Do I Trust You?

What the Consumers of Banking Services Think of Islamic Banks – And Why? Prepare for a few surprises…

FOR THE PAST 4 YEARS, Edbiz Consulting has been asking consumers of banking services all over the world to name their most trusted Islamic banking brands. This year, we also asked the respondents to tell us how much they trust or distrust the people, from different ethnic and faith groups, who are involved in Islamic banking. This was expected to help us understand why users of banking services have shied away from patronising Islamic banks. For there was a common view held by a sizable part of the Muslim community in Britain that an English banker should not serve as managing director of the first stand-alone Islamic bank in the country, i.e., Islamic Bank of Britain.

 

SO WHO DO CONSUMERS OF ISLAMIC BANKING SERVICES TRUST, or distrust the most? Is it true that Muslims’ opinions about different ethnic and faith groups are still based on experiences spanning over centuries of conflict and co-existence? Conversely, is it true that most non- Muslims do not want to do business with an Islamic bank?

Many readers may in fact find even the starting point of our analysis intriguing. Respondents were asked which ethnic and faith group they trusted in top and middle management of Islamic banks. In total, 14 such groups were identified (listed in Table 1). In terms of visibility of ethnicity and faith groups in Islamic banking, Christians (particularly the English) are the most visible after Muslims. In the UK Islamic banking sector, three out of six Islamic banks have British / European CEOs, and the remaining three also previously had Christian CEOs. Therefore, it appears as if the replacement of non-Muslim CEOs with Muslim CEOs is a step towards garnering greater trust of the users of Islamic financial services.

The two groups whose people seemed most trustworthy to consumers of Islamic banking are Muslims and English, and from within Muslims South Asians, Far Eastern and Arabs are most trusted. When one looks at the characteristics that these groups embody, it’s very easy to see why they are trusted so much.

Both these groups – Muslims and English – score highly in our surveys for completely different reasons. While Muslims are trusted for purely religious reasons and their commitment to Islam, the English are trusted primarily for their honesty, professionalism and attention to detail.

London has been central to a lot of developments in Islamic banking and finance (IBF) right from the beginning. A number of Islamic financial institutions – including Albaraka Bank – started their Islamic banking operations in the 1980s, and the subsequent commitment of the British government to understand IBF and provide it a level-playing field are seen favourably by the consumers of Islamic banking services.

The trust in UK and its involvement in IBF is evident from the 2014 sovereign sukuk issuance by the governments of Hong Kong, South Africa and Luxembourg who all followed the issuance of sukuk by the British government.

The South Asians are trusted primarily because of their most conservative views on Shari’a, probably because most of them follow the hanafi school of thought, which is deemed as most conservative in fiqh al muamalat al maliya (the jurisprudence of financial transactions). The Far Eastern Muslims, led by Malaysians, are trusted the most because of the role of the government in promoting IBF and developing arguably the most comprehensive regulatory framework for Islamic financial services. The Arabs are in general deemed as the most dedicated Muslims and they are trusted because of their commitment to Islam on an individual level.

It seems as if Shari’a authenticity is the most important factor that will influence a consumer of Islamic banking services to trust an individual, faith or ethnic group, or institution involved in Islamic banking. However, political and historical factors cannot be completely ruled out. The Christians and Europeans

are trusted more than Jews alludes to the fact that Muslims have a long history of dealing with the Europeans and that they feel more comfortable with them than Jews who are seen unfavourably perhaps because of the ongoing Arab-Israel conflict. Other groups like Americans, Africans, Russians, the Japanese and the Chinese are least trusted because of the

relatively lower engagement of Muslims with them.

The Least Trusted Group – Hindus –

Is perhaps because of the statistical bias in the data, as 43% of the respondents in the sample had a South Asian background. India has been at the heart of the ongoing conflict with Pakistan over the disputed territory of Kashmir. In fact, 89% of the respondents with a Pakistani background do not trust Hindus. Yet, in spite of that, Indian people’s qualities are very clearly understood by Islamic banks, especially in the countries comprising the Gulf Cooperation Council (GCC) where Hindus are employed at top positions in Islamic banks. Similarly, Malaysian Hindus have not seen any kind of discrimination against them by the Islamic banks in the country.

Which Islamic Banks Are  Trusted The Most?

It is not surprising to find that Dubai Islamic Bank (DIB) is the most trusted brand in Islamic banking. This can partially be explained with the help of its long history and visibility in the global Islamic banking market. DIB operates in multiple jurisdictions, including UAE, Pakistan, Jordan and Sudan, either as a direct DIB brand or through its subsidiaries or the companies in which it has substantial shareholdings. Table 2 lists the top 10 trusted brands and the 10 least trusted brands in Islamic banking.

