News / Economy

Islamic Banks Rebrand to Attract Foreign, Non-Muslim Customers

A woman walks past a branch of Noor Islamic Bank, which changed its name to Noor Bank in January 2014, in Dubai in 2010.
A woman walks past a branch of Noor Islamic Bank, which changed its name to Noor Bank in January 2014, in Dubai in 2010.
Reuters

Islamic banking is based on core principles of the religion. So it is striking that some banks are removing the word "Islam" from their names - a sign of both the potential of Islamic finance to grow, and the obstacles to it becoming mainstream.

In January, Dubai-based Noor Islamic Bank changed its name to Noor Bank. Abu Dhabi Islamic Bank (ADIB), the emirate's largest sharia-compliant lender, now plans to call itself Abu Dhabi International Bank when operating abroad.

In both cases, the changes are part of the banks' plans to expand. They aim to move well beyond a relatively small group of customers who stress religious permissibility, to a much larger customer base for whom pricing and service quality are key.

This approach could help Islamic banks establish themselves globally, not just in the Muslim-majority regions of the Gulf and southeast Asia, and appeal to larger numbers of non-Muslims as well as Muslims.

But the banks feel that to broaden their appeal and compete directly with conventional institutions for customers, they need to play down their Islamic nature among the general public.

"Rebranding is an essential part of widening the appeal of the industry, whether we call it ethical, alternative or sustainable finance," said Yerlan Baidaulet, a member of the board of executive directors at the Saudi Arabia-based Islamic Development Bank, a multilateral institution. "Our mindset has to be global, we have to think wider in terms of customer appeal. Why monopolise the concept and keep calling it only Islamic?"

Growth

Islamic banks, which follow principles such as bans on interest payments and pure monetary speculation, have been growing rapidly in the Gulf and southeast Asia for a decade.

In the six-country Gulf Cooperation Council they now account for about a quarter of total banking assets.

In the past couple of years growth has slowed in some countries, however, as the banks have largely run out of new customers who are willing to base their choices primarily on an institution's Islamic credentials.

In Qatar, for instance, asset growth rates of Islamic banks have dropped to just above those of their conventional peers, cutting a large lead which the industry previously held. Islamic banking assets in Qatar grew 12.2 percent in 2013, down from 35.1 percent in 2011, central bank data shows.

So to continue expanding, the banks have two options. One is to compete for the mass of consumers - by some estimates, 60 or 70 percent of the population even in a mainly Muslim country - who base their choice of bank on non-religious factors.

ADIB is in the process of acquiring a large number of such customers; in April it said it had agreed to buy the United Arab Emirates retail banking operations of Barclays for an expected price of 650 million dirhams ($177 million).

The Abu Dhabi bank is now trying to persuade roughly 110,000 former Barclays customers to stay with ADIB rather than moving to conventional banks. This involves competing directly on non-religious aspects of its service.

The other growth option for Islamic banks is to move into new markets in Asia, Europe or Africa, in countries which have Muslim minorities but where establishing a profitable presence will require attracting large numbers of non-Muslims.

The banks have no intention of changing the sharia-compliant nature of their products. But removing the word "Islam" from their names is a way of avoiding any perception that Islamic banks focus on religious issues while neglecting aspects such as quality of service.

Islamic Bank of Britain (IBB), which was acquired in January by Qatar's largest Islamic bank Masraf Al Rayan, is studying whether to rebrand itself to appeal to a wider customer base, said IBB chief executive Sultan Choudhury.

"We have to look at branding - sometimes the positioning as an Islamic bank can work against us," he said. "After the takeover we want to look at how we present the bank to customers. We have to consider how to position the brand to be all-inclusive."

IBB, based in Birmingham, offered a savings account promotion last year for which it estimated 55 percent of applications were from non-Muslims. It had similar success in marketing products in Scotland by avoiding any of the Arabic terminology often used to describe Islamic financial products, Choudhury said.

"Ultimately the contracts are sharia-compliant...but this helps in consumer understanding."

Ethical

Tirad Mahmoud, ADIB's chief executive, said Islamic banks had an advantage over conventional banks in being able to stress the moral foundations of their business - a consideration which has become more important since banking abuses fueled the global financial crisis.

For example, Islamic banks reject much of the complex financial engineering used by conventional banks. Returns on Islamic bank accounts are based on investment income rather than on interest payments.

"The real competitive advantage that Islamic banks have is that they are ethically constructed. We need to promote this. The denomination doesn't matter," Mahmoud said.

ADIB says a survey which it commissioned found 1,000 retail customers in the UAE, Egypt, Turkey, Indonesia and Britain believed a lack of ethical principles was the biggest problem in their banking relationships.

However, the survey also showed that while Islamic banks were perceived as treating customers more fairly than conventional institutions, they were seen as lacking best industry practices and failing to deliver a simple banking experience. Rebranding can help to change that.

Name changes can also help Islamic banks expand in markets where regulation limits their branding options: ADIB has plans to enter Turkey, Algeria and Saudi Arabia, all of which restrict the use of religious terms, Mahmoud said.

In Turkey, for example, Islamic banks describe themselves as "participation banks" to comply with staunchly secular legislation.

