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

    Multimedia Obama Calls on Americans to Help the Families of Its War Dead

    In last Memorial Day of his presidency, Obama lays wreath at the Tomb of the Unknown Soldier at Arlington National Cemetery

    The Strife of the Party: Will Trump Permanently Alter Republicans?

    While billionaire mogul's no-holds-barred style, high-energy delivery are what rocketed him to nomination, they also have created rift between party elites and his supporters

    China's Education Reforms Spark Protest

    Beijing is putting a quota system in place to increase the number of students from poor regions attending universities

    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.
    Tech Startups Showcase Wares at Amsterdam Conferencei
    X
    Serginho Roosblad
    May 30, 2016 5:11 PM
    More than 20,000 tech enthusiasts, entrepreneurs and lovers of digital technology came together in Amsterdam recently at the Next Web Conference to discuss the latest developments in digital technology, look to the future and, of course, to connect. In recent years, there has been an explosion of so-called startup businesses that have created devices and applications that have changed the way we live; but, as Serginho Roosblad reports for VOA, there are pitfalls for such startups as well.
    Video

    Video Tech Startups Showcase Wares at Amsterdam Conference

    More than 20,000 tech enthusiasts, entrepreneurs and lovers of digital technology came together in Amsterdam recently at the Next Web Conference to discuss the latest developments in digital technology, look to the future and, of course, to connect. In recent years, there has been an explosion of so-called startup businesses that have created devices and applications that have changed the way we live; but, as Serginho Roosblad reports for VOA, there are pitfalls for such startups as well.
    Video

    Video US Military's Fallen Honored With Flags

    Memorial Day is a long weekend for most Americans. For some, it is the unofficial start of summer -- local swimming pools open and outdoor grilling season begins. But Memorial Day remains true to its origins -- a day to remember the U.S. military's fallen.
    Video

    Video Rolling Thunder Rolls Into Washington

    The Rolling Thunder caravan of motorcycles rolled into Washington Sunday, to support the U.S. military on the country's Memorial Day weekend
    Video

    Video A New Reading Program Pairs Kids with Dogs

    Dogs, it is said, are man's best friend. What some researchers have discovered is that they can also be a friend to a struggling reader. A group called Intermountain Therapy Animals trains dogs to help all kinds of kids with reading problems — from those with special needs to those for whom English is a second language. Faiza Elmasry has more on the New York chapter of R.E.A.D., or Reading Education Assistance Dogs, in this piece narrated by Faith Lapidus.
    Video

    Video Fan Base Grows for Fictional Wyoming Sheriff Longmire

    Around the world, the most enduring symbol of the U.S. is that of the cowboy. A very small percentage of Americans live in Western rural areas, and fewer still are cowboys. But the fascination with the American West is kept alive by such cultural offerings as “Longmire,” a series of books and TV episodes about a fictional Wyoming sheriff. VOA’s Greg Flakus recently spoke with Longmire’s creator, Craig Johnson, and filed this report from Houston.
    Video

    Video Chinese-Americans Heart Trump, Bucking National Trend

    A new study conducted by three Asian-American organizations shows there are three times as many Democrats as there are Republicans among Asian-American voters, and they favor Hillary Clinton over Donald Trump. But one group, called Chinese-Americans For Trump, is going against the tide and strongly supports the business tycoon. VOA’s Elizabeth Lee caught up with them at a Trump rally and reports from Anaheim, California.
    Video

    Video Reactions to Trump's Success Polarized Abroad

    What seemed impossible less than a year ago is now almost a certainty. New York real estate mogul Donald Trump has won the number of delegates needed to secure the Republican presidential nomination. The prospect has sparked as much controversy abroad as it has in the United States. Zlatica Hoke has more.
    Video

    Video Drawings by Children in Hiroshima Show Hope and Peace

    On Friday, President Barack Obama will visit Hiroshima, Japan, the first American president to do so while in office. In August 1945, the United States dropped an atomic bomb on the city to force Japan's surrender in World War II. Although their city lay in ruins, some Hiroshima schoolchildren drew pictures of hope and peace. The former students and their drawings are now part of a documentary called “Pictures from a Hiroshima Schoolyard.” VOA's Deborah Block has the story.
    Video

    Video Vietnamese Rapper Performs for Obama

    A prominent young Vietnamese artist told President Obama said she faced roadblocks as a woman rapper, and asked the president about government support for the arts. He asked her to rap, and he even offered to provide a base beat for her. Watch what happened.
    Video

    Video Roots Run Deep for Tunisia's Dwindling Jewish Community

    This week, hundreds of Jewish pilgrims are defying terrorist threats to celebrate an ancient religious festival on the Tunisian island of Djerba. The festivities cast a spotlight on North Africa's once-vibrant Jewish population that has all but died out in recent decades. Despite rising threats of militant Islam and the country's battered economy, one of the Arab world's last Jewish communities is staying put and nurturing a new generation. VOA’s Lisa Bryant reports.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.8977
    JPY
    USD
    111.18
    GBP
    USD
    0.6834
    CAD
    USD
    1.3038
    INR
    USD
    67.139

    Rates may not be current.