An Investigation into the Awareness, Understanding and Perceptions Held by Consumers of and Towards Islamic Banking and Finance

Qazim Ali Sumar

May 2009

Dissertation submitted to the University of Leicester in partial fulfilment of the requirements for the degree of BA Management Studies


Chapter 1 – Introduction –

1.1 An End to Capitalism?


Chapter 2 – Literature Review

2.1 History of Contemporary Economic Thought 2.2 Failures of the Free Market Capitalistic Ideology 2.3 The Ills of the Ideology 2.4 Islamic Economic Thought, The Ailment? 2.5 Islamic Banking and Finance 2.6 Opportunities for Islamic Banking and Finance 2.7 Challenges

7 8 9 11 13 16 17

Chapter 3 – Methodology

3.1 Multi Strategic theory 3.2 Research Design 3.3 Analysis 3.4 Sample 3.5 Channel

20 21 23 24 25

Chapter 4 – Data Analysis

4.1 Respondent Description 4.2 Awareness 4.3 Understanding 4.4 Perceptions 4.5 Triangular Causation Hypothesis

26 26 29 32 41

Chapter 5 – Conclusions

5.1 Awareness, Understanding and Perceptions 5.2 A Platform for growth 5.3 Limitations 5.4 Recommendations 5.5 Reflections

43 44 47 48 49

Chapter 6 – References

6.1 References 6.2 Appendices

50 63


Acknowledgments This dissertation, in its entirety is dedicated to Zahra, her honourable father, beloved husband and exemplary sons. Whose guidance continues to shed its light upon the paths I tread. I extend my appreciation to family and friends, for their kind words of encouragement. Heartfelt gratitude is offered to my supervisor, who throughout this arduous journey, was truly a sincere guide, offering the best of advice, and picking me up when I fell.


Abstract One of the substitutes being proposed to replace the current financial system is the paradigm surrounding Islamic finance. It proved crucial therefore to provide an evaluation of this proposal, in light of its opportunities and challenges, the foremost of the latter being discovered as the lack of consumer awareness and understanding of the sector, alongside the void of managerial insight of consumer perceptions. It was therefore sought to investigate these aspects, in hope of providing practicing managers the insight they needed to overcome the challenges faced by the sector and generate growth. The research incorporated quantitative alongside qualitative elements, the respective principles of which combined, and became manifest in an interview. Research was focused in Harrow, borough of London, due to its unique demographic diversity, the sample selected was 15 Muslim / 15 Non Muslim respondents, in order to reflect general opinions, as Islamic Banking and Finance is increasingly attempting to capture the mainstream market. Levels of awareness and understanding were found to be significantly low across the sample. The underlying factors of which were found to be excessive media influence on consumer perceptions. We proposed the “Triangular causation hypothesis” as an explanation for the lack of awareness and consequently demand.


Chapter 1 – Introduction
1.1 An End to Capitalism? On April 2nd of 2009, world leaders assembled in London for the G20 summit. The focal issue was to identify the factors which prompted the current financial crisis and to propose viable solutions for future prevention. The unequivocal conclusion reached was that major failures in regulation had been the main catalyst for the crisis; and that enhanced regulations alongside increased government oversight were vital in the restructuring of the economic system (Kennedy & Donaldson 2009). Over the past 18 months we have witnessed job losses in the millions, homeowners being forced out of their homes and severely stinted economic growth; while company directors, managers and derivative traders responsible for the crisis; have walked away with bonuses exceeding $500 million (BBC 2009B, Wang et al 2008). Free market capitalism has in effect increased the autonomy of financial markets to a level of societal detriment (Smart 2003). Alongside enhanced regulation, world leaders have expressed the need for an ethical code to be embedded in the market. Barack Obama recently stated “It’s not about dollar and cents, it’s about our fundamental values” (Obama 2009), Gordon Brown similarly stated “Our markets are in need of morals” (Cooper 2009). In light of economic reform, a system encompassing regulation and morality; while simultaneously allowing markets to flourish is highly sought after. Cooper (2008) on this note suggested religion, with its ethical connotations should not be afraid to voice opinions in search for a global solution. The Islamic Banking and Finance (IBF) sector, built on the ideas of Islamic economic thought yielded to this call many decades ago. It incorporates the morality, balance between regulation and autonomy world leaders are searching for. Furthermore the regulations and principles, to which it adheres, meant a complete aversion of the financial storm; nor would such a crisis even be conceivable (Qadri 2009).


In fact, in light of the crisis the sector experienced renewed growth at 30% and celebrated several new banks openings its doors, while many conventional banks were closing theirs (Oakley 2009; Safa 2009). The sector having avoided the financial storm drew the attention of numerous economists; with experts predicting exponential growth in the near future and others even proposing its complete implementation, providing it overcomes the obstacles standing in its way. The foremost of these considered to be consumer’s deficiency of awareness and understanding of the products and services it offers, and a void of managerial insight into what consumers actually think and feel about them. With the proposals of a refurbished economic and financial system bearing large similarities to IBF, it proves crucial to address the aforementioned barriers of IBF preventing it from such growth or even implementation. This dissertation therefore, seeks to investigate the awareness, understanding and perceptions held by consumers of and towards Islamic Banking and Finance. The findings will provide institutions offering Islamic financial services, a platform on which to formulate strategies in an attempt to overcome the challenges it currently faces. In chapter 2 we commence the evaluation of contemporary literature concerning Islamic economic thought and IBF in light of the failures of modern economic thought. Chapter 3 outlines the methodology employed alongside its epistemological and ontological grounding. Chapter 4 provides the analytical discussion pertaining to the findings. Chapter 5 will draw conclusions stemming from the data collection and literature review; recommendations and reflection will subsequently be offered at the close of this chapter.


Chapter 2 - Literature Review
This chapter endeavours to evaluate the vast body of literature concerning the failures of contemporary economics and the solutions offered by the Islamic economic paradigm. We venture to analyse the theory of IBF in views of its application, challenges and opportunities. 2.1 History of Contemporary Economic Thought The principles of modern economic thought were extracted from Adam Smith’s (1723 1790) famous ‘The Wealth of Nations’; in which he outlined the fundamentals of free market ideology. A theory which proposed the pursuance of self interests in a market void of regulations and government intervention would eventually result in societal welfare (Smart 2003). His ideas were implemented in the early 1900’s, and have dominated most of the 20th century. The first major collapse of free market ideology came in 1929 and lasted throughout the thirties, better known as the Great Depression. Economists attributed the failure to banks predominant involvement in risky activities (Khan 1999). Unemployment worldwide reached record levels, in the U.S a staggering 25% unemployment was witnessed; many believed this was the end of the free market ideology (Wolf 2009). What followed was managed capitalism through the ideas of Keynes, largely based on the manipulation of fiscal policies. As a result, the U.S experienced thirty years of continuous growth, a period referred to as ‘les trente gloriuses’. However in 1973, the U.S entered upon recession, and we saw a return to free market capitalism; termed neo liberalism (ibid). The pursuance of wealth contributing to optimal social welfare hypothesis was revived (Ibrahim 2000). The ‘rational economic man’ whose raison d'être was capital accumulation and Say’s law its sole point of reference, dictating economic health to be the sole result of market fluctuations (Chapra 1999), had been resurrected.


2.2 Failures of free market capitalistic ideology The employment of free market ideology has arguably led to a number of financial crises, most notably the 1929 Wall Street crash, Black Monday of 1987, Black Wednesday of 1992, the 1997 Asian crisis, the 2000 crash and the current subprime crisis. The main instigators of which have been identified as a lack of regulation, speculation and interest rates (Smart 2003). 2.2.1 The 2007 Subprime crisis The current crisis has so far taken $3 trillion of bailout and liquidity injections by various governments in an attempt to relieve its severity (Chapra 2009). The World Bank and International Monetary Fund (IMF) have predicted slowdown in global economic growth similar to levels post World War 2 (Farooqi 2009). It has so far claimed 5.1 million jobs in the U.S alone, experts predict that levels could top 10% by 2010 (Chandra & Benjamin 2009). In the U.K record levels of unemployment have been reached at 2 million (Taylor 2009). The excessive and imprudent lending in the U.S led to the subprime market collapsing. The bad debt generated was sold worldwide together with good debt through financial vehicles known as collateralised debt obligations (Chapra 2009). As homeowners began to default, institutions suffered tremendous losses; leading to the subsequent credit crunch. The outstanding debt of derivatives has been estimated at $600 trillion, more than 10 times the size of the world economy; rightfully earning the title ‘financial weapons of mass destruction’ (ibid). The lack of regulation allowed for such loans to primarily be issued and secondly be sold. Free market principles encourages financial markets to increasingly finance its operations on debt, Wolf (2009) reports the U.S financial sector aggregate debt escalating from 22% of GDP in 1981 to 117% in 2008, whereas in the UK; the figure reached approximately 250%.


A few of the institutions that have failed or been nationalised as a result of the crisis include Morgan Stanley, Lehman Brothers, AIG, Northern Rock and recently Lloyds TSB; however it has by no means contained itself to the financial sector, Woolworths and giant General Motors have also failed (Qadri 2009). 2.3 The ills of the ideology Free market capitalism has undoubtedly wrought inefficiencies out of the market, benefiting consumers through enhanced choice and lower prices; yet the question is, at what price? The income inequality between rich and poor nations is increasing (Wild et al 2008), while simultaneously the lowest levels of foreign aid contributions by developed countries have been recorded, despite their increasing wealth (Ahmed 2000). Drastic shifts have also been witnessed in employment. Labour under the free market is classified alongside the means of production, reducing people to mere commodities; Slater & Tonkiss (2001) refers to the trend as the liquidation of labour. Klein (2000) has reported extensively on the downward pressure capitalism has had on wages, labour and environmental conditions. Reports from the U.S testify to the income inequality; Durrani (2008) found executives earning 520 times more than the average worker. AIG is yet another example in light of which Barack Obama commented “ a corporation that finds itself in financial distress due to recklessness and greed, It’s hard to understand how derivative traders at AIG warranted any bonuses, much less than $165m in extra pay, while remaining afloat with tax payers money” (Obama 2009). Furthermore table 1 (insert table 1) show CEO’s of major financial institutions, receiving outrageous bonuses while their companies were failing. Durrani (2008) on these grounds proposed that what we’re experiencing, rather than an economic or financial crisis; is the catastrophe of human values.


2.3.1 Interest as a form of exploitation The inability of homeowners to make interest payments was the main catalyst of the current crisis. Ahmed (2000) proposes interest as being detrimental to economic activity as a whole. As interest payments along with principal amounts are made incumbent upon the borrower regardless of financial conditions, the borrower; a medium sized business for the sake of argument, will recover costs by raising, thereby aggravating inflation. Or perhaps cut costs by downscaling employment levels. Effects of interest rates are evident in economic tendencies. High interest rates are associated with a reluctance to spend, negatively impacting economic growth and new employment; whereas low interest rates are coupled with enhanced spending leading to positive economic growth, business expansion and job creation (Ibid). The charging of interest, Saidi (2008) argues, results in the systematic transfer of money from those that have less to those that have more, leading to the circulation of wealth among the affluent; evident in the widening gap of income and poverty levels. The widespread devastation following the crisis, as well as issues addressed in previous sections, clearly suggests the failure of free marker ideology; and its theory of social well being. The very definition of free market capitalism by Marx, “...its primary objective is not the satisfaction of human need, but the realization of profit” (Smart 2003:9), indicates the level at which society is prioritized within the free market. Furthermore, Keynes on such a society wrote: “The love of money as a possession – as distinguished from the love of money as a means to the enjoyments and realities of life – will be recognized for what it is, a somewhat criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease” (1963; 369).


