RIT Dubai study finds offering better rates is key to growth of Islamic Banking

A new study released by Dr. John Ireland, Associate Professor at the Rochester Institute of Technology Dubai, suggests 68 per cent of Muslim customers in the UAE are prepared to shift loyalty from Islamic banks to conventional banks to obtain better rates

27 August, Dubai, UAE: A new study released by Dr. John Ireland, Associate Professor of Marketing at the Rochester Institute of Technology Dubai, has found that whilst Muslim Islamic banking consumers in the UAE have a strong preference towards Islamic banks and products, 68 per cent of those surveyed were prepared to shift loyalty to conventional banking options if a two per cent better rate was offered. The study also revealed that 44 per cent of customers would choose conventional banking offers if the rate increased to one per cent.

The research surveyed 300 current UAE Islamic banking customers. It is the first study to quantify the loyalty of Islamic banking customers in terms of price and demonstrate the existence of price sensitivity tiers. The study used  choice-based conjoint analysis and a market simulation to analyse customer preferences for Islamic and conventional investment, savings and car finance products offered by   Islamic  and conventional banks.

Commenting on the study, researcher Dr. John Ireland said: “Previous research and conventional wisdom would suggest that Muslim customers of Islamic banks are not willing to trade off the benefits of Sharia compliance for better rates. However, our research revealed that many Islamic banking customers willing to switch to conventional products to avoid the high costs associated with Islamic banking. Whilst it is key that the Islamic finance sector continues to remain focused on service, image, religious obligations and location, they must also be aware of  price if they wish to achieve a greater market share. This research goes some way to explaining why Islamic banks in the UAE hold only 19 per cent of banking assets even though 76 per cent of residents and all citizens are Muslim, according to the UAE census of 2015. However, it’s not all doom and gloom for the Islamic Finance sector: the study also showed that 32 per cent of Islamic banking consumers would remain loyal to Sharia products and banks even at a 2 per cent disadvantage.”

The research is set to be published by the International Journal of Bank Marketing this Fall. The Rochester Institute of Technology Dubai offers a wide range of Bachelor’s and Master’s options specializing in Islamic Finance and Marketing.

 

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NOTES TO EDITORS

About RIT Dubai

Established in 2008, RIT Dubai is a not-for-profit global campus of Rochester Institute of Technology, NY, one of the world's leading technological universities. RIT Dubai is based in Dubai Silicon Oasis and offers the same highly valued American Bachelor and Master’s degrees in business, leadership, engineering, and computing as in the main campus in Rochester, NY,USA. The university offers a unique Master’s in City Science, one of the only ones in the region.

About RIT NY

Rochester Institute of Technology (RIT) is one of the world’s leading career oriented, technological-focused universities, offering high quality academic programs, outstanding committed faculty, and state-of-the-art facilities. Founded in 1829, RIT is the 11th largest private university in the US, and our cooperative education program is one of the oldest and largest in the world