banks entering the industry in significant numbers -and competing directly with the incumbent "conventional" ones -the question of selection criteria of the banks' customers is of obvious interest. The purpose of this paper is to study the decision-making process of a sample of UK customers and the factors that may influence them. Design/methodology/approach -The paper uses a sample of 156 UK questionnaire respondents, comprising Muslim and non-Muslim bank customers alike. The methodological approach is partly borrowed from Masood et al. with the chosen questions aimed at finding out what drives the selection process of bank customers. Findings -The paper's major findings show that, irrespective of the demographic features and the religion of the respondents, the criterion "low services charges" is the top customers' criteria. The Islamic nature of the bank is, however, placed second, pointing to the importance of religious orientation.Research limitations/implications -The major limitation of the paper relates to the size of the sample of respondents. The findings of the paper are likely to be of interest to UK banks determining how best to attract customers in the new era. Future research may usefully focus on an international comparison of bank selection criteria by employing an index of religiosity. Originality/value -The paper is of particular value because it focuses on the choice of banking in the context of the recent significant growth in the Islamic banking industry in the UK.

Understanding Islamic Bank Selection of Customers: A Field Research from Turkish Participation Banks

“…Gerrard and Cunningham (1997) studied Singapore and Islamic banking by analyzing approaches of Muslim and non-Muslim customers. Mansour, Abdelhamid, Masood, and Niazi (2010) find in their survey of 156 United Kingdom located respondents that low service charges regardless of the demographic features and the religion of the respondent was the first criterion of the customers' criteria and it is followed by religious orientation.…”

A Conceptual Model of Literature Review for Family Takaful (Islamic Life Insurance) Demand in Malaysia

“…There are number of studies focuses on both customers' awareness and satisfaction of product and services in Islamic financial system (see, Naser et al, 1999;Ahmad & Haron, 2002;Bley & Kuehn, 2003;Dusuki & Abdullah, 2007;Al-Ajmi et al, Adnan, 2010;Mansour et al, 2010). While, a few of studies have focused only on the consumers preferences to Islamic banking products (see, Gerrard & Cunningham, 1997;Metawa & Almoswawi, 1998;Bley & Kuehn, 2003;Rammal & Zurbruegg, 2006).…”

“…Various studies (for example, Naser et al, 1999;Almossawi, 2001;Dusuki & Abdullah, 2007;Gait & Worthington, 2008;Mansour et al, 2010) have affirmed that the reputation as of the important contributors in the selection of Islamic banking among customers. It is in line with a takaful study, which found that majority of respondents chose reputation as their reason for choosing takaful operator (Bashir et al, 2011).…”

“…6, No. 3;2013Mansour et al, 2010Rustam et al, 2011). In addition, a study by Bashir et al (2011) has documented that easy to understand product is one of the critical reasons for choosing takaful operator.…”

“…There are many studies which considered the reputation as one of the factors that contribute to the selection of Islamic financial instituitions such as in finance, banking, as well as in insurance (Haron et al, 1994;Gerrard & Cunningham, 1997;Naser et al, 1999;Al-Ajmi et al, 2009;Mansour et al, 2010;Bashir et al, 2011;among others). Various studies (for example, Naser et al, 1999;Almossawi, 2001;Dusuki & Abdullah, 2007;Gait & Worthington, 2008;Mansour et al, 2010) have affirmed that the reputation as of the important contributors in the selection of Islamic banking among customers.…”