2.4 Islamic Economic Thought, The ailment? Muhammad Baqir Al-Sadr (1935-1980) pioneered the revival of Islamic economic thought. In his 1960 magnum opus ‘Iqtisaduna’ (‘Our Economics’), he described a socioeconomic order which sought to replace the capitalistic and socialist principles which were dominating the Muslim world; an order he believed more capable of solving the contradictions of the capitalistic system and more able to satisfy human needs (Aziz n.d). Under the system a welfare state would be instituted, in which the government held responsibility for the provision of minimum essential needs of society; thereby ensuring the economic welfare of citizens. This would be achieved through taxes on income and savings, in adherence to Islamic law (Seestani 2000). These instruments allow for the funding of the welfare state, simultaneously serving as preventionary mechanisms against wealth amassing and circulating among the affluent minority. It is therefore unlike the capitalist state which leaves all functions to fluctuations of the market, and nor is it like the socialist/communist order advocating full state ownership. The state merely directs the direction of economic activity, while giving individuals the right of private ownership (Aziz n.d). The intervention by the government within this paradigm is therefore not to hinder freedom of trade, but rather oversee economic activity in ensuring societal well being (Presley & Sessions 2004). Even though the advent of IBF was relatively recent, its foundations lie in the Holy Quran (sacred scripture revealed in the 7th century) and the Sunnah (sayings and actions of the Prophet Muhammad p.b.u.h.f) (Monger & Shadeh 2008). From these sources directly, or indirectly through analogy and reasoning; Shariah law is derived (Ainley et al 2007; AlOmar & Abdel-Haq 1996). It addresses every facet of life, ranging from social, political and economical spheres; guiding man not in only in the relationship with God, but also with members of society (Islam 2008). Following are a few verses from the Holy Quran forming the basis of the Islamic economic/financial system:


Chapter 3, Verse 130: “Oh you who believe! Devour not usury (riba), doubled and multiplied; but fear God that ye may prosper” Chapter 30, Verse 39: “And remember whatever you may give out in usury (riba) so that it might increase through other people's possession will bring you no increase in the sight of God - whereas all that you give out in charity, seeking God's countenance, will be blessed by him for it is they, they who thus seek His countenance that shall have their recompense multiplied” The prohibition of usury/riba forms the basis of the IBF system. Al-Omer & Abdel-Haq (1996) describe riba as the premium the borrower must pay to the lender along with the principal amount as a condition for the loan or for an extension in its maturity (modern day interest), this form of riba is not permissible within IBF as it is seen as exploitative; bearing negative effects on the economy as previously discussed. It’s worth mentioning that IBF is not alone in its stance against interest rates and speculation (Dar & Presley 1999), rather western theorists such as Minsky, Greenwald, Stiglitz, Bernante and Gertler have all identified a relationship between interest rates, macroeconomic instabilities and cyclical fluctuations (Matthews et al n.d). There is even reference within the Old Testament to the prohibition of interest, within the chapter of Exodus. The Islamic paradigm encourages entrepreneurship and innovation ensuring maximum utilization of global resources and economic growth; channelling rewards to individuals alongside society (Bhatti & Khan 2008). In addition to interest, Shariah prohibits speculation, business risk is obviously inescapable in any system, rather in reference to derivatives, swap, futures and CDO’s, the main catalysts of historical financial crises; are not allowed due to the devastation they cause. Areas of investment are also restricted within the system, investment in products/services deemed impermissible by the religion such as alcohol, weapons, pork and pornography are not allowed (Islam 2008).


As you can see, Islamic economics is more than just interest free banking, rather it is a complete concept of an economic system; rejecting many of the norms associated with contemporary thought (Ahmed 2000); “preferring to marry the freedom and innovation of the market economy to the fairness and balance of social democracy” (Hassan 2008; 28) 2.5 Islamic Banking and Finance The establishment of IBF was introduced to allow Muslims to bank in adherence to religious principles (Zaher & Hassan 2001). Today’s main fully Shariah compliant Islamic players such as Kuwait Finance House, Dubai Islamic Bank and Faisal Islamic banks were formed during the 70’s as a result of increased liquidity in the Middle East region following the boom in oil prices (Grose 2008, Khan & Bhatti 2008C). In the early 1980’s Iran, Pakistan and Sudan transformed financial sectors to fully function along Islamic principles (Ibid). Despite IBF’s 40 year history, it was only following the millennium shift the sector began experiencing increased growth and sophistication. Products and services currently range from current/savings accounts, home financing, asset leasing, bonds, insurance, private equity and asset management through to corporate financing (Ibid). Retail Islamic products began appearing on UK high streets in the early 1990’s but were limited in scale (Ainley et al 2007); the first insurance products were introduced as recently as 2008 through U.K’s and western Europe’s first Islamic insurance company; ‘Principle Insurance’ (Oakley 2008). The U.K was also home to the wests first wholly Shariah compliant bank, Islamic Bank of Britain (IBB); established in 2004 (FSA 2006). The sectors growth and potential has led conventional financial institutions such as HSBC, Citigroup, Merrill Lynch, Deutsche Bank, Barclays and Lloyds TSB; (Zaher & Hassan 2001, Bundhun 2009) to establish Islamic subsidiaries or ‘windows’ attempting to capitalize on the growing market (Maurer 2001).


The U.K government has shown distinctive determination in the promotion of IBF, with the intention of establishing London as the western financial centre of IBF (Landberg & Vina 2006). Efforts include pursuing avenues towards the issuance of Islamic government bonds, as well as the abolishment of double-stamped duties in a move to further encourage Islamic mortgages (The Economist 2008B). Table 2 (insert table 2) is indicative of the U.K’s success in pursuance of its objectives; by achieving ranking above Muslim states such as Pakistan and Egypt. Furthermore, table 3 (insert table 3), lists the 5 wholly Islamic and 23 subsidiaries of conventional banks who contribute to the success (Shoon 2009). 2.6.1 The Theory in Practice The range of products and services are based on 4 main principles, Musharaka, Murabaha, Mudaraba and Ijara (Insert item 2 for glossary of terms) (Al-Omar & AbdelHaq 1996, HSBC Amanah, Khan & Prodhan). The Current/Savings accounts are based on Murabaha principles; where rather than payable interest, the funds are invested in commodities, which are subsequently sold to the bank at a profit earning both client and bank dividends (HSBC Amanah). The principles behind mortgages are Murabaha, diminishing Musharaka or Ijara. In the preceding two, the bank purchases the property as a proxy, and then resells it to the client through fixed installments earning the bank a profit. Upon completion of payment schedule, property rights are transferred to the client. Ijara, is similar but is essentially a substitute for leasing, where the installments represent rental payments (Khan & Prodhan 1992). Musharaka and Mudaraba principles apply to the investment and corporate finance products. The latter resembles venture capitalism, where the client provides expertise and management while the bank provides capital. Profit is shared at pre agree ratios, whereas the loss is borne solely by the provider of capital.


Musharaka can be referred to as a joint venture, where both parties contribute funds as well as management and expertise. Profit is shared on pre-agreed terms whereas loss is borne in proportion to capital contribution (Al-Omar & Abdel-Haq 1996). The client/bank relationship can therefore be likened to mutual shareholders, where profits and losses are aligned to collective performance (Qorchi 2000). This consequently means Islamic institutions will be in competition not only with conventional banks, but with venture capital firms, investment companies and merchant banks as well (Naser & Moutinho 1997). Due to banks enhanced exposure to risk, the likelihood of client defaults is reduced. DiVanna (2009) argues that based on the relationship structure, banks will endeavor to provide more support and are likely to restructure terms; essentially meeting the needs of clients. IBF in this way assists consumers in securing much needed finance in circumstances where they perhaps would have failed without it (Tlemsani & Matthews 2004, Saidi 2008). Due to speculation restrictions in instruments such as derivatives and CDO’s; investors along with society are protected from excessive risk (Balfour 2008, Desai 2008). IBF’s reliance on classical funding through depositors, rather than on money markets like their conventional counterparts, who in 2008 were lending out £700 billion in excess of their deposit base (Hassan 2008, The Economist 2008) means they are less affected by credit freeze’s (Martin 2008, Billing 2009). 2.6.2. Past, current and predicted growth of Islamic Finance Wilson’s (1999) prediction of IBF’s ‘meager’ future could not be farther from the truth. The sector is flourishing in Africa, Asia, Europe and to a lesser extent in North America; reports show the existence of 300 financial institutions across 70 countries providing Islamic finance (Khan & Bhatti 2008).


The sector has experienced annual growth of 15-20%, however accelerated to 30% over the past two years (Khan 2009, Safa 2009); Deutsche Bank head of operations has been quoted stating “Islamic Finance is growing at the speed of light” (Tett 2006; 1). IBF’s assets under management were estimated by the Boston Consultancy Group at $400bn in 2008, up from $100bn in 2000 (2008); growing at 23% compared to 10% compared to assets under conventional management (Bremner & Shameem 2007). Standard & Poor’s estimate however that the potential market lies close to $4 trillion, suggesting 90% of the market has yet to be capitalized (2007). Khan & Bhatti (2008) make similar predictions; within 10 years they propose 40-50% of global Muslim savings being held under IBF’s management. 2.7 Opportunities for Islamic Banking and Finance The collapse of financial markets has provided an opportunity for IBF to flourish as many have lost confidence in conventional finance. The trend towards ethical consumption coupled with the rapid growth of Islam is briefly discussed in subsequent sections. 2.7.1 Islam, the fastest growing religion Reports suggest that Muslims account for approximately 20-25% of the world’s population (The Economist 2008B, Saidi 2008), and is the world’s fastest growing religion (Albrecht 1998). IBF instruments currently represent 1% of the global Muslim population’s financial instruments and therefore represent a huge opportunity (The Economist 2008B). Paul Sherrin, head of Lloyds Islamic operations said “Britain is home to a large and fastgrowing Muslim community, but many have found their financial needs left wanting” (Abu-Shakra 2006; 2, Anker 2006). Reports estimate 2-3 million Muslims in the U.K, representing 50% of ethnic minorities and 3-5% of the total population.


The 5,000 richest Muslims in the U.K are reported to have liquid assets of over £3.6 billion, and 5,000,000 have annual incomes in excess of £30,000, making these excellent prospects for IBF. There are also 0.5 million Muslim visitors annually spending approximately £600 million (FSA 2006, Duckers 2002, Mawson 2002). 2.7.2 A shift towards ethics and morality Since the neo liberal turn in the 1970’s we have witnessed an increased interest in ethical investment and corporate social responsibility (Snider et al 2003). Reports reveal that in 2003, 11.3% of total U.S assets under professional management were invested in ethical instruments (Benson et al 2006). The ‘greed is good’ mantra which led to the crisis has affected consumer’s confidence; a Merrill Lynch report suggests consumers will become more conservative as to where they keep their money (Siddiqi 2008, Miller 2009). On this note the director of HSBC Amanah Malaysia suggested IBF not being restricted to conservative or radical Muslims but has become mainstream business (Shameen 2005). Transactions within IBF are the epitome of honesty, justice and equity (Haron & Azmi 2008); hence embracing the philosophical underpinning of ethical investments. Furthermore the principles and structures of ethical financial products are more or less identical to IBF (Knight 2006). The potential for IBF therefore stretches beyond religion, race or nationality; it appeals to the morality within every man. 2.8 Challenges The main obstacles of IBF today comprise of the lack of consistency in regulations, the void of human capital and more importantly the unawareness of IBF’s theological backdrop.


2.8.1 Lack of regulations and regulators Shariah being derived partly through reasoning and analogy, differences in interpretation are inevitable and have become a source of inconsistency across banks and products (Khalaf 2007). The 2002 central bank summit in Washington aimed to address this issue by pursuing avenues towards establishing an international regulating board (Sundararajan & Errico 2002), however with a lack scholars grounded in Islamic jurisprudence alongside an in depth understanding of financial instruments, there are no regulators to actually serve on the board (Khan & Bhatti 2008, Singh 2009, Bokhari 2008). Even regular IBF bankers are proving difficult to locate. Iqbal & Mirakhor (1987) and Alibhai (2006) suggest this is due to the high levels of requirements IBF bankers must meet; knowledge of conventional finance, Islamic finance, Shariah law and investment evaluation capabilities, due to the nature of IBF. These factors have translated into growth hindrance, as innovation, development and consistency requires bankers and in this case scholars (Poolton & Ismail 2000, Noman 2002). 2.8.2 Awareness, Understanding and Perceptions. The lack of consumer awareness of IBF and its products has been suggested to be one of the main barriers in preventing the sector from reaching its potential (Cunningham & Gerrard, Naser et al 1997, Gait & Worthington 2007). Secondly, those that are aware of its existence do not understand how they work and are oblivious to the product structures (DiVanna 2009, Zaher & Hassan 2001). Despite such findings, not much seems to have been done by banks in order to educate or even promote their products. As Sole’ (2007) emphasized; “the degree of success will lie in whether potential customers are informed and understand the products” (16). Yet both the HM Treasury (2008) and Murtuza (2002) agree and acknowledge the minimal mainstream media interest surrounding IBF; in stark contrast to general promotion and advertising theories; the purpose of which are to build awareness; in an attempt to remind consumers of the existence of the brand or product and entice purchase (Fill 2002).


