Just how loyal are Islamic banking customers?

2018 ◽  
Vol 36 (3) ◽  
pp. 410-422 ◽  
Author(s):  
John J. Ireland
Keyword(s):  
Conjoint Analysis ◽  
Design Methodology ◽  
Price Sensitivity ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Market Simulation ◽  
Conventional Banks ◽  
The Impact ◽  
Practical Implications

Purpose The purpose of this paper is to determine the rate difference required to persuade Islamic banking customers to switch to conventional banks. Design/methodology/approach A choice-based conjoint analysis survey was administered to 300 UAE Islamic banking customers. Customer utilities for Islamic and conventional banks, products and prices were developed to test hypotheses while a market simulation estimated the impact of rate changes on choice shares. Findings Overall, Muslim customers of Islamic banks strongly preferred Islamic banks and products. However, 43 percent were willing to switch to conventional banks to obtain better rates. Indeed, the share choosing conventional banks rose from 25 percent when rates were the same to 68 percent when conventional products offered 2 percent better rates. Research limitations/implications This research requires replication and extension in appropriate contexts such as Malaysia and Indonesia. Moreover, the existence of price sensitivity tiers implies underlying benefit segments that should be studied. Practical implications As so many Islamic banking customers would switch to conventional banks for better rates, it seems that conventional banks compete with Islamic banks for most clients. Islamic banks should price accordingly. Originality/value This is the first study to quantify the loyalty of Islamic banking customers in terms of price and, consequently, the first to demonstrate the existence of price sensitivity tiers. It is also the first in this field to apply conjoint analysis and market modeling.

Are Islamic banks different? The application of the Radical Affinity Index

2019 ◽  
Vol 12 (1) ◽  
pp. 2-29 ◽  
Author(s):  
Leire San-Jose ◽  
Jon Cuesta
Keyword(s):  
Great Britain ◽  
Design Methodology ◽  
Islamic Banking ◽  
Ethical Dimension ◽  
Islamic Banks ◽  
Ethical Perspective ◽  
Content Type ◽  
Social Commitment ◽  
Practical Implications ◽  
Ethical View

Purpose The purpose of this paper is to extend the literature on Islamic banking by examining their ethical dimension using transparency, placement of assets, guarantees and participation from Radical Affinity Index. Design/methodology/approach To this end, a sample of 20 Islamic banks from 13 countries (Bahrain, Saudi Arabia, Malaysia, Pakistan, Kuwait, Tanzania, Great Britain, Oman, Iraq, Egypt, Bangladesh and Qatar) was used. Findings The results are robust to ethical effects. The evidence suggests that among Islamic banks, at least some of them could improve their ethical requirements of the Sharia; they obtained lower scores than ethical banks in terms of RAI variables (transparency, placement of assets, guarantees and participation). Research limitations/implications It is used a random sample rather than population with the limitations that entails. The variables in the index are based on ethical perspective; then, the index is applied in Islamic banking but with the ethical view limitation. Practical implications The Islamic banks have the option to increase their transparency including further information regarding the beneficiaries of the benevolent funds; moreover, it would offer a clearer view about their ethical and social commitment towards society. Originality/value Additionally, this paper broadens the scope of the literature by analysing the determinants of Islamic banking around ethical dimensions of financial entities.

scholarly journals Estimating the price range and the effect of price bundling strategies

2019 ◽  
Vol 29 (2) ◽  
pp. 166-181 ◽  
Author(s):  
Sérgio Dominique-Ferreira ◽  
Cristina Antunes
Keyword(s):  
Market Share ◽  
Design Methodology ◽  
Price Sensitivity ◽  
Content Type ◽  
Price Range ◽  
Price Bundling ◽  
Hotel Managers ◽  
The Impact ◽  
Practical Implications