Most trusted                                               %                         Least trusted                                                                       %
1.                Muslims	89	1.	Jews	48
2.           English	81	2.	Americans	43
3.           South Asian Muslims	73	3.	Africans	35
4.           Far Eastern Muslims	69	4.	Russians	30
5.           Arab Muslims	68	5.	Japanese	29
6.            Christians	59	6.	Chinese	28
7.                Europeans	53	7.	Hindus	27

In fact, the top five most trusted brands in Islamic banking happen to be stand-alone full-fledged Islamic banks. The list of the top 10 brands in Islamic banking included only one bank – CIMB Islamic – which is a subsidiary of a conventional banking group. All other brands (given in Table 2) are full- fledged Islamic banks from UAE, Kuwait, Saudi Arabia, Malaysia, Qatar, Indonesia and Pakistan. It seems as if the uncertainty over the branding of Abu Dhabi Islamic Bank (ADIB) and aversion of the top management to present it as an Islamic banking brand has an adverse effect in terms of the trust consumers of Islamic banking services have in ADIB. Some consultancy companies have led many Islamic banks to believe that their Islamic branding is a hindrance to their further development and growth. Impressed by this thinking, Noor Islamic Bank in the UAE was changed to Noor Bank last year, although it still remains a Shari’a-compliant bank. According to a study commissioned by ADIB, only 7% of the respondents in UK said that they don’t mind doing business with an Islamic bank.

Consequently, the bank decided to introduce itself as ADIB UK – a brand that disguises its Islamic identity in the acronym.

What comes as a shocking surprise is the level of distrust HSBC attracts amongst those who are using Islamic banking services. Almost two-thirds of the respondents who included HSBC in their list of the trusted brands in Islamic banking chose HSBC as their least trusted brand in Islamic banking. This is a surprising result as HSBC Amanah is considered by many as one of the most well-known brands in Islamic banking. This is rather an intriguing result, given that most of the consumers of Islamic banking services trust the English as the second most trusted ethnic group involved in Islamic banking (Table 1). Another British bank involved in Islamic banking, namely Standard Chartered Bank, is the second least trusted brand in Islamic banking, followed by Citi Bank.

CIMB Islamic Is A Curious Islamic Brand – On one hand, it is the sixth most trusted brand in Islamic banking, and on the other hand, it is also reported as the ninth most distrusted brand. CIMB Islamic is perhaps the most visible Islamic brand in Malaysia. The CEO of CIMB Islamic, Badlisyah Abdul Ghani, is considered as a “rock star” in IBF, and this mixed result for CIMB certainly requires further investigation.

Most Trusted                                              %                        Least Trusted                                                                       %
1.                Dubai Islamic Bank	77	1.	HSBC	66
2.            Kuwait Finance House	71	2.	Standard Chartered	63
3.            Al Rajhi Bank	66	3.	Citi Bank	52
4.            Bank Islam Malaysia Berhad	60	4.	Faisal Bank	44
5.            Albaraka Bank	59	5.	Public Islamic (Malaysia)	39
6.            CIMB Islamic	53	6.	Al Salam Bank Bahrain	22
7.                Qatar Islamic Bank	53	7.	Noor Bank	21
8.            PT Bank Muamalat (Indonesia)	52	8.	Islamic Bank of Britain	19
9.            Meezan Bank	51	9.	CIMB Islamic	15
10.             Abu Dhabi Islamic Bank	50	10	Al Hilal Bank	13

	Meezan	QIB	KFH	Alrajhi	DIB	BIMB	CIMB-I	Albaraka	Muamalat	ADIB
Meezan	91	65	67	53	57	34	33	50	56	58
QIB	34	88	71	68	69	30	30	59	35	68
KFH	39	79	87	71	69	35	37	67	40	65
Alrajhi	41	77	76	85	73	53	45	69	55	66
DIB	61	63	70	65	84	39	33	64	45	67
BIMB	55	69	71	69	70	80	71	67	59	58
CIMB-I	51	59	61	63	66	69	79	61	60	61
Albaraka	89	80	81	79	78	45	44	78	49	66
Muamalat	62	69	69	68	69	66	66	64	77	65
ADIB	65	69	70	69	68	49	48	67	53	75

One way of gaging the internal strength of a brand is to see how the employees of a particular business think about their brands. Not only this, but it is also instructive to investigate what employees of one business think about other competing businesses. When employees of the top 10 most trusted brands in Islamic banking were asked if they trusted their own brands, an interesting picture emerged. Table 3 presents a matrix showing how much employees of the top 10 most trusted Islamic banks trust their own brands and other leading brands in the industry. Diagonal entries represent the weighted percentage of the respondents who trust their own brands; off-diagonal entries represent the weighted percentage of employees of one organisation who trust the other organisation and its brand. For example, the box in row 2 and column 3 states that 65% of the respondent employees of Meezan trust Qatar Islamic Bank (QIB).