Little research has discussed the underlying reasons for this phenomenon; we propose that the cause may lie in the opinions of Islam held by the general population. Mazrui (2006) suggests that the image of Muslims across the globe is often one of negative contexts; Karbhari, Naser & Shahin (2004) concurred with Mazrui in regards to the poor attitude often held of Islam, this issue will form part of the ‘perceptions’ aspect of the investigation. Through the evaluation of the literature we identified many of the economic and social ills associated with free market ideology. Economists in unison are blaming the system for the current financial crisis. The analysis of the literature allowed us to grasp the solutions Islamic economic encompassed; which would lead to the avoidance of the all too often market collapses. It highlights then, with the current paradigm shift in economic policy, and IBF a proven substitute; alongside a growing Muslim population and enhanced interest for ethical investment, the importance of the examination as to where the industry stands with consumers. The findings of which, will enable institutions to informatively pursue avenues in which to generate growth. This study then, seeks to investigate the levels of awareness, understanding and perceptions held by consumers of and towards IBF; within the general population of London Borough Harrow.


Chapter 3 – Methodology
In this chapter we venture to describe and evaluate the chosen methodology and the underlying factors for its employment. An outline of each component of the research process will be provided. 3.1 Multi Strategic Theory Research tends to encompass a particular research theory, pending upon nature of research; it will either be quantitative or qualitative or a combination of both. The research theories can “ viewed as exhibiting a set of distinctive but contrasting preoccupations; that reflect epistemologically grounded beliefs about what constitutes acceptable knowledge” (Bryman & Bell 2003;21); the theories in essence seeks to discern matters in contrasting fashions. Quantitative research emphasizes quantification in the collection and analysis of data. It adopts a deductive approach to the relationship between theory and research, in an attempt to test hypothesis (ibid). The focus of qualitative research however “lies with depth rather than breadth” (ibid; 289). It predominantly emphasises an inductive approach to the relationship between theory and research, where emphasis is placed on the generation of theories. The epistemological position can be described as interpretivist, meaning that an understanding of the social world is sought rather than the static view of social life which quantitative research provides (ibid). The ontological position associated with qualitative research can be described as constructionist implying that social properties are outcomes of the interactions between individuals, in contrast to the objectivist ontology assigned to quantitative methods that reifies the social world (ibid). In table 4 (insert table 4) you can further see the contrasting concepts of the two theories. The use of each theory can be justified by its own merits. Quantitative research tends to signify higher validity and reliability, through the opportunity and ease of re-testing, establishing causation by using variables and the possibility of generalising findings


(Bryman & Bell 2003). However, what this means as we briefly mentioned earlier, is that it fails to distinguish people and social institutions from the world of nature. It describes phenomenon through mere figures thereby discarding any social context (ibid). In contrast to which qualitative research seeks to explore the experiences, perceptions and feelings of participants; in relation to contextual characteristics (ibid). The contextual significance is extremely important in this investigation. With the current economic climate and sudden escalated growth of IBF, it proves crucial to analyse the perceptions of consumers in light of these factors. However qualitative research is also far from ideal. Criticisms levelled at the theory include issues of subjectivity, validity and problems with replication and generalisation (Kumar 2005). Furthermore, the process of coding in the analysis of qualitative data has been accused of being unreliable; due to the inevitable impact of researchers own demographics while interpreting responses (Bryman & Bell 2003). As the research question comprises of two distinct aspects; awareness alongside understanding (quantitative) on one hand and perceptions (qualitative) on the other; the theory chosen would be required to facilitate both these aspects. As each theory in and by itself would fail to do so, we decided to employ a multi strategy theory. Several approaches of this theory exists, however we chose the complimentary approach classified by Hammersley (1989); in which the two separate theories are employed in order that different aspects of an investigation can be dovetailed. 3.2 Research Design In order to capture aspects of both quantitative and qualitative elements; an interview encompassing both structured and semi structured facets will be employed. Bryman & Bell (2003) suggests the interview being a prominent data collection technique for both quantitative and qualitative research. Robson (2002) suggested that an interview allows the researcher to elicit all types of information from the respondent, ranging from beliefs, attitudes, values and perceptions.

The quantitative aspects of the interview will be structured, coupled with close ended questions. This will allow for increased standardization, reducing any error of variability that may occur due to interviewer inconsistency or misinterpretation and enhancing the facilitation for comparability and analysis of data (Bryman & Bell 2003). “Close ended questions are extremely useful for eliciting factual information...” (Kumar 2005; 134), and enhances the validity and reliability of the study. On the other hand, the qualitative aspects demand a semi structure nature alongside open ended questions. Referring back to Kumar’s statement, “...whereas open questions are useful for seeking opinions, attitudes and perceptions” (2005; 134). As responses or hints are not offered, it encourages respondents to volunteer more of their personal information, allowing the researcher to gauge pure attitudes and opinions (Bryman & Bell 2003). The semi structured nature will allow for deviation and probing from and into predetermined questions, where opportunities to gain a deeper understanding arises (Saunders et al 2007). The structure cannot however be classified as solely semi structured, it undoubtedly incorporates elements of a focused interview as termed by Merton et al (1956; Bryman & Bell 2003), due to the relatively narrow focus of the questions. The combination of structures and question types provides the unique combination which will yield responses satisfactory to the posed question. By employing a mixed method, it allows for the avoidance of criticisms associated with each theory in its singularity, while facilitating for the capitalization of strengths in their plurality. Item 1 (insert item 1) a blank copy of the interview schedule, as you can see, each quantitative element is complemented by qualitative features. The informal conversational style of the interview is suggested to lead to respondents feeling more comfortable in sharing opinions and feelings; more so than in a questionnaire (Saunders et al 2007). The physical proximity also allows for questions and concepts to be explained, discussed or clarified if necessary.


Moreover, face to face contact allows for non verbal reactions to be gauged and if deemed fruitful probed and investigated (Bryman & Bell 2003). However, personal contact could also act as a catalyst for respondent bias, “where the respondent makes an attempt to construct an account that hides some data, or generates false data in order to portray him/herself in a socially desirable role” (Saunders et al 2007; 600). Another bias that may influence responses is the interviewer bias; where researcher’s comments, tone or non verbal behaviour may manipulate responses. 3.3 Analysis The first step in the analytical process is deciding how to record the information. One option would by the use of a tape recorder, the use of which allows the researcher to fully concentrate on the responses and behaviour of the subject; it would subsequently facilitate easier analysis (Saunders et al 2007). However while conducting the pilot interview, we found the test respondent focusing quite excessively on the device, showing signs of anxiety and hesitance when answering questions, especially question 9 onwards. Kumar (2005) suggests that the use of a recording device may inhibit or alter responses to a certain degree, due to an increased likelihood of respondent bias. We therefore resorted to note taking as we felt that brief yet ‘true’ responses held greater value in comparison to extensive yet potentially ‘contaminated’ ones. Microsoft Excel will be employed to statistically analyse and graphically present quantitative findings. From the blank interview, you will notice several personal factual questions at the outset; these will take shape as variables in trying to establish causation and trend identification. More sophisticated methods of analysis such as models of bivariate analysis were deemed unnecessary in relation to the question at hand and were therefore discarded (Bryman & Bell 2003). With the qualitative data being in the form of words, sentences and at times even paragraphs; the analysis proves more difficult. Common forms of analysis include ethnographic coding and grounded theory; both requiring a process of coding (ibid).


The issue with coding is the possible loss of context as responses are categorized and removed from their sequential order; as well as likelihoods of errors in measurement arising as a result of the variability of the coding process (ibid). Based on these factors, examination of qualitative data will take the form of descriptive analysis. Bryman & Bell (2003; 295) state “...qualitative researchers are more inclined to provide a great deal of descriptive data when reporting the fruits of their research”. Descriptive analysis emphasizes the importance of contextual understanding, the very foundation of an interpretivist epistemology; grasping perceptions of a social group in relation and context to the specific environment in which they operate. 3.4 Sample Dar & Presley (2004) reported London as being the home of 45.2% of the U.K’s Muslim population, the choice of London and Harrow was therefore primarily influenced by its demographic nature alongside its residential proximity; Harrow being one of the few local authorities with an ethnic majority population, and the most diverse religious make up (Harrow council 2008). Table 5 and 6 (insert table 5 & 6), statistically represents the various ethnic and religious groups within the borough. This provides an additional aspect to the findings due to the enhanced exposure of respondents to different cultures and religions. Selecting an appropriate sample is crucial. We established Muslim and ethical consumers as the natural market for IBF, but in light of recent financial developments and subsequent confidence issues; the general consumer market also holds potential. Hence the sample needs to be representative of these factors. A system of stratified random sampling was therefore chosen, where random selection takes place within defined respondent categories (Bryman & Bell 2003). The pursuit of an ‘ethical’ consumer group would prove unfeasible, so two categories were established; Muslim (MU) and Non Muslim (NM).


Through the division of respondents, enhanced levels of causation and trends can be identified for each category; a system of random or systematic sampling may not have captured a sufficient fraction of each market and data would therefore be rendered shallow. The sample will consist of 30 respondents, 15 for respective categories; reflecting a compromise between the constraints of time and need for precision (ibid). The compromise in size facilitates for enhanced insight of qualitative elements, while still providing significant breadth for validation of quantitative aspects. In light of this sacrifice Saunders et al (2007) suggest that data collection and analysis, with regards to the understanding and validity that can be gleaned from the data; is more important than the size of the sample. 3.5 Channel The success of stratified sampling is reliant upon the relative ease of category identification (Bryman & Bell 2003). Avenues were therefore pursued which allowed for alleviated respondent classification; the vicinity surrounding the local mosque (Muslim place of worship) was therefore approached for gathering data for the MU category, whereas the town centre was used to fulfil the NM quota. Actual research subsequently took place upon completion of interview schedule and determination of time and locality. The research took place over a two week period; the MU category was sought on two consecutive Fridays due to the weekly prayers being held in the mosque providing the opportunity to gather data. Whereas the NM sample was gathered throughout the two week period, with no attention paid to day or time. We felt the interview process was quite successful, with relatively positive levels of willingness to participate and insightful responses given. The next chapter seeks to analyse and discuss the collected data.


Chapter 4 – Data Analysis and Discussion
In this chapter we endeavour to analyse and discuss the findings. An analytical discussion will unfold drawing contrasts between the lack of awareness and consumer perceptions. While some respondents gave consent to use their names, others did not. Respondents will be therefore by referred to as either MUx signifying Muslim respondent x, or NMx representing Non Muslim respondent x, with ‘x’ representing the number of the participant. Respondents range from MU1 – MU15, and NM1 to NM15. Prior to the analytical sections, a brief description of the sample will be given. 4.1 Respondent description In graphs 1 – 5 (insert graphs 1 - 5), a demographic breakdown of MU respondents is graphically presented. With the MU category, we see the sample had a male majority of 67%. Age wise respondents were fairly evenly spread out between 25-48 years. Majority of respondents had completed A-levels, but degree level was also significant. The sample consisted of 53% British nationals, and 47% of immigrants. The 47% included Indian, Pakistani and Bangladeshi nationals. However, descents of all British nationals were found in these three countries. The majority of foreign nationals had lived in the U.K for less than 20 years. The NM sample was relatively similar (insert graphs 6 - 9); a fairly equal distribution of ages 25-48 was found. Majority of respondents were university graduates, however A-level completion was also significant. The gender distribution was one sided, with 80% male respondents. Concerning religious beliefs, majority of 47% were atheists with Christianity following at 33%. 4.2 Awareness Graph 10 (inserts graph 10) depicts basic existential awareness of IBF, 100% of MU and 86% NM respondents were aware of IBF; though the extent of their awareness differed substantially.