Purpose The purpose of this paper is to investigate and identify the price sensitivity of consumers of three- and five-star hotels and to determine the impact of bundling strategies on consumers’ price sensitivity. Design/methodology/approach To calculate price sensitivity, authors apply the van Westendorp’s price sensitivity meter (PSM). To understand the impact of bundling strategies, univariate and bivariate techniques are applied. Findings PSM results reveal the optimal prices and the range of acceptable prices for three- and five-star hotel. The bundling strategy results reveal that five-star customers are less sensitive to mixed-leader bundling. Regarding mixed-joint bundling, managers could improve sales through bundling strategies if they selected an attractive service (e.g. restaurants). Practical implications Findings assist hotel managers to understand the different price sensitivities, according to the hotel typology. Managers can manage prices without the risk of losing market share or revenue. The results help managers in deciding which bundling strategies they can create, as well as the services to be included to achieve highest profitability. Originality/value No research to date to the best of the authors’ knowledge has attempted to understand and compare the role of bundling strategies in three- and five-stars hotels. Moreover, no research has attempted to measure and compare customers’ price sensitivity of three- and five-stars hotels.

Measuring Shariah non-compliance risk (SNCR): claw-out effect of al-bai-bithaman ajil in default

2017 ◽  
Vol 8 (3) ◽  
pp. 272-283
Author(s):  
Saiful Azhar Rosly ◽  
Muhammad Arzim Naim ◽  
Ahcene Lahsasna
Keyword(s):  
Content Analysis ◽  
Design Methodology ◽  
Islamic Banking ◽  
Legal Environment ◽  
Islamic Banks ◽  
Legal Cases ◽  
Content Type ◽  
Potential Loss ◽  
Critical Requirement ◽  
Practical Implications

Purpose The purpose of this paper is to examine the meaning, nature and measurement of Shariah non-compliant risk faced by Islamic banks. Design/methodology/approach Al-bai-bithaman ajil (BBA) contract documentation is analyzed in the light of the legal environment in Malaysia and measurement of Shariah non-compliant risk based on constructed or hypothetical cases. Findings Shariah non-compliant risk will adversely affect bank’s earnings when BBA contracts are deemed invalid in the court of law, either in a foreclosure or ruling via court declaration. Research limitations/implications The paper is written based on content analysis, Malaysian legal cases with hypothetical examples for better understanding. Practical implications Islamic banking should be able to use the findings to estimate potential loss from Shariah non-compliant risk and make the necessary provisions. Originality/value This paper provides new insights of risks faced by credit-intensive Islamic banks, that when relinquishing critical requirement of Islamic contract such as ownership risk will suffer loss.

Index for measuring convergence between objectives and practice of Islamic banking

2021 ◽  
Vol 14 (2) ◽  
pp. 205-229
Author(s):  
Zahid Siddique
Keyword(s):  
Design Methodology ◽  
Theory And Practice ◽  
Islamic Banking ◽  
Mathematical Form ◽  
Islamic Banks ◽  
Content Type ◽  
Loan System ◽  
Additive Form ◽  
Practical Implications ◽  
Over Time

Purpose Islamic banking was developed to serve two objectives: to replace interest-based loan system with profit and loss sharing investment modes and to promote equity in resource allocation. The first objective is called procedural whereas the second one is termed consequential. Scholars have been debating about the success of Islamic banking in achieving these objectives. This paper aims to develop an index for measuring the extent of convergence between theory and practice of Islamic banking. Design/methodology/approach For measuring the procedural and consequential convergence between objectives and practice of Islamic banking, the paper derives a set of indicators from the celebrated theory of Islamic banking and then develops the methodology of ranking all banks in terms of those indicators. Findings The paper provides ranking of Islamic banks in Pakistan in the light of this index. The results indicate that none of the Islamic banks in Pakistan has been doing good enough to achieve the convergence, instead they are moving in the opposite direction over time. Practical implications Using the methodology developed in this paper, universal ranking of Islamic banks may be issued every year. Originality/value Scholars have proposed some indices for measuring the performance of Islamic banking. There are two basic problems with these proposed measures: they do not directly compare the performance of Islamic banking against its stated objectives and they naively use an additive form of index without explaining the reason for this choice, i.e. as to what are the desirable characteristics which their preferred mathematical form of index serves. The index proposed in this paper attempts to overcome these shortcomings.

