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

    Candidates' Comments Fly Like New Hampshire Snowflakes

    Four days ahead of the country's first-in-the-nation Republican and Democratic party primary elections, surveys show the parties' contests tightening

    South Korea Says North Korea Moving Closer to Rocket Launch

    In phone call, US President Barack Obama and Chinese President Xi Jinping agree that Pyongyang's move would be 'provocative'

    Australian Commander: IS Changing Tactics

    Head of Australian forces in Middle East talks with VOA about training Iraqi troops, countering evolving Islamic State efforts and defeating extremism

    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.
    German Artists to Memorialize Refugees With Life Jacket Exhibiti
    X
    Hamada Elsaram
    February 05, 2016 4:30 PM
    Sold in every kind of shop in some Turkish port towns, life jackets have become a symbol of the refugee crisis that brought a million people to Europe in 2015.  On the shores of Lesbos, Greece, German artists collect discarded life jackets as they prepare an art installation they plan to display in Germany.  For VOA, Hamada Elrasam has this report from Lesbos, Greece.
    Video

    Video German Artists to Memorialize Refugees With Life Jacket Exhibit

    Sold in every kind of shop in some Turkish port towns, life jackets have become a symbol of the refugee crisis that brought a million people to Europe in 2015.  On the shores of Lesbos, Greece, German artists collect discarded life jackets as they prepare an art installation they plan to display in Germany.  For VOA, Hamada Elrasam has this report from Lesbos, Greece.
    Video

    Video E-readers Help Ease Africa's Book Shortage

    Millions of people in Africa can't read, and there's a chronic shortage of books. A non-profit organization called Worldreader is trying to help change all that one e-reader at a time. VOA’s Deborah Block tells us about a girls' school in Nairobi, Kenya where Worldreader is making a difference.
    Video

    Video Genius Lets World Share Its Knowledge

    Inspired by crowdsourcing companies like Wikipedia, Genius allows anyone to edit anything on the web, using its web annotation tool
    Video

    Video Former Drug CEO Martin Shkreli Angers US Lawmakers

    A former U.S. pharmaceutical business executive has angered lawmakers by refusing to explain why he raised the price of a life-saving pill by 5,000 percent. Martin Shkreli was removed from a congressional hearing on Thursday after citing his Fifth Amendment right to stay silent. Zlatica Hoke has more.
    Video

    Video Super Bowl TV Commercials are Super Business for Advertisers

    The Super Bowl, the championship clash between the two top teams in American Football, is the most-watched sporting event of the year, and advertisers are lining up and paying big bucks to get their commercials on the air. In fact, the TV commercials during the Super Bowl have become one of the most anticipated and popular features of the event. VOA's Brian Allen has a sneak peek of what you can expect to see when the big game goes to commercial break, and the real entertainment begins.
    Video

    Video In Philippines, Mixed Feelings About Greater US Military Presence

    In the Philippines, some who will be directly affected by a recent Supreme Court decision clearing the way for more United States troop visits are having mixed reactions.  The increased rotations come at a time when the Philippines is trying to build up its military in the face of growing maritime assertiveness from China.  From Bahile, Palawan on the coast of the South China Sea, Simone Orendain has this story.
    Video

    Video Microcephaly's Connection to Zika: Guilty Until Proven Innocent

    The Zika virus rarely causes problems for the people who get it, but it seems to be having a devastating impact on babies whose mothers are infected with Zika. VOA's Carol Pearson has more.
    Video

    Video Solar Innovation Provides Cheap, Clean Energy to Kenya Residents

    In Kenya, a company called M-Kopa Solar is providing clean energy to more than 300,000 homes across East Africa by allowing customers to "pay-as-you-go" via their cell phones. As Lenny Ruvaga reports from Kangemi, customers pay a small deposit for a solar unit and then pay less than a dollar a day to get clean energy to light up their homes or businesses.
    Video

    Video Stunning Artworks Attract Record Crowds, Thanks to Social Media

    A new exhibit at the oldest art museum in America is shattering attendance records. Thousands of visitors are lining up to see nine giant works of art that have gotten a much-deserved shot of viral marketing. The 150-year-old Smithsonian American Art Museum has never had a response quite like this. VOA's Julie Taboh reports.
    Video

    Video Apprenticeships Put Americans on Path Back to Work

    Trying to get more people into the U.S. workforce, the Obama administration last year announced $175 million in grants towards apprenticeship programs. VOA White House correspondent Aru Pande went inside one training center outside of Washington that has gained national recognition for helping put people on the path to employment.
    Video

    Video New Material May Reduce Concussion Effects

    As the 2016 National Football League season reaches its summit at the Super Bowl this coming Sunday (2/7), scientists are trying to learn how to more effectively protect football players from dangerous and damaging concussions. Researchers at Cardiff and Cambridge Universities say their origami-based material may solve the problem. VOA’s George Putic reports.
    Video

    Video Saudi Arabian Women's Sports Chip Away at Stereotypes

    Saudi Arabian female athletes say that sports are on the front line of busting traditions that quash women’s voices, both locally and internationally. In their hometown of Jeddah, a group of basketball players say that by connecting sports to health issues, they are encouraging women and girls to get out of their homes and participate in public life. VOA’s Heather Murdock reports.
    Video

    Video A Year Later, Fortunes Mixed for Syrians Forging New Lives in Berlin

    In April of last year, VOA followed the progress of six young Syrian refugees -- four brothers and their two friends -- as they made their way from Libya to Italy by boat, and eventually to Germany. Reporter Henry Ridgwell caught up with the refugees again in Berlin, as they struggle to forge new lives amid the turmoil of Europe's refugee crisis.
    Video

    Video Zika Virus May be Hard to Stop

    With the Zika virus spreading rapidly, the World Health Organization Monday declared Zika a global health emergency. As Alberto Pimienta reports, for many governments and experts, the worst is yet to come.

    World Currencies

    EUR
    USD
    0.8926
    JPY
    USD
    116.68
    GBP
    USD
    0.6871
    CAD
    USD
    1.3751
    INR
    USD
    67.653

    Rates may not be current.