Graph 11 (insert graph 11) shows respondents awareness of banks offering IBF. 80% of total respondents were able to identify IBB as one of the providers, beyond that however levels were significantly low. From MU respondents, 60% and 33% identified HSBC and Lloyds respectively, with only 20% exhibiting awareness beyond these three. Moreover, the insignificant 20% that did identify beyond IBB, HSBC and Lloyds could be explained through contextual analysis. MU3 expressed a particular interest in IBF, and said he had been following its development; whereas MU5, had exposure to the finance sector as a whole due to his occupation as an investment banker. Only one NM respondent managed to indentify beyond IBB; NM8. He displayed awareness of 9 out of the 11 institutions mentioned; his awareness however, similarly to MU3 and MU5, can be attributed to context, upon investigation we notice his occupation as a bank manager, therefore suggesting particular exposure to developments in the industry. Respondents awareness of products and services offered within IBF are displayed in graph 12. MU respondents exhibited high levels of awareness of current, savings and deposit accounts along with mortgages; with 66% identifying the former and 80% the latter. However yet again, 20% of respondents were responsible for the remaining product awareness levels. Investment banker MU5 exhibited awareness of 6 out of the 7 products that were mentioned. MU6 managed to identify all products, upon contextual investigation; we find he actually held an Islamic corporate loan, and furthermore was a Pakistani national; Pakistan as we mentioned earlier has an entirely Islamic financial system. These factors can therefore be said to contribute to his awareness. In regards to NM respondents, we notice similarly to bank identification, levels were extremely low. In this instance only two respondents could identify any products. Bank manager NM8 again displayed high levels of awareness by identifying all of the products mentioned. NM9 exhibited awareness of the Islamic mortgage; however we find the respondent being an estate agent who had come into contact with the product; providing additional evidence of awareness being a result of particular circumstances.


Graphs 13 and 14 (insert graphs 13, 14) depicts respondents source and channel of information. As suggested by graph 13, 85% of MU respondents stated word of mouth as one of the sources through which they gained awareness. 46% proposed that the mere sight of an Islamic bank’s branch contributed to their awareness; upon further inquiry this was found exclusively to be IBB. Newspaper articles were a source of awareness for 33% of respondents; additional probing revealed these to be limited to broadsheets including The Financial Times and Daily Telegraph. Television adverts represented 13%. Further questioning found the adverts were aired solely on foreign channels available only via satellite TV, adverts were further found to be for IBB only. Two respondents stated Magazines as a source, but yet again these were not mainstream, rather specialist magazines dedicated solely to finance developments. Awareness through occupation was only found to be true to one participant. The ‘other’ category included sources such as awareness through nationality. For NM respondents (insert graph 14) the majority’s source of information was the mere sight of an IBB branch, representing 73% of respondents, which was reflected in the extent of awareness exhibited. Newspapers (broadsheets) were proposed by 20% of respondents. Awareness through occupation represented 13%, these were the bank manager and estate agent mentioned earlier. Word of mouth and Television was stated by one respondent respectively. Upon further questioning, it was found that the TV advert was similarly to MU respondents, on a foreign satellite channel and related to IBB. The results collectively gesture towards considerably high levels of awareness, yet the extent of which is considerably low. Only respondents with circumstances leading to increased exposure were found to have significant levels of awareness. Further elaborate discussions will unfold in subsequent sections.


4.3 Understanding The understanding element will be quantitatively analysed using a familiarity rating. Several variables will be examined in correspondence to familiarity in order to identify any trends. Graph 15 (insert graph 15) shows the relationship between gender and familiarity for the MU category. A significant difference was discovered between genders; males with an average familiarity rating of 2.4 whereas females a mere 1. Even bearing in mind the unequal distribution in gender (graph 2), a closer look revealed every female respondent having a rating of 1. As the NM category displayed a general lack of familiarity across the board; similar analyses would prove futile. The significance of age in relation to familiarity is showed in graph 16 (insert graph 16). The 33-40 MU group exhibited the highest level of familiarity. However as investment banker MU5 and engineer MU7, who also owned an Islamic mortgage, both displaying significantly high levels of familiarity fell within this group; it inevitably influenced the group’s average. The NM respondents in the 41-48 bracket showed higher levels of familiarity than the MU respondents. However, bearing in mind contextual features; bank manager NM8 and estate agent NM9 both exhibiting considerable familiarity, belonging to this age bracket naturally offset the average. Disregarding contextual factors however, a clear trend of familiarity among ages 33-56 was found. A relationship was also found between qualification levels and familiarity. Graph 17 (insert graph 17) gestures towards the notion that higher levels of education signified a greater level of familiarity, especially within the MU sample. The exception is the apparent higher familiarity within the A-level group in comparison to the degree group.


Upon contextual analysis, we find that the A-level average was influenced by MU6 who had a familiarity rating of 4. By discarding his rating, we find the average would have been a mere 1, thereby supporting the trend of heightened familiarity corresponding to qualification. The period of residency in relation to familiarity also revealed a relationship, yet slightly less significant. In graph 18 (insert graph 18, blue line) you can see the level of familiarity continuing to increase corresponding to period of residency. Familiarity at point 0 represents the average level of familiarity of British nationals, the relationship may have proved stronger had this value not been offset. Both investment banker MU5 and engineer MU7, were British nationals, by discarding their ratings, the average would have been 1.3; thus highlighting the trend between familiarity and period of residency. The New Average series (insert graph 18) plots the new average. Further insight was sought of respondent’s familiarity concerning the underlying tenets of IBF. As discussed in section 2.4, these comprise of prohibitions in the charging of interest, speculation and restrictions on investment. Graph 19 (insert graph 19) depicts 86% of MU respondents correctly identifying the prohibition of interest, whereas a meagre 26% and 20% identified speculation and investment restrictions respectively. This also stemmed from contextual factors, as MU3, MU5 and MU6; all of whom had high levels of familiarity and understanding due to personal circumstances, were the only respondents successfully identifying the other two principles. This further emphasises the low levels of familiarity found among the MU category. The levels shown for NM respondents were based solely on responses by bank manager NM8 and estate agent NM9, accentuating the role of occupation or special context in awareness and familiarity for Non Muslims.


An evaluation of respondent’s knowledge concerning specific terms and product structures surrounding IBF was also desired. This refers to question 4 of the interview, where respondents ability to explain the terms Musharaka, Murabaha and Mudaraba was examined; these being the main product structures used in IBF. In keeping to expectations, majority of the sample were oblivious to the terms and product structures, in exception of the respondents to who frequent reference has been made. MU5 and MU6 correctly defined the terms, MU3 vaguely managed to do so. MU7 correctly identified the term and structure of mortgages, Murabaha; due to the respondent owning an Islamic mortgage. From the NM sample we find NM8 was not aware of the actual terms, but correctly described the product structures and NM9 similarly to MU7; correctly described the mortgage principles. In summary of the above outlined findings then, we find the level of awareness being quite high. However, the extent of this awareness was fairly shallow; especially among NM respondents; whereas the MU sample exhibited a slightly superior awareness being able to identify a few institutions and a small selection of products. In relation to understanding, general findings revealed a significant lack of familiarity across the variables. Higher familiarity was found in males, between ages 33-56, with higher educational qualifications and especially among foreign nationals. Even though MU respondents displayed slightly enhanced awareness and understanding in comparison to NM, which was expected, the extent and level of the awareness and understanding was significantly low among the majority. The data supports findings by Cunningham & Gerrard (1997) who found similar levels of awareness. In their study, a mere 20.7% of respondents were aware of the term Riba (interest) and a further insignificant 31% knew what Shariah meant. What this shows is not only a lack of awareness in regards to IBF, but towards the religion in general.


The findings also correspond with Naser et al (1997), who found a complete unawareness of the terms and product structuring associated with IBF. The analysis revealed that only respondents with special circumstances, such as an occupation providing exposure, an explicit interest or actually owning an Islamic financial product were likely to have particularly high levels of awareness and understanding. The contextual analysis allowed for this enhanced insight to be grasped; highlighting its importance within business research. The relationships discovered between familiarity, education and residency were also supported by Dar & Presley (1999) and Metawa & Almossawi (1998), who found a majority of potential and current IBF customers, were well educated and of Middle Eastern or Indo/Pak nationality. In regards to the sources of information, a crucial point to note is the nonexistence of IBF within mainstream media. Internet, TV, magazines and billboards promoting the services and products were completely absent. The TV and magazine sources that were mentioned, were not mainstream, rather satellite TV and specialist magazines. The insignificant levels of awareness and understanding can therefore be attributed to the lack of promotion and advertising. Institutions appear to have neglected the marketing and promotional aspects of their operations. The possible reasons pertaining to this will be discussed in subsequent sections. 4.4 Perceptions This section seeks to offer an insight into the opinions, feelings and general views held by respondents towards not only IBF, but Islam as an entity; which was mentioned briefly in section 2.8.2 as being a possible hindrance to the sectors growth. Responses from question 9 onwards of the interview provide the basis of analysis. 4.4.1 Perceptions of IBF Due to the general lack of understanding found across the sample, the main tenets of IBF were explained, especially in relevance to the financial crisis; prior to asking questions.

Concerning the support for a completely Islamic financial system, 93% of MU expressed direct support for the proposal, whereas 93% of NM articulated the antonym. The negative consequences of the crisis and the ethical considerations IBF encompasses were found to be the foremost factors underlying the unequivocal support by MU respondents. We find MU R5 stating: “Yes if it can help the economy. The current financial system seems to be based on greed. We’ve all heard about the excessive bonuses and frauds” MU R14 stated “Yes, would be good. As I said earlier, I’m self employed, I run a small business and the credit crunch has made things very difficult” On the other hand, several MU respondents including MU R3, MU R5 and MU R7 motioned towards the idea that an Islamic financial system would never be implemented; regardless of its array of benefits. MU R5 suggested that as the government would forego tax payments from industries restricted under the Islamic system, it would not be implemented. He states “Didn’t you know the pornography industry has received bailouts?” It’s interesting to note that respondents with such opinions all had either significant qualifications or higher levels of awareness and understanding of IBF. The factors behind the collective rejection by NM respondents were primarily based on concerns for choice and freedom within the market. NM R1 stated: “No, I mean it’s good that Muslims here can bank the way they need to, but I don’t see a need for the whole system to be like that. There needs to be a choice for everyone; and I’m sure there is a way out of the financial mess other than Islamic banking” NM R14 stated “No, there should be a choice for everyone; you cannot force everyone to have Islamic accounts, when not everyone is Muslim”


From the NM sample, only NM R12 expressed support for an Islamic system. He stated: “Yes, if it can provide a system that accommodates everyone and not just Muslims”. Alongside the MU respondents undeniable support for an Islamic financial system, 93% also expressed an interest for the products and services; highlighting the potential market within Muslim consumers. Yet the question arises as to why they had yet to adapt the services, bearing in mind 100% of MU respondents had an awareness of IBF. However, as discussed earlier, the awareness exhibited was considerably basic, while only a select few had an understanding of the sector; this was found to be the main reason why the majority of MU respondents had yet to switch their services. MU R14 stated “Yes I would be interested, perhaps if someone explained how it works and if it’s competitive”. Future considerations based on further investigations were also expressed, such as MU R15 who stated “Yes, I’m actually looking for a mortgage at the moment; I will now definitely look into it and see what’s available”. When asked about the main reasons or motivators pertaining to the willingness and interest in switching services; the societal benefits of the system and its embedded ethical principles were again found to be the main attractors rather than Shariah legislation. With the lack of understanding being identified as the main antagonist of consumption, it however fails to account for respondents with significant understanding who have yet to ‘convert’ their finances to Islam. Investment banker MU5 is an example of this, he states: “I’m quite weary of the service, even though it’s got the Shariah stamp; the fact that they charge payments at levels similar to interest, suggests it’s exactly the same, just with a different name. Even the assistance in granting credit they supposedly offer those less qualified for loans, the fact that the bank becomes a partner and is therefore exposed to risk, means they will be even more stringent than conventional banks. Therefore even though it may be called Shariah, in my opinion I think it’s just the same”.