Moderation effect on Islamic banking preferences in UAE

2018 ◽  
Vol 36 (1) ◽  
pp. 41-67 ◽  
Author(s):  
Mohammed Hersi Warsame ◽  
Edward Mugambi Ireri
Keyword(s):  
Design Methodology ◽  
Islamic Banking ◽  
Individual Investors ◽  
Content Type ◽  
Moderation Effect ◽  
Moderation Effects ◽  
Bank Managers ◽  
Convenience Sampling ◽  
Conventional Banks ◽  
Practical Implications

Purpose The purpose of this paper is to examine the direct and indirect moderation effects of demographic and socio-economic(s) factors on the adoption of Islamic banking in UAE. Design/methodology/approach Convenience sampling was done on the residents of Sharjah, Dubai, and Abu Dhabi. A closed-ended questionnaire with 30 items was designed and pre-tested before the start of the study. Path analysis and moderation testing were the main analytical approach. A total of 320 respondents completed the survey. Findings The research revealed that demographic and socio-economic(s) moderators may have direct and indirect moderation effects on the adoption of the Islamic banking in the UAE, which indicates the importance of these factors in the provision of Islamic banking products and services in the UAE. Practical implications This study further revealed that these moderators have huge practical implications for Islamic bank managers and marketers as they can exploit these demographics to enhance their market share in the UAE. Social implications In UAE, minimal attention has been directed toward the role moderators would play in the criterion that individual investors would use in the adoption of Islamic banking products and services in a cosmopolitan environment that is experiencing competition from conventional banks. Originality/value An extensive review of the existing literature on the adoption of Islamic banking reveals that no empirical research has been undertaken to explore the role played by demographic and socio-economic(s) moderators in the adoption of Islamic banking in UAE and internationally. This study attempts to fill this gap.

scholarly journals Do Islamic banks gain from corruption and money laundering (ML)?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kinza Aish ◽  
M. Kabir Hassan ◽  
Qamar Uz Zaman ◽  
Sadaf Ehsan ◽  
Khurram Abbas ◽  
...  
Keyword(s):  
Money Laundering ◽  
Design Methodology ◽  
Random Effect ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Bank Profitability ◽  
Content Type ◽  
Real Model ◽  
Effect Regression ◽  
The Impact

Purpose This paper aims to examine the impact of corruption and money laundering (ML) on the profitability and stability of Islamic banks. Design/methodology/approach This study used the data of 53 conventional and 19 Islamic banks of Pakistan and Malaysia to have comparative insights. The empirical methods include the fixed effect and random effect regression and generalized methods of moment for robust results. Findings The results indicate that Islamic banks gain from corruption and ML. Corruption and ML affect bank profitability and stability positively in a less corrupt environment, i.e. Malaysia; however, corruption hurts Islamic banks’ performance, and ML favours Islamic banking profitability and stability in a more corrupt environment, i.e. Pakistan. Originality/value The present study pioneers the debate on corruption and ML related to Islamic banking profitability and stability. This study provides important insights to regulators and Shariah advisors to build a real model of Islamic banking.

scholarly journals The impact of Islamic banking model and Islamic financial development on bank performance: evidence from dual banking economies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tanveer Ahsan ◽  
Muhammad Azeem Qureshi
Keyword(s):  
Financial Development ◽  
Fixed Effects ◽  
Generalized Method Of Moments ◽  
Bank Performance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Country Level ◽  
Conventional Banks ◽  
The Impact

Purpose The purpose of this study is to develop an Islamic Banking Index representing the Islamic banking model and to investigate its impact on the performance of Islamic and conventional banks. This study also analyzes the impact of Islamic financial development on bank performance. Design/methodology/approach The authors collected the data from 23 countries for the period from 2010 to 2018 and developed a composite Islamic Banking Index. The authors applied the generalized method of moments on 3,542 bank-year observations for both Islamic and conventional banks to analyze the impact of the Islamic Banking Index on bank performance. The results of the study are robust to time-fixed effects, country-level time-varying factors and endogeneity issues. Findings The authors found that Islamic Banking Index positively contributes to the return on assets (ROAit) of Islamic banks only. This impact becomes highly significant in countries with comparatively higher Islamic financial development. This finding suggests that the Islamic financial development in a country provides a supportive operating environment to Islamic banks and increases their performance. The authors also found that Islamic Banking Index positively contributes to the return on equity (ROEit) of both types of banks. Practical implications The authors argue that moving away from interest-based products and focusing more on diversified portfolios can boost the performance of both types of banks without increasing their risk levels. Originality/value To the best of the authors’ knowledge, this is the first study that develops a composite Islamic Banking Index based on differentiating factors of the Islamic banking model and investigates the impact of Islamic Banking Index and Islamic financial development on bank performance.

