International Journal ofBank Marketing15/6 [
] 204–216 © MCBUniversity Press[
Islamic banking: a study in Singapore
Division of Banking and Finance, Nanyang Business School, NanyangTechnological University, Singapore
J. Barton Cunningham
School of Public Administration, University of Victoria, Canada
Establishes that, in Singa-pore, which has a minority ofMuslims in its population,both Muslims or non-Muslimsare generally unaware of theculture of Islamic banking.Also the two separate groupshave different attitudestowards the Islamic bankingmovement, with the degree ofdifference depending on thenature of the respectivematter put to them. Forexample, when asked whatthey would do if an Islamicbank did not make sufficientproﬁts to make a distributionin any one year,62.1 percent of Muslims said theywould keep their depositswithin the Islamic bankingmovement, while 66.5 percent of non-Muslims said theywould withdraw theirdeposits. In relation to bankselection criteria, there wasgeneral accord as betweenMuslims and non-Muslims onthe rating of the variouscriteria. Five signiﬁcantdifferences were noted, themost relating to “being paidhigher interest on savings”.The desire to be paid higherinterest was far stronger withnon-Muslims.
While the amount of published informationconcerning Islamic banking principles andtheir application in Muslim countries contin-ues to grow, relatively little relates to theapplication of the same principles in coun-tries which have small populations of Mus-lims. This gap will possibly narrow over theyears as Muslim banking becomes even moreinternationalized and forms part of the ﬁnan-cial scene in those countries in which Mus-lims are in the minority.One country, which has a minority of Mus-lims in its population, is Singapore. In the1990 census, there were about 350,000 Mus-lims in the resident population of some 2.3million. Even though there is such a smallnumber of Muslims living in Singapore, it ispossible that Islamic banking will be intro-duced into the country in the not too distantfuture. This possibility arises for two mainreasons. First, neighbouring Malaysia andIndonesia have already successfully intro-duced Islamic banking into their ﬁnancialservices sector. As Singapore is a majorprovider of ﬁnancial services in South EastAsia, to compete for Muslim sourced depositson an equal basis would require Islamicbanking to be made available in Singapore.Second, Singapore’s Finance Minister, inmid-June 1994, announced that commercialbanks would be permitted, if they felt itwas viable to do so, to set up an Islamic bank-ing operation.There are a range of matters which anylocal bank will have to consider in decidingwhether to start up a local Islamic bankingoperation. While, possibly, all or almost all of Singapore’s 350,000 Muslims would supportany Islamic banking operation, that numberof potential customers may be considered asbeing too small for a viable operation, espe-cially if several banks decide to enter themarket. If the number of resident Muslims isconsidered to be too small to create a viableoperation, local banks may wish to establishif non-Muslims view Islamic banking in apositive way and, if so, establish the likelysupport which they would give.The comments and observations aboveraise a number of questions. For example, incountries where Muslims are in the minority;ﬁrst, “to what extent are local people aware of the culture of Islamic banking?”; second,“what is the attitude of local people towardsIslamic banking?”; and third, “what are thebank selection criteria of local people?” Bysampling both the Muslim minority and thenon-Muslim majority in such countries,appropriate comparisons can be made.Answers to these questions should proveinvaluable to any bank which is consideringsetting up an Islamic banking operation in acountry which has a small population of Mus-lims.Immediately following this introduction,there is a review of the pertinent literature,this covering the culture of Islamic banking,attitudes towards Islamic banking and thebank selection process. Then, the objectivesof this study are listed and an explanationprovided of the methodology that was used.The results are thereafter presented, followedby conclusions which, among other things,contain general comments about the resultsobtained. The present research produced anumber of interesting ideas for future studiesand these are described in the ﬁnal part of this paper.
A review of the literature established an idealreference source of materials and researchwritings concerning Islamic Banking, eventhough this merely covered the decade of the1980s (Ali and Ali, 1994). Using this and otherinformation sources, it was found that arange of published information was available.The information was in the form of PhD dis-sertations (El-Bdour, 1984; Khan, 1983), bookswritten by leading academics and practition-ers (e.g. Homoud, 1985; Shirazi, 1990), pub-lished research in the form of reports (e.g.Ahmad, 1987; Iqbal and Mirakor, 1987) and journal articles (e.g. Erol and El-Bdour, 1989;Erol
, 1990; Shook and Hassan, 1988; andSudin
, 1994).Relevant parts of the above informationsources, plus pertinent material from othersources are described in the three-sectionliterature survey below. In the ﬁrst section,