As you can see he felt IBF bore similarities to conventional banking, and did not therefore see a need to switch. This issue will be addressed briefly in the conclusion. MU6 similarly exhibited significant levels of understanding; however, he actually owned an Islamic financial product; a corporate loan from IBB. Upon enquiry of the underlying motivations pertaining to this, he suggests the willingness to comply with religious beliefs led to his decision. Upon analysis however, we notice besides the Islamic loan; he also held a conventional mortgage with Lloyds and current/savings accounts with NatWest. The enquiry emerged as to why he had not acquired Islamic versions of these, in keeping with his beliefs. He stated: “I got the loan from IBB at a fairly competitive price and with the partnership structure enabling me to get expert advice I thought it was a really good deal. However, I found with the current account, they weren’t as competitive, and I would only use the fully Islamic banks as I don’t quite trust the conventional banks offering the services”. Suggesting that perhaps rather than compliance with belief; the actual motivation was based on the competitiveness and benefits of the product. In similar fashion we find MU3, who also showed considerable understanding stating: “I don’t feel the service and competitiveness of the Islamic products will be as good, but if I were to purchase any product, I would probably use IBB or another fully Islamic bank, as I suspect the conventional banks might not operate strictly to Shariah law, I feel like they’re just trying to make money in this growing market”. Additionally, postgraduate engineer, Islamic mortgage owner MU7; stated when asked about his services: “IBB just seemed like the natural choice for the mortgage. I tried comparing between the Islamic and conventional banks offering the Islamic mortgage, but it was quite hard to locate any information from the conventional banks, whereas on IBB’s website it clearly explained the terms and product structuring, it therefore seemed like the safest bet”.

As you can see then, while the majority of MU respondents with limited understanding quite happily entertained the idea of consuming Islamic financial products, the minority exhibiting understanding actually expressed degrees of hesitance, especially regarding conventional banks and the emphasis of competitiveness. With NM respondents, a manifest 86% expressed a lack of interest. The samples collective attitude can be captured by NM14’s response; “No, not at this time”. Even NM8 and NM9, despite their understanding and IBF’s ethical connotations, did not express any form of interest. Two respondents however, did convey an interest. One was NM12, who had also expressed support for an Islamic system; the other was NM4 who stated “Yes, from what you’ve told me, it sounds quite good”. These respondents however share important characteristics which we believe were the main factors underlying their interest for Islamic financial products; these were positive opinions and attitudes towards Islam. 4.4.2 Perceptions of the brand Islam We seek to evaluate respondent’s views and feelings towards Islam as an entity; attempting to test some of the theoretical views put forward in section 2.8.2; as well as proposing the theory we labelled the triangular causation hypothesis. An examination of why respondents felt there was a lack of promotion revealed quite interesting opinions. MU respondents in unison felt banks, Islamic and conventional respectively had failed to promote their Islamic services; and attributed this to their lack of understanding. MU11 stated: “Usually every other advert on TV is about mortgages or some kind of financial service, which is why we know about them and buy them. Whereas with Islamic finance, we haven’t seen anything and consequently as you saw earlier I hardly know anything about it”


Similarly MU12 stated “I don’t know why they haven’t advertised. I mean as a Muslim I feel like I should know more about it, but then really I feel like I haven’t been told”. Majority of NM respondents, similarly agreed banks had not sufficiently promoted their Islamic services, and were quite confounded by the phenomenon. For example, NM2 stated: “Don’t know really, quite surprising as the normal banks have so many adverts for all their other products”. We also found estate agent NM9 stating “I don’t know to be honest, they really should though. We get quite a few people asking about it, but they haven’t got a clue about what it is or how it works”. According to market research, demand for Islamic mortgages is estimated at £4.5bn (BBC 2002). These responses from the MU and NM sample reflect the opinions of the majority; a few respondents did however offer a contrasting view, MU5 stated: “I think if perhaps Lloyds or Barclays carried out extensive advertising for their Islamic services, it would impact and perhaps reduce demand for their conventional products, due to the associations people have with Islam”. Similarly MU7 stated: “Well in my opinion it’s to do with the general public feelings about Islam” In addition, marketing executive NM11 said “I’ve worked with marketing for a long time now, and no offense to you, but in all honesty, if I were Lloyds, I wouldn’t advertise either, I don’t think it will be good for business” These minority responses clearly make a connection between Islam and advertising. It is interesting to note that above quoted respondents, had qualifications at degree level or above, whereas the majority of respondents failing to identify this connection had lower level qualifications. While this partially supports our proposed triangular hypothesis; with only a few respondents actually identifying the link, we sought to further examine how respondents felt Islam was portrayed in the media. We expected to find severely contrasting views, however surprisingly respondents from both categories exhibited similar opinions. MU1 stated:


“Not very well, it’s quite bias and unfair and there is no real voice defending the claims being made by the media”. Similarly MU 4 said “I think everyone would agree the representation is quite negative”. From the NM respondents we find NM11 stating: “I work in the media, and I can say that yes unfortunately more often than not they emphasize the negative aspects” As well as NM14 who said “Well it’s always associated with terrorism and all that, even though that may not be the truth” We notice all respondents agreeing on Islam being portrayed in a negative light and most suggesting it being a false attribution. The next question sought to examine how respondents personally viewed Islam, through ascribing adjectives they felt were associated with the ‘brand’ Islam. Graphs 20 and 21 (insert graphs 20-21) plot the range and frequency of the characteristics mentioned. A choice of responses was not offered as it would have influenced the validity of findings. MU respondents as expected associated Islam with purely positive qualities such as ‘love, peace, morality and equality’ whereas we found a range of characteristics from NM respondents. As you can see, the majority were neutral but with slight negative connotations such as ‘confused, strange and different’, while others were purely negative; ‘hypocritical and frightening’. If we look at the extended responses of the purely negative ascriptions, we find NM5 stating: “No offense to you, but from what I’ve seen and heard, I would say it’s quite hypocritical and confused. I mean you’ve got the peaceful and the radical extremist”. Likewise NM2 said: “I mean from 9/11 to 7/7 and all the stuff you hear about beheadings and stoning, I’d say frightening to be honest, no offense”. A few of the positive associations from NM respondents were also explored further. NM6 stated: “Well the basic teachings are actually quite similar to Christianity even though most people don’t know that, so I would say love and peace”


Similarly NM4 said: “I’m actually good friends with many Muslims, so I’d say friendly and kind”. Along the same lines NM12 suggested: “You know I’ve actually been to some Muslim countries on holiday, like Morocco and Egypt, so I think I’ll say friendly and oriental”. We wish to highlight here that respondents NM4 and NM12, who formed part of the minority ascribing positive qualities to Islam, were the only NM respondents expressing an interest in Islamic financial products. While those who associated Islam with negative attributes articulated opposition to an Islamic system including the products. In an attempt to further establish this relationship, we enquired whether respondents would be interested in ethical financial products; which in effect are identical to Islamic financial products (discussed in section 2.7.2). In the event of respondents exhibiting an interest for ethical finance, the conclusion could be drawn that the ‘brand Islam’ is the antagonist of IBF consumption. A staggering 100% of MU respondents expressed an interest for ethical financial products, however many patronized IBF over ethical finance. For example MU11 stated: “Yes sounds good, but if it’s the same as Islamic, I’d opt for that” Similarly MU15 said: “Yes, but between this and the Islamic products; obviously being Muslim I would support the Islamic products”. Interestingly, investment banker MU5 who was mentioned holding quite alarming reservations regarding Islamic financial products displayed an interest in ethical financial products suggesting they were more ‘Shariah compliant’. In relation to NM respondents, a dominant majority of 86% exhibited an interest for ethical financial services, however much emphasis was placed on the need for competitiveness. NM10 stated: “Yeah sounds good, as long as they’re not more expensive”. Likewise NM6 said: “I didn’t even know there was such a thing, well if it’s proven competitive I don’t see why not”. These responses leave open the possibility of drawing the conclusion mentioned earlier; that the negative perceptions and attitudes of Islam were the repellents of mainstream

IBF consumption. However the arrival at such a conclusion, by simply drawing parallels between responses leaves the findings and triangular causation hypothesis vulnerable to criticisms based on interpretation effects. In avoidance of this, we sought to further strengthen the relationship by investigating whether respondents believed IBF would generate increased interest were it to change name. 100% of MU respondents agreed with the proposition, where we found MU10 stating: “Well yes, I mean if you change the name, people wouldn’t know its Islamic banking, they would think its ethical banking, and I think more people would be interested in that”. Likewise MU3 said: “Yes definitely, well because of the media issues we discussed earlier, I believe the mainstream are more likely to associate with ethics and moral principles rather than Islam”. Opinions of NM respondents were however slightly more diverse. While 53% felt changing the name would generate interest, 47% felt it would not. Three main categories of responses emerged. The first of which, felt changing the name of IBF would lead to enhanced appeal due to media and public opinions, the second group suggesting the name was of no relevance and the third group, felt changing the name ‘to hide’ it’s Islamic principles would be deceptive and ethically questionable. An example of each is given below. NM6: “Obviously with the opinions people have of Muslims and Islam, you know with the terrorism and all that, they might not trust it, especially with all the Arabic terms you mentioned”. NM13: “I don’t see why it would. People that want the service wouldn’t care about what it’s called”. NM2: “I mean if it’s the same thing, but just changing the sign on the wall, that’s kind of deceptive aint’ it? If it’s Islamic banking, then people should know that” A minor majority of 53% then, believed a change of name would generate more interest, whereas the 47% that did not; were still part of the group who were interested in ethical finance.

What this suggests is that regardless of whether all NM respondents made a connection between the brand Islam and demand for IBF (which a majority did), the fact that respondents collectively felt Islam was being negatively portrayed in the media, and proposed relatively negative ascriptions; and then expressed interest in ethical finance while previously having rejected Islamic finance – speaks volumes in itself. 4.5 Triangular causation hypothesis The underlying principle of the theory is the overall negative attitude and context which surrounds the words Islam, Shariah and Muslim; and the effect of this attitude on products and services related to these terms. We find Hassan (2008), the current affairs editor at channel 4, when introducing IBF stating: “It is called – take a deep breath – ‘Shariah Compliant’, but has nothing to do with the beheadings, amputations and stoning that some of us here in the west automatically associate with Shariah law” (28). Reports show that Europeans perceive Muslims more negatively than any other group (Rheault & Mogahead 2008), but many suggest that since 9/11 alongside today’s political climate, Americans are fast becoming the most likely to hold negative opinions (DiVanna 2007). In a documentary hosted by Morgan Spurlock in Michigan (2004), a word association exercise was carried out; the characteristics mentioned with greatest frequency alongside Islam were terrorist, scared, suicide bomber and bin laden. Shocking but not surprising however, especially when major U.S newspapers such as The Washington Times feature articles proposing Islamic banks being the main sponsors of terrorist activity (Ehrenfeld & Abady 2008). With mainstream media persistently associating Islam with negative attributes, as well as accentuating the relationship (Akel n.d); the resistance to IBF is natural consequence. The U.S is according to reports, a decade behind in its adaption and development of IBF (Qadri 2009); this could very well be the result of these negative attributions. Even the U.K government despite its commitments to IBF, elicits similar negativity; when inviting Deutsch MP Geert Wilders to show a film in the House of Lords, a film which


linked Islam with terrorism; moreover a film which no TV company were willing to broadcast and Netherlands tried to ban (BBC 2009). We suggest that the negative connotations of Islam are the underlying factors of IBF’s promotional absence; and additionally leading to any promotion that does materialise to opt for an un-Islamic campaign (Wright & Yunjar 2007, Marketing Week 2006). These factors are related to corporate identity management, the main purpose of which is to retain and embody the company’s value system (Mitki et al 2007). As the hypothesis suggests; if the company exposes its relation to Islam through offering IBF, the negative associations will translate onto the company, jeopardizing corporate identity, and a possible loss of current and potential customers. This can be reflected in the motivation of conventional banks to offer IBF through an alias; Barclays taking the name Al Safi Trust and RBS using ABT Finance (insert table 3). In marketing circles known as de-marketing, the central ideas of which consists of utilizing marketing communications to dampen and control demand (Lawther et al 1997), although in this context employed to maintain demand for the company’s other products. As demand for IBF depends on increased awareness and understanding; which is reliant on advertising and promotion; which in turn is restricted due to media influence, which curtails initial demand - it ultimately leads to the restriction of IBF’s potential growth; the very crux of our hypothesis. Through the elaborative discussions of awareness, understanding and perceptions of IBF and Islam, we discovered many interesting points; the majority of which led us to establish and solidify the triangular causation theory. The next chapter will outline conclusions, limitations, recommendations and reflections.