Competition and market structure of the Malaysian Islamic banking industry

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohd Faizal Basri
Keyword(s):  
Market Structure ◽  
Monopolistic Competition ◽  
Banking Industry ◽  
Financial System ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Under Performing ◽  
Conventional Banks ◽  
The Impact

Purpose This paper aims to investigate the impact of competition in the Malaysian Islamic banking industry and the market structure of the industry by focusing on the particular impact created by the entrance of fully fledged foreign Islamic banks plus the introduction of Islamic subsidiaries of existing conventional banks in the country (domestic and foreign ownership). Design/methodology/approach Using a sample of 16 Islamic banks in the country that operated between 2008 and 2015, this paper measures the competition among the Islamic banks using the Panzar-Rosse Model and by looking at the market structure of the industry using the k-bank concentration ratio and the Herfindahl-Hirschman Index. Findings The study found that between 2008 and 2015, the Malaysian Islamic banking industry operated in monopolistic competition conditions with a moderately concentrated market structure. The introduction of foreign Islamic banks caused the market structure to become more competitive and less concentrated by comparing the results that include foreign Islamic banks against the results generated with a subsample of domestic Islamic banks only. Bank Negara Malaysia’s (BNM’s) financial reform and the liberalisation of the financial system were proven to induce competition making the financial system more resilient, competitive and dynamic. The Islamic banks have recorded consistently increased annual performance with the under-performing Islamic banks catching up on the top performers. Originality/value Very few research studies have focused on the market structure and competition of the Islamic banking industry in Malaysia, especially using recent financial data; this study will contribute to filling the existing gap.

scholarly journals Islamic finance: financial inclusion or migration?

2018 ◽  
Vol 10 (2) ◽  
pp. 277-288 ◽  
Author(s):  
Ahmed Tahiri Jouti
Keyword(s):  
Financial Institutions ◽  
Financial Services ◽  
Design Methodology ◽  
Financial Inclusion ◽  
Islamic Finance ◽  
Islamic Banks ◽  
Content Type ◽  
The Stability ◽  
The Impact ◽  
Practical Implications

Purpose This paper aims to define a methodology to assess the impact of introducing Islamic finance on financial inclusion. Design/methodology/approach The paper is based on a literature review to understand the link between Islamic finance and financial inclusion. The second part of the paper presents a conceptual framework to assess the impact of introducing Islamic finance on financial inclusion in a defined context based on the profiling of people interested in Islamic finance. Findings The paper brings an insight on the impact of introducing Islamic finance. Indeed, it could cause a financial migration to Islamic banks that can take many forms and depends on many factors that call for deep analysis. Research limitations/implications The paper would help financial authorities and financial institutions to measure the impact of introducing Islamic finance on their businesses and the stability of the whole system. Practical implications Islamic finance can not only enhance financial inclusion but also create financial migration. The two implications can vary from one context to another. Social implications Islamic finance can contribute in the effort of including “self-excluded” people with religious concerns as well as people without access to financial services. Originality/value This paper promotes the idea that Islamic finance is not exclusively a way to enhance financial inclusion.

Does corruption affect Islamic banking? Empirical evidence from the OIC countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zuhairan Yunmi Yunan
Keyword(s):  
Empirical Evidence ◽  
Current Literature ◽  
Design Methodology ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Performance Measurements ◽  
Dynamic Panel ◽  
Content Type ◽  
Islamic Countries ◽  
The Impact

Purpose This paper aims to examine whether the level of corruption affects profitability and soundness of Islamic banking. Design/methodology/approach This paper uses a dynamic panel of 61 Islamic banks from 12 Organization of Islamic Cooperation (OIC) countries covering the period between 2016 and 2018. Findings This paper finds that the empirical evidence examined shows that corruption does affect the profitability and soundness of Islamic banks. Originality/value The value of this paper is to emphasize further understanding of corruption behaviour on Islamic banking in Islamic countries. This paper contributes to filling the gaps in the current literature on corruption and Islamic banking. Existing literature has only focussed on either profitability or soundness of Islamic banking, whereas this paper analyses the impact of corruption levels for both performance measurements simultaneously.

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