Meezan Bank – The Largest Islamic Bank in Pakistan – Is Trusted Most by its own Employees –

It is interesting, as DIB being the most trusted Islamic banking brand is only the fifth Islamic brand in terms of being trusted by its own employees. Furthermore, while Meezan Bank’s employees have a very positive view on their own brand, they tend to trust other Islamic banking brands far less than that. This could very well be self-appreciation that in general prevails in Pakistan where people tend to believe that they are the most authentic when it comes to religious practices. In Pakistan, the practices like bai’ ‘ina (buy back sale) and tawarruq are not acceptable, and therefore Islamic bankers in Pakistan do not think very highly of the Islamic banks that are involved in such practices. The lowest trust in Malaysian Islamic banks is perhaps due to the fact that they have been involved in bai’ ‘ina. More importantly, employees of other Islamic banks show very low level of trust in Meezan Bank, which may primarily be due to lack of awareness of the Meezan brand outside Pakistan.

The Malaysian Islamic banks are the least trusted brands amongst the employees of Islamic banks in the Middle East and Pakistan. The lack of trust in Malaysian Islamic banking brands is commonly understood, as most Arabs do not endorse practices like bai’ ‘ina. Similar attitude prevails towards bai’ ‘ina in Pakistan. This poor rating of Malaysian Islamic banks is expected to change in future, as bai’ ‘ina is being routed out from the country, and new Shari’a standards acceptable globally are replacing the old Malaysia-centric Shari’a approach.

It may come as a surprise to many that ADIB

happens to be the least trusted brand by its own employees. As the underlying reasons for the observed preference ordering was beyond the scope of this survey, it will be interesting to study the factors that may contribute to such a distrust. Although Islamic bankers at ADIB are self-critical, they are just as much critical of other peer brands. Their ratings of all the Islamic banks, apart from the ones in the Far East, is more or less the same, ranging from 65 to 70. The same is true for the employees of Bank Muamalat Indonesia.

This should, however, not come as a surprise to those who are aware of the academic research in the field of social change and cultural differences. There has always been a tradition of self-criticism in the organisations that are exposed to the Western style of management. Given that ADIB’s top management aspires to develop their bank as a Citibank kind of organisation (perhaps because a lot of the top management actually have a Citi background), it is expected that its employees are not entirely happy with the current state of affairs and that they know that organisational reforms and enhancement of the brand need to be done. As a matter of fact, the bank management has been toying with the idea of dropping the word “Islamic” from its name to enhance its branding.

The proposed name for international operations of the bank is Abu Dhabi International Bank, which is clearly a move away from the Islamic identity of the bank.

An opposite argument may hold for the employees of Meezan Bank, who are least exposed to the Western style of management, and may in fact be overwhelmed by the rather local success of their bank.

Does Trust, or Lack of it, Really Matter?

The answer is an unequivocal “yes”. Many industry observers fear an inexorable decline in popularity of Islamic banking if it fails to develop a distinct identity independent of its conventional counterpart. While the attempts to bring Islamic banking into mainstream are desirable and must be applauded, this mainstream relevance should not come at the expense of loss of identity. Secularising the identity of Islamic banking is at best expedient.

Trust is often claimed to be a prerequisite of brand loyalty. Without trust there can be little business. So it will be difficult to win more business for an Islamic bank in the wake of diminishing trust In its brand and in its distinct value proposition. For Islamic banking to develop itself further, it should study the models of Islamic banking as presented by the likes of Dubai Islamic Bank. Despite ups and downs in its 40 years of history, DIB has maintained its distinct identity and has over the decades gone from strength to strength in terms of its brand development.

 

There is also a need to understand the true potential of Islamic branding. According to Miles Young, “A market of 1.6 billion people that has scarcely been tapped, Muslim consumers offer enormous potential to Western marketers – but only if their values are fully understood.” It is ironic that while mainstream players in the consumer markets are identifying, respecting and capturing the opportunities in Muslim communities, some Islamic banks are trying to move away from this multi-trillion opportunity. This is certainly behind slivering of the word “Islamic” from some of the Islamic banking brands. While the likes of ADIB have paid heed to the advice that only seven percent of the people in UK are willing to do business with an Islamic bank, they failed to understand the finding that this number goes to 28 percent when such people are educated about Islamic banking.

A little bit of empathy and understanding of an Islamic brand and identity will go a long way to develop the required trust not only amongst the consumers of Islamic banking services but also amongst the employees of Islamic banks. This process must start from the top management. We believe that Meezan Bank’s employees trust their own brand the most is due to a strong emphasis on its Islamic identity by the top management. This survey is very clear in at least one thing. In order to be trusted by others, trust yourself first.