Chapter 5 – Conclusions and closing remarks
5.1 Awareness, Understanding and Perceptions The literature evaluation and data analysis allowed for many vital conclusions to be drawn. A review of IBF’s opportunities allowed us to grasp its sheer potential, but more importantly the obstacles preventing the realization of this potential. The lack of awareness and understanding of consumers, both Muslim and Non Muslim was found to be great. Our findings, in line with contemporary studies affirmed that the majority of Non Muslim’s awareness was extremely minimal, if not non existential; whereas Muslims did have a slight, but still very basic understanding of IBF. A significant level of awareness and understanding was predominantly found among persons of higher qualifications, in higher managerial or professional occupation, foreign nationality, middle aged and male gender, all of whom had obtained their understanding either through occupational exposure, foreign residency or through actual consumption of IBF products. Accentuating the minimal probability of the common man’s likelihood of understanding the principles and structures of IBF; established as the main factors’ antagonising consumption. Especially if we look at the qualification levels in Harrow, we find in table 7 (insert table 7); only 41% has qualifications higher than A-level (London 44%); alongside 33% of the population with occupations of higher managerial or professional nature (insert table 8 – London 46%); further highlighting the minimal probability of an understanding. The lack of understanding was found to be the main reason preventing Muslim consumers from acquiring IBF products, which a large majority said they would; had they understood how it worked. Surprisingly however, the motivation for Shariah adherence was surpassed by the societal benefits and ethical implications. Ethical considerations also had a bearing on Non Muslims as they all showed an interest in ethical finance, the opposite of which they exhibited for Islamic finance; even though the two are indistinguishable in structure and principle. The main reasons for which was found to be media influence.


The media’s often negative portrayal of Islam had led consumers to form a negative perception of the ‘brand Islam’, and anything associated with it; the fear of which rendered banks hesitant towards undertaking advertising and promotional activities, this consequently leaves potential consumers unaware and uninformed and demand inevitably stagnating. 5.2 A Platform for growth As mentioned at the outset, the intentions behind this study was essentially to provide managers in the sector with a platform, from which avenues of growth generation could be informatively pursued. The most important insight gained was evidently the need for banks to engage in mainstream marketing in pursuit of spreading awareness and essentially educating consumers; this was also proposed by Gait & Worthington (2007). This is however not an easy feat as you must have gathered from our elaborative discussion. Wilson (1995) suggests however, that the best platform for IBF marketing lies in ethics; our findings clearly concur as we found 93% of total respondents expressing an interest in ethical finance. The marketing strategy therefore needs to promote and emphasize the ethical propositions, rather than relying on religious credentials, as Wilson (2003; 1) suggested; “The word ethical is used as a label and equated with Islamic, but there has been no attempt to make the link...”, the need for a more ethical proposal seems to be the opinion of many academics, including Wood (2007), Safa (2009) and Bokhari (2007) who suggested banks needed to overcome their image as merely the representatives of religion. DiVanna (2007) gives the example of Qatar national bank, who took into consideration customer trends of excessive spending during the month of Ramadhan, and in consideration of which deferred all loan payments due the same and following month, these values he suggest need to be the focal point of any marketing campaign. Along with many academics we also suggest IBF undergo an identity transformation, in seeking to avoid any negative connotations associated with the sector, suggestions


include ‘ethical banking’ or ‘profit and loss banking’ (Saidi 2009). Islamic banks such as Blue Ocean and 1stEthical, as you can see have already acted on the concept and have subsequently witnessed positive growth (Grose 2008, Scott 2008). In our opinion however, the marketing of morality will not suffice in generating considerable growth. We therefore propose that banks become involved with Mosques, Churches, Synagogues and local communities with the objection of educating consumers of the benefits of IBF, perhaps through holding seminars and workshops, where concepts and principles of IBF can be explained. This will not only generate increased demand, but for conventional banks it will remove the stigma surrounding their Islamic services as we noticed was present in some of our responses, and also highlighted by Y-Sing (2008). Conventional banks actually have an advantage over Islamic banks, from our findings, it was clear that competitiveness and service played major roles in interest for IBF; subsequently due to the experience, efficiency and sophistication of conventional banks, they are more capable of providing excellent service alongside competitive products, this idea was also supported by Dusuki & Abdullah (2007) In light of our findings however, it must be stated that with the vast resources banks control, it would be naive to suggest that they had not carried out extensive market research into this very area. This leads us to daringly suggest that perhaps the apparent absence of a marketing strategy – is in fact the strategy. In light of severe and difficult media conditions, by de-marketing their Islamic operations and relying on the spread of word of mouth for its growth, would actually prove more beneficial. We say beneficial because the strategy allows for corporate identities to be upheld, while simultaneously tapping into the Muslim market through word of mouth. IBF’s speed of growth actually plays no relevance, as Muslim consumers who are not aware of IBF, will continue to bank with conventional institutions.


The silence of IBF however may come to an end, with the advent of Barack ‘Hussein’ Obama, and his quoting sayings from Prophet Muhammad (p.b.u.h.f), (Obama 2009), in press conferences, suggests that we might perhaps be witnessing a global attitude shift, which will bode well for Islamic Banking and Finance.


5.3 Limitations Despite the benefits the multi strategic approach offered, our study, like any other is not without limitations. The purpose of our research requiring elements of both quantitative and qualitative nature was reflected in our sample size. The criticism could be made that the sample was neither vast enough to adequately render quantitative data valid and reliable, or small enough to provide sufficient depth of the qualitative data. We feel however that we utilized the best aspects of both, thereby not limiting ourselves to only one form of research, which by itself only provides one aspect to every question, while our research offered both quantitative and qualitative findings. Another limitation of the research process was the possibility of respondent bias. When Muslim respondents were asked whether they would be interested in IBF, their responses may have been influenced by this bias, in an attempt to portray a desirable social position. As well as non Muslims when asked to ascribe qualities to Islam, due to our own demographic, as well as respondent bias, may have influenced responses. We actually noticed a slight pause in response when questions 14 and 15 were posed; this suggests the possibility of responses being influenced. However, when analysing results, the responses elicited were still sufficient in establishing strong relationships.


5.4. Recommendations In terms of our own study, the recommendation we feel is the most important, would be to address the issues mentioned in the previous section. By changing interviewers, varying in ethnicity, would offer a greater insight into perceptions of consumers towards IBF. In terms of future research, we feel it is extremely important and necessary to carry out an extensive investigation into the effects of the regulation inconsistency we mentioned in section 2.8.1. It has actually been found that scholars can charge as much as $88,500 per year, per bank, in addition to figures reaching levels of $500,000 for advising on large capital market transactions (Tett 2006). An investigation which seeks to identify the effects of this on the integrity of the products and services offered would prove highly beneficial; as well as addressing any principal agent problems that may occur. Another area which would contribute to the academic thought surrounding IBF, is its apparent higher risk and vulnerability to property market fluctuations; as suggested by Wigglesworth (2008). He suggested that from stress tests it was revealed, where in an instance real estate was to decrease substantially; Islamic banks would suffer up to 50% capital losses. An investigation shedding light upon this issue would therefore highlight the potential dangers, and offer possible solutions.


5.5 Reflections As conclusions have been drawn, it dawns on me that the process is nearly over. In offering my reflections on the entire dissertation process, from its inception to its conclusion, there are several things I wish to ‘reflect’ on. First of all, I genuinely feel I managed the research process quite well, both in regards to literature and field research. I managed to review an extensive range of literature, which provided me with scope from various different perspectives. The field research I also feel went quite well. In exception of the possible respondent bias, I believe all responses reflected reality. The only problem, or issue rather I wish to address is the actual scope of this research. First of all, it needs to be known that I had initially sought to pursue a different question, one which involved critical analysis of Islamic banks marketing communications strategies. However, after first being granted access, I was at a much later date informed that the access had been withdrawn. This was fairly late in the ‘dissertation period’ which meant I had lost a lot of time and efforts in researching pure marketing literature. I consequently shifted research to focusing on the consumer aspect of IBF. As I began researching, I discovered more and more angles and important issues which I could address. This is where the main problem arose, I had so much information, all relevant but at the same time irrelevant and I subsequently tried my best to produce a coherent piece of work based on this. But due to the extensive amounts of information and possibilities, I often suffered from analytical paralysis. But in the end I feel I have addressed the most important issues, however there are evidently some major concepts and trends which were discovered but I could not elaborate on due to the limited scope, I can guarantee that a hermeneutical study of this dissertation will yield many theories, concepts and trends. But in general, I have learnt a vast array of skills from carrying out this research project, and in conclusion I feel it has been quite a successful endeavour. Perhaps my biggest mistake, my only crime; was being overambitious.


Chaper 6 – References and Appendices
6.1 References 6.1.1 Books Al-Omar, F. & Abdel-Haq, M. (1996). Islamic Banking. Theory, Practice & Challenges. London. Zed Books. Bryman, A. & Bell, E. (2003). Business Research Methods. Oxford University Press. New York. Chapra, U. (1999) Islam and the Economic Challenge. The Islamic foundation. UK Fill, C (2002). Marketing Communications. Contexts, Strategies and Applications. 3rd edition. Prentice Hall. U.K Hammersley, M. (1989). The Dilemma of Qualitative Method: Herbert Bumer and the Chicago Tradition. London. Routledge. Iqbal, Z. & Mirakhor, A., (1987) Islamic Banking, International Monetary Fund, Washington. Keynes, J.M. (1963). “Economic possibilities for our grandchildren”, in Essays in Persuasion, New York, NY: W.W. Norton, pp. 358-74. Klein, N. (2001) No Logo. Flamingo. London. Kumar, R. (2005). Research Methodology – A step by step guide for beginners. 2nd edition. London Mazrui, A.A. (2006) Islam, between Globalization and Counterterrorism. U.S.A. Africa World Press Robson, C. (2002) Real World Research. Blackwell Publishing.


Saunders, M. Lewis, P. and Thornhill, A. (2007) Research Methods for Business Students. FT Prentice Hall Seestani, A.S.A. (2000) Taudhihul Masae’l – English Laws. 3rd Edition. Ansariyan Publications. Qum Slater, D. & Tonkisss, F. (2001) Market Society: Markets and Modern Social Theory. Cambridge: Polity Press. Smart, B. (2003) Economy, Culture and Society, Buckingham UK: Open University Press The Holy Quran – (7th century) English Translation by S.V Mir Ahmed Ali Wild, J., Wild, K. & Han, J. (2008) International Business. The Challenges of Globalization. 4th Edition. Pearson Education. United Stated. Wilson, R. (1995) Marketing strategies for Islamic financial products. New Horizon. 6.1.2 Journal and contemporary articles Ahmed, S.A. (2000) Global Need For A New Economic Concept: Islamic Economics. International Journal of Islamic Financial Services. Vol1. No.4 Alibhai, F. (2006) Bankpraxisen från himlen. En fallstudie av HSBCs införande av islamisk bankverksamhet. Examens Arbete, Uppsala Universitet. (Translated to English by author). Anker, G. (2006) Lloyds TSB set to Target Scotland with Islam Loans. Moneymarketing. 22nd June. Aziz, T.M. (n.d) An Islamic Perspective of Political Economy: The Views of late Muhammad Baqir al-Sadr. Al-Tawhid Islamic Journal. Vol.X. No.1. Qum. The Islamic Republic of Iran. Benson, K.L., Brailsford, T.J. & Humphrey, J.E. (2006) Do socially responsible fund managers really invest differently? Journal of Business Ethics, Vol. 65, pp. 337-57.