"In respect of awareness of participation banks, there has not been any problem. Everybody knows they are Islamic banks and operate according to Islamic banking principles," said Osman Nihat Yilmaz, deputy secretary general of the Participation Banks' Association of Turkey."Less religiously-linked branding could be useful for the industry if it wants to attract non-Muslim clients." 

ADIB'S Mahmoud rejected the idea that removing the word "Islam" from banks' names was in any way compromising their Islamic nature. Instead, he said, it could put the focus where it should be: on the quality of banks' services.

"Some Islamic banks are unfairly using their Islamic label in Muslim communities," he said. "It is an emotional label that is very powerful in these communities, but are we leveraging on emotions?"

You May Like

Video One Year After Thai Coup, No End in Sight for Military Rule

Since carrying out the May 22, 2014 coup, the general has retired from the military but is still firmly in charge More

Goodbye, New York

This is what the fastest-growing big cities in America have in common More

Job-Seeking Bangladeshis Risk Lives to Find Work

The number of Bangladeshi migrants on smugglers’ boats bound for Southeast Asian countries has soared in the past two years More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Turkey's Main Opposition Party Hopes for Election Breakthroughi
X
May 22, 2015 10:23 AM
Turkey’s main opposition Republican People’s Party has sought an image change ahead of the June 7 general election. The move comes after suffering successive defeats at the hands of the Islamist-rooted AK Party, which has portrayed it as hostile to religion. Dorian Jones reports from the western city of Izmir.
Video

Video Turkey's Main Opposition Party Hopes for Election Breakthrough

Turkey’s main opposition Republican People’s Party has sought an image change ahead of the June 7 general election. The move comes after suffering successive defeats at the hands of the Islamist-rooted AK Party, which has portrayed it as hostile to religion. Dorian Jones reports from the western city of Izmir.
Video

Video Europe Follows US Lead in Tackling ‘Conflict Minerals’

Metals mined from conflict zones in places like the Democratic Republic of Congo are often sold by warlords to buy weapons. This week European lawmakers voted to force manufacturers to prove that their supply chains are not inadvertently fueling conflicts and human rights abuses. Henry Ridgwell reports from London.
Video

Video Class Tackles Questions of Race, Discrimination

Unrest in some U.S. cities is more than just a trending news item at Ladue Middle School in St. Louis, Missouri. As VOA’s Kane Farabaugh reports, it’s a focus of a multicultural studies class engaging students in wide-ranging discussions about racial tensions and police aggression.
Video

Video Mind-Controlled Prosthetics Are Getting Closer

Scientists and engineers are making substantial advances towards the ultimate goal in prosthetics – creation of limbs that can be controlled by the wearer’s mind. Thanks to sophisticated sensors capable of picking up the brain’s signals, an amputee in Iceland is literally bringing us one step closer to that goal. VOA’s George Putic reports.
Video

Video Afghan Economy Sinks As Foreign Troops Depart

As international troops prepare to leave Afghanistan, and many foreign aid groups follow, Afghans are grappling with how the exodus will affect the country's fragile economy. Ayesha Tanzeem reports from the Afghan capital, Kabul.
Video

Video Poverty, Ignorance Force Underage Girls Into Marriage

The recent marriage of a 17-year old Chechen girl to a local police chief who was 30 years older and already had a wife caused an outcry in Russia and beyond. The bride was reportedly forced to marry and her parents were intimidated into giving their consent. The union spotlighted yet again the plight of many underage girls in developing countries. Zlatica Hoke reports poverty, ignorance and fear are behind the practice, especially in Asia and Africa.
Video

Video South Korea Marks Gwangju Uprising Anniversary

South Korea this week marked the 35th anniversary of a protest that turned deadly. The Gwangju Uprising is credited with starting the country’s democratic revolution after it was violently quelled by South Korea’s former military rulers. But as Jason Strother reports, some observers worry that democracy has recently been eroded.
Video

Video California’s Water System Not Created To Handle Current Drought

The drought in California is moving into its fourth year. While the state's governor is mandating a reduction in urban water use, most of the water used in California is for agriculture. But both city dwellers and farmers are feeling the impact of the drought. Some experts say the state’s water system was not created to handle long periods of drought. Elizabeth Lee reports from Ventura County, an agricultural region just northwest of Los Angeles.
Video

Video How to Clone a Mammoth: The Science of De-Extinction

An international team of scientists has sequenced the complete genome of the woolly mammoth. Led by the Swedish Museum of Natural History in Stockholm, the work opens the door to recreate the huge herbivore, which last roamed the Earth 4,000 years ago. VOA’s Rosanne Skirble considers the science of de-extinction and its place on the planet
Video

Video Blind Boy Defines His Life with Music

Cole Moran was born blind. He also has cognitive delays and other birth defects. He has to learn everything by ear. Nevertheless, the 12-year-old has had an insatiable love for music since he was born. VOA’s June Soh introduces us to the young phenomenal harmonica player.

VOA Blogs

World Currencies

EUR
USD
0.8957
JPY
USD
120.93
GBP
USD
0.6393
CAD
USD
1.2199
INR
USD
63.470

Rates may not be current.