Bhatti, I.M. & Khan, M.M. (2008) Topics in Interest Free and Islamic Banking and Finance: Part 1. Managerial Finance. Vol.34 No.9 Bokhari, F. (2007) No Easy Route to Islamic Banking Growth. Financial Times, March 5th. Bokhari, F. (2008) Skills Shortages Still Hamper Islamic Finance. Financial Times. July 3rd. Cunningham, J.B & Gerrard, P. (1997) Islamic Banking: A Study in Singapore. International Journal of Bank Marketing. Vol.15 Dar, H.A. & Presley, J.R. (1999) Islamic Finance, A Western Perspective. International Journal of Islamic Financial Services. Vol.1 No.1 Duckers, J. (2002) No title. Birmingham Post. 21st Sep. Dusuki, A.W. & Abdullah, N.I. (2007) Why do Malaysian Customers Patronise Islamic Banks? International Journal of Bank Marketing. Vol.25. No.3. 142-160 Ehrenfeld, R, & Abady, S.A. (2008) Islamic Banking. The Washington Times 12/11/2008 Grose, T.L. (2008). The Rise of Islamic Banking. U.S News & World Report. 15th Dec. Vol.145. No.13 Hassan, M. (2008) Sharia Banking is Growing Fast. The New Statesmen. 15th December. Haron, S. & Azmi, W.N.W (2008) Determinants of Islamic and Conventional Deposits in The Malaysian Banking System. Managerial Finance. Vol.34. No.9. pp.618-643 Ibrahim, S.H.M. (2000) Nurtured By ‘Kufr’: The Western Philosophical Assumptions Underlying Conventional (Anglo-American) Accounting. International Journal of Islamic Financial Services. Vol.2. No.2. Islam, N. (2008) Islamic Banking Means Western Opportunity , Muslims have particular banking needs – and few venues to fulfil them. Gallup Management Journal. 14th August


Karbhari, Y., Naser, K. & Shahin, Z. (2004) Problems and Challenges Facing the Islamic Banking System in the West: The Case of the U.K. Thunderbird International Business Review. Vol.46. No.5. 521-543 Khalaf, R. (2007) Islamic Banking Held Back By Lack of Scholars. Financial Times, November 19th Khan, B. & Prodhan, B. (1992) Islamic Banking: A survey. Management Research Papers. Templeton College. Khan, F. (1999) Financial Modernization in the 21st Century and Challenge for Islamic Banking. International Journal of Islamic Financial Services. Vol.1 No.3 Khan, M.M. & Bhatti. I.M. (2008) Development in Islamic Banking: A Financial riskallocation Approach. The Journal of Risk Finance. Vol.9. No.1. 40-51 Khan, M.M. & Bhatti, I. (2008C) Islamic Banking and Finance: On its Way to Globalization. Managerial Finance. Vol.34. No.10. pp. 705-725 Khan, O. (2009) Islamic Finance – A Global Alternative. Accountancy Ireland. Vol.41, No.1 Lawther, S., Hastings, G.B. & Lowry, R. (1997) De-Marketing: Putting Kotler and Levy’s Ideas into Practice. Journal of Marketing Management. 13, 315-325 Marketing Week (2006) HSBC Rolls out Global Campaign For Islamic Bank. 22nd June. Matthews, O. (2005) How the west came to run Islamic banks, Newsweek International Edition, 31 October. Maurer, B. (2001) Engineering an Islamic Future. Speculations on Islamic Financial Alternatives. Anthropology Today. Vol.17. No.1 Mawson, J. (2002) No title. Financial Times. 25th Feb Metawa, S.A. & Almossawi, M. (1998) Banking Behaviors of Islamic Bank Customers: Perspectives and Implication. International Journal of Bank Marketing. Vol.16. No.7


Mitki, Y., Herstein, R. & Jaffe, E.D. (2007). Learning Mechanisms for Designing Corporate Identity the Banking Industry. International Journal of Bank Marketing. Vol. 25, No. 7, 452-468 Monger, R. & Shadeh, M. (2008). Islamic Finance enters the Mainstream. Management Accounting Quarterly. Spring. Vol.9. No.3 Murtuza, A (2002) Islamic Antecedents For Financial Accountability. International Journal of Islamic Financial Services, Vol.4, No.1 Naser, K., Jamal, A. & Khatib, K.A (1997). Islamic Banking: A Study of Customer Satisfaction and Preferences in Jordan. International Journal of Bank Marketing. Vol.17. No.3. pp. 135-150 Naser, K. & Moutinho, L. (1997) Strategic Marketing Management: The Case Of Islamic Banks. International Journal of Bank Marketing. Vol. 15. No.6. pp. 187-203 Noman, A.M. (2002) Imperatives of Financial Innovation For Islamic Banks. International Journal of Islamic Financial Services. Vol.4. No.3 Oakley, D. (2008) Islamic Banking: Sharia-Compliant Institutions Buck Trend. Financial Times, November 24th. Presley, J,R. & Sessions, J.G. (2004) Islamic Economics: The Emergence of a New Paradigm. The Economic Journal. Vol.140. No.424. 584-596 Poolton, J. and Ismail, H. 2000 New Developments in Innovation. Journal of Managerial Psychology. Vol. 15 No. 8, pp. 795-811. Qadri, S. (2009) Islamic Finance: An Alternative. Banking & Financial Services Policy Report. Vol.28. No.1 Qorchi, M. (2005) Islamic Finance Gears Up. Finance and Development – A Quarterly Magazine of the IMF. Vol.42, No.4


Rammal, H.G. & Zurbruegg, R. (2007) Awareness of Islamic banking products among Muslims: The case of Australia. Journal of Financial Services Marketing. Vol 12. 1, 65-74 Rheault, M. & Mogahed, D. (2008) Cartoons and Controversy – Free expression or Muslim Exceptionalism in Europe? Harvard International Review. Summer Saidi, T.A. (2008) Relationship between ethical and Islamic banking systems and its business management implications. South African Journal of Management. Vol.40. No.1. 43 Singh, H. (2009) U.K’s Shariah Banking Still Lacks Awareness, Skills and Standardisation. The Malaysian Reserve, Feb 23rd. Snider, J., Hill, R.P. and Martin, D. (2003) Corporate social responsibility in the 21st century: a view from the world’s most successful firms, Journal of Business Ethics, Vol. 48, pp. 175-87 Sole’, J. (2007) Introducing Islamic Banks into Conventional Banking Systems. IMF Working Paper. International Monetary Fund. 07/175 Sundararajan, V. & Errico, L. (2002) Islamic Financial Institutions and Products in the Global Financial System: Key Issues in Risk Management and Challenges Ahead. IMF Working Paper. International Monetary Fund. Tett, G. (2006) Islamic Banking Confounds Sceptics. Financial Times, June 2nd The Economist (2008) Faith – Based Finance. September 4th. The Economist (2008B) Savings and Souls. September 4th. Wigglesworth, R. (2008) Islamic Banks Exposed to Property Risk. Financial Times, October 27th.


Wilson, R. (1999) Challenges and Opportunities for Islamic Banking and Finance in the West: The United Kingdom Experience. Thunderbird International Business Review. Vol.41. 421-444 Wright, T. & Yuniar, Y. (2007). Islamic Finance Widens Pitch; Banks aim to Show Shariah Products Can Be Competitive. Wall Street Journal, September 5th, P. B3 Wolf, M. (2009). Seeds of its own destruction. Financial Times. March 8th. Wood, A. (2007) Private Banking Seeks New Islamic Niche. Financial Times, October 22nd. Zaher, T.S & Hassan, M.K (2001) A Comparative Literature Survey of Islamic Finance and Banking. Financial Markets, Institutions & Instruments. Vol.10, No.4 6.1.3 Electronic Journals, articles and working papers Abu-Shakra, E. (2006). Lloyds TSB Launches Islamic Banking Across Britain. Press Release. Url: ne/6306_islamic.pdf. Accessed: 11th February. 10.30 Akel, B. (n.d). Islam and the Western Media. Url: Accessed: 15th March. 14.22 Albrecht, K. (1998). Turning the Prophets Words into Profits, Islamic Banking with its strict codes, is growing fast. Business Week. 16th March. Url: Accessed: 19th December. 11:15 Ainley, M., Mashayekhi, A., Hicks, R., Rahman., A. & Ravalia, A. (2007) Islamic Finance in the U.K: Regulation and Challenges. Financial Services Authority. November. Url: Accessed: 27th Dec. 11.25 Balfour, F (2008) Islamic Finance may be on to something. Business Week. November 13. Url: Accessed: 19th December. 09:20


BBC (2009) Dutch MP refused entry to Britain. Url: 21st March. 18.15 BBC (2002) Islamic Mortgages Worth Billions. 29th November. Url: Accessed: 19th November 17.10 Billing, S. (2009) Moody’s Backs Islamic Banks to Emerge Stronger. Arabian Business. Url: Accessed: 29th February 13:49 Boston Consulting Group (2008) Islamic Banking Publication. Url: Accessed 1st November 13.33 Bremner, B. & Shameen, A. (2007) The Ties That Bind the Middle East and Asia. Business Week. 21st May. Url: Accessed: 20th January 21.20 Bundhun, R (2009) Deutsche Bank Launches New Shari’ah Platform. Arabian Business. Url: Accessed: 19th January 20:54 Chandra, S. & Benjamin, M. (2009) Bernanke ‘Green Shoots’ May Signal False Hope Amid Job Losses. Bloomberg. Url: Accessed: 10th April. 13.45 Chapra, U. (2009) The Global Financial Crisis: Can Islamic Finance Help? New Horizon. Url: =home. Accessed: 8th January. 22.25


Cooper, Z. (2009) God and The G20 – What Wisdom does religious faith offer in the Credit Crunch? March 27th. Times Online. Url: Accessed: March 29th. 17.40 Dar, H.A. (2004). Demand for Islamic Financial Services in the U.K: Chasing a Mirage? Economic Research Paper. No. 04-11. Url: Accessed: 21st December. 13.40 Desai, U. (2008). Credit Crisis Gives Islamic Finance a Chance to Shine. International Herald Tribune. August 19th. Url: DiVanna, J. (2007). Will Islamic Banking Appeal to Non-Muslims? The Arab Financial Forum. Url: Accessed: 12th January 12.45 DiVanna, J. (2009) The Growing Appeal of Islamic Finance. Url: Accessed: 12th January. 12.15 Durrani, M. (2008) Islamic Finance: This is not a credit crisis. Url: Accessed: 12th Feb. 14.55 Farooqi, R. (2009) Global Financial Crisis Unthinkable Under Islamic Banking Principles. Url: Accessed: November 5th 11.00 Financial Standards Authority (2006) Islamic Banking in the U.K. Briefing note 9th March. Url: Accessed: 22nd December. Accessed: 15.30


Gait, A.H. & Worthington, A.C. (2007) An Empirical Survey of Individual Consumer, Business Firm and Financial Institution Attitudes Towards Islamic Methods. Faculty of Commerce Working Paper. Url: Accessed: 5th February. 4.59 Harrow Council (2008) Accessed: April 15th 15.55 HM Treasury. (2008) The Development of Islamic Finance in the U.K: The Governments Perspective. Url: Accessed: January 10th. 15.30 HSBC Amanaha.FAQ. Url: Accessed November 10th. 17.45 Institute of Islamic Banking and Insurance (n.n) Accessed: November 17th. 20.00 Kennedy, S. & Donaldson, K. (2009) G-20 Backs Regulation Crackdown, $1.1 Trillion Aid. Bloomberg. Url: me. Accessed: April 2nd. 17.40 Knight, J. (2006) Islamic Banking Goes Nationwide. BBC. Url: Accessed: 29th Oct. 16:33 Landberg, R.V. & Vina, G. (2006) Islamic Banking Sought by U.K. International Herald Tribune. Url: Accessed: 26th December. 11.50 Matthews, R., Tlemsani, I. & Siddique, A. (n.d) Islamic Finance. Kingston University Business School. Url: Accessed: 12th Feb. 15.20


Meglio, D.F. (2007) A Fresh Take on Islamic Finance. Business Week. 30th March. Url: Accessed: 19th December. 10:25 Miller, R. (2009) Bloomberg. Url: Accessed: March 11th 14.58 Office for National Statistics. (2004) Neighbourhood statistics. Url: Accessed: 10th April 18.15 Safa, S. (2009) Islamic Banking; A Mainstream Alternative to Conventional Finance. White Paper. Url: Accessed: February 1st. 15.30 Schoon, N. (2009) Islamic Finance in Continental Europe. Islamic Finance News. Vol.6. No.9. 6th March. Url: Accessed: 11th March. 15.55 Scott, J.C. (2008) Unveiling Islamic Banking and Finance. Url: Accessed: November 19th. 16.40 Shameen, A. (2005) Islamic Banks: A Novelty No Longer. Business Week. 8th August. Url: Accessed: 20th December. 13.15 Siddiqi, N. (2008) Emergence of Ethical Investment. Keynote Address. Url: Accessed: 22nd December. 20.30


Standard & Poor’s (2006) Islamic Finance Comes of Age. Business Week. October 26th. Url: Accessed: 19th December. 10:10 Taylor, A. (2009) Employment Soars above 2m. Financial Times. Url: Accessed: March 19th. 17.10 The Holy Bible (4th century) Accessed: 21st March Wang, F., Bernard, S., Chung, J., Scholtes. S., Farrel, G. & Guerrera, F. (2008) The fallen giants of finance. Financial Times. Url: Accessed: 27th December 2008. Weisman, J. & Whitehouse, M. (2009) U.S., Britain Talk New Market Rules. Wall Street Journal 4th March. Url: Accessed: 6th March. 18.00 Wilson, R. (2003). Parallels Between Islamic and Ethical Banking. Centre For Middle Eastern and Islamic Studies. University of Durham. Url: Accessed: 13th Feb. 12.30 Wolf, M. (2008). Keynes offers us the best way to think about the crisis. Url: Accessed: February 11th. 17.26 Y-Sing, L. (2008). Government Seen Helping Islamic Finance. International Herald Tribune. November 18th. Url:


6.1.4 Online Videos Spurlock, M. (2004) 30 days as a Muslim documentary. Viewed: 29th April. Obama, B (2009) Speech delivered at a press conference. Url: Viewed: 18th March. Obama, B (2009B) Speech at the white house national prayer breakfast. Viewed: February 19th.


6.2. Appendices 6.2.1 Tables Table 1 - CEO bonuses CEO J. Cayne M. Sullivan R. Fuld S. O’Neal A. Mozilo D. Mudd R. Syron K. Thompson K. Killinger Corporation Bear Stearns AIG Lehman Brothers Merrill Lynch Countrywide Fannie Mae Freddie Mac Wachovia WaMu Latest Bonus $m 32.1 14.3 34.4 162 132 13.4 19 15 4.5 Current State Collapsed Bailout Bankrupt Failed Bailout Bailout Bailout Bailout Bankrupt

Figures taken from: Wang, Bernard, Chung, Scholtes, Farrel and Guerrera (2008

Table 2 - Banking, Takaful and fund assets ($bn) US$ bil (2007) Banks Iran Saudi Arabia Malaysia Kuwait UAE Bahrain Qatar UK Turkey Pakistan Bangladesh Egypt Sudan Others Total 233 91.2 65.7 54 48.2 37.1 19.3 18.1 15.8 6.3 5.7 5.7 5.2 16.6 622 Total Takaful 2.3 0.8 1.3 0.2 0.9 0.3 0.4 — — — — — 0.1 0.4 6.6 Firms — — 0.1 8.9 0 — 1.3 — — — — — — 0.2 10.5 2007 235.3 92 67.1 63.1 49.1 37.4 21 18.1 15.8 6.3 5.7 5.7 5.3 17.2 639.1 2006 154.6 69.4 65.1 37.7 35.4 26.3 9.5 10.4 10.1 15.9 14.3 3.9 4.5 14.4 471.5 Number of firms 25 17 38 29 12 27 14 6 4 20 14 3 23 48 280


Table 3 – Institutions in the U.K offering Islamic finance

Name Ahli United Bank of Ireland (Alburaq) Bank of London and Middle East Barclays Cap (Al Safi Trust) BNP Paribas (Najmah) Bristol & West Citi Group Deutsche Bank Europe Arab Bank European Finance House European Islamic Investment Bank Gatehouse Bank HSBC Amanah IBJ International London Islamic Bank of Britain Goldman Sachs (J Aron & co) Lloyds TSB Standard Chartered UBS United National Bank Arab Banking corporation Riyadh Bank Cedel International Dawnway Day Global Investment Gulf International Bank The Halal Mutual Investment Company Albaraka International ltd Royal Bank of Scotland (ABT Finance)

Shariah Compliance Window Window Fully Window Window Window Window Window Window Fully Fully Fully Window Window Fully Window Window Window Window Window Window Window Window Window Window Window Fully Window

Table 2 & 3 Compiled from Schoon (2009) & Institute of Islamic Banking and Insurance (n.d)


Table 4 – Contrasting aspects of research theories Quantitative Numbers Point of view of researcher Researcher distant Theory testing Static Structured Generalization Hard reliable data Macro Behaviour Artificial setting Qualitative Words Points of view of participants Researcher close Theory emergent Process Unstructured Contextual understanding Rich deep data Micro Meaning Natural setting Compiled using Bryman & Bell (2003; 302)

Table 5 – Religious presence in Harrow Religion All people Christian Muslim Buddhist Hindu Jewish Sikh Any other religion No Religion Religion not stated Harrow 206,814 97,799 14,915 1,390 40,548 13,112 2,073 4,208 18,674 14,095 London 7,172,091 4,176,175 607,083 54,297 291,977 149,789 104,230 36,558 1,130,616 621,366

Source: Office of National Statistics (2004)


Table 6 – Harrow ethnic diversity Ethnical classification White Persons White British White Irish White other Mixed Mixed: White and Black Caribbean Mixed: White and Asian Mixed Other Asian or Asian British Indian Pakistani Bangladeshi Other Caribbean African Other black Chinese Other ethnic Harrow 121,543 103,207 9,057 9,279 5,840 1,371 2,018 1,818 61,314 45,310 4,317 953 10,734 12,703 6,116 5,656 931 5,414 2,567 2,847 London 5,103,203 4,287,861 220,488 594,854 226,111 70,928 59,944 61,057 866,693 436,993 142,749 153,893 133,058 378,933 343,567 378,933 60,349 193,235 80,201 113,034

Black or Black British

Chinese or other ethnic group

Source: Office of National Statistics (2004) Table 7 – Qualification levels in Harrow Qualification category No Qualifications Level 1 Qualifications Level 2 Qualifications Level 3 Qualifications Level 4/5 Qualifications Other Qualifications Harrow 31,159 20,388 30,392 16,036 44,297 8,242 London 1,257,929 689,228 904,205 518,626 1,642,467 287,897

Source: Office of National Statistics (2004)


Table 8 – Occupational classification In Harrow Occupational Category Higher Managerial and professional occupations Large employers and higher managerial occupations Higher professional occupations Lower managerial and professional occupations Intermediate occupations Small employers and own account workers Lower supervisory and technical occupations Semi routine occupations Routine occupations Not classified Harrow 9,650 3,320 6,330 20,042 9,531 8,389 4,375 7,965 4,425 3,134 London 722,771 283,071 439,700 1,244,842 535,533 306,742 251,494 380,810 236,026 127,437

Source: Office of National Statistics (2004)


6.2.2 – Graphs Graph 1 – MU respondent’s age spread

Graph 2 – MU Gender distribution

Graph 3 – MU Educational classifications


Graph 4 – MU nationality

Graph 5 – MU residency period (l.t = less than x/years)

Graph 6 – NM age spread


Graph 7 – NM gender distribution

Graph 8 – NM educational levels

Graph 9 – NM sample religious breakdown


Graph 10 – Existential awareness

Graph 11 – Awareness of IBF institutions

Graph 12 – Awareness of IBF products and services


Graph 13 – MU channel/source of information


Graph 14 – NM source/channel of information

Graph 15 – Familiarity / Gender

Graph 16 – Familiarity / Age


Graph 17 – Familiarity / qualification level

Graph 18 – MU Familiarity / residency period


Graph 19 – Familiarity of IBF tenets

Graph 20 – MU associations with Islam

Graph 21 – NM associations with Islam


6.2.3 Items Item 1 – Interview Schedule
Good Morning/Afternoon/Evening Thank you for taking part in this research. Name (Voluntary) Age (17-24) (25-32) (33-40) Gender M / F (41-48) Occupation Nationality (born in the U.K) (less than 30 years) (less than 10 years) (less than 40 years) Ethnicity/Origin (less than 20 years) (40 years +) (49 – 56) (56+)

Education completed Religious Beliefs UK Residency

Please state your current financial service: Link with Islamic services: 1. 2. 3. Are you aware of Islamic banking and finance? Yes / No

How would you rate your familiarity with Islamic Banking? (0 1 2 3 4 5) Do you know the main tenets behind Islamic Banking? (interest, speculation, investment restrictions) Yes / No b) which?


Can you explain/describe the concepts of Musharaka/Murabaha/Mudaraba? Yes - Correctly/Vaguely/incorrect No Are you aware of any of the products/services offered by Islamic Banks? (Deposit/savings account, Mortgage, Lease, Insurance, Joint ventures, loans, asset management) Yes / No. b) How many?



Do you know of any Islamic banks in the U.K? Yes / b) Can you name them?



Do you know of any conventional banks offering Islamic financial services? Yes / No b) Which ones?


How did you find out about; the existence, the tenets, the terms, products and the banks? If any; state which


If Muslim/non Muslim – with significant awareness, understanding 9. Do you hold an account? Yes / No

10. What were the main reasons for switching to Islamic banking? Not switching? Muslim/non Muslim – insignificant, no awareness. Islamic finance is built on a system of justice and equity. The current financial crisis would not have occurred if U.K’s financial sector was fully Islamic. Nor is such a crisis conceivable under Islamic finance, due to the prohibition of interest, derivatives excessive risk and leverage. Investments in alcohol, weapons, pornography or gambling are seen as unethical and not allowed. 11. Would you be supportive of a completely Islamic financial system? Yes / No 12. Would you be interested in Islamic financial products? Yes / No not? Why? Why not? Why? Why

13. Do you feel Islamic banks, as well as conventional banks; have done enough to advertise their Islamic services? Yes / No c) If No, Why do you think that is? 14. How do you feel Islam is portrayed in the media? 15. If Islam was a brand, what qualities or values would you associate with it? In recent years there has been emerging trends of increased demand for ethical finance, where funds are not invested in alcohol, arms, pornography or gambling. Nor is excessive risk or interest rates incorporated within the system. 16. Would you be interested in ethical financial products? Yes / No 17. If Islamic finance changed its name to ethical banking, or profit and loss banking do you think more people would be interested? Yes / No 18. Why do you feel that is? Any comments, further discussion. Thank you for your time and cooperation.


Item 2 Glossary of Terms
What is Musharaka? Musharaka means a relationship established under a contract by the mutual consent of the parties for sharing of profits and losses in the joint business. It is an agreement under which the Islamic bank provides funds, which are mixed with the funds of the business enterprise and others. All providers of capital are entitled to participate in management, but not necessarily required to do so. The profit is distributed among the partners in pre-agreed ratios, while the loss is borne by every partner strictly in proportion to respective capital contributions. What is Mudaraba? A form of partnership where one party provides the funds while the other provides expertise and management. The latter is referred to as the mudarib. Any profits accrued are shared between the two parties on a pre-agreed basis, while loss is borne by the provider(s) of the capital. What is Murabaha? Literally it means a sale on mutually agreed profit. Technically, it is a contract of sale in which the seller declares his cost and the profit. Islamic banks have adopted this as a mode of financing. As a financing technique, it can involve a request by the client to the bank to purchase a certain item for him. The bank does that for a definite profit over the cost, which is stipulated in advance. The OIC Islamic Fiqh Academy has recognized murabaha as a Shariah compliant mode of Islamic banking.11 What is Ijara? Letting on lease. Sale of a definite usufruct of any asset in exchange of definite reward. It refers to a contract of land or other asset leased at a fixed rent payable in cash and also to a mode of financing adopted by Islamic banks. It is an arrangement under which the Islamic banks lease equipments, buildings or other facilities to a client, against an agreed rental. The lessee generally also has an option to purchase the leased asset. The OIC Islamic Fiqh Academy has recognized ijara as a Shariah compliant mode of Islamic banking.8 Sources: Khan & Prodhan (1992) & HSBC Amanah


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