Purpose: The purpose of this questionnaire is to find out knowledge and opinion of people about Islamic banking system. It will help me to estimate possibility of. I am pursuing MBA (Finance) at the University of Gloucestershire, United Kingdom. and I am doing a dissertation on the Islamic Banking and Conventional . The following questionnaire has been prepared for research purpose. conventional banking system and Islamic banking system. You consider the profit of the.
|Language:||English, Spanish, Japanese|
|Distribution:||Free* [*Registration Required]|
PDF | On Oct 12, , Mohamed Sharif Bashir and others published QUESTIONNAIRE on customer satisfaction- Islamic Banking (1). Appendix I: Questionnaire on Islamic Finance Objectives and Achievements I believe .. 11 ciulamuhabal.ga's%ciulamuhabal.ga the financial matters with sharia, Islamic banking and finance was still . Islamic banking products and services collected questionnaire data.
Hence, at the end of the day, unconvinced Muslim and other critical outsiders, observe that Islamic banks in reality keep interest but just call it by another name, such as commissions or profits It is a mix which has most of the characteristics of a riba-based loan and the flaws of the Western capitalist system. It fails to highlight the features of Islamic investment based on risk-sharing and real investment.
It does not recognize the guarantee of the capital or its return. The pressure on Shari'ah boards to approve the products of institutions that pay their salaries serving as a sort of modern-day equivalent of the medieval "court ulama"  is part of the problem according to M.
A large market of pious Muslims, inspired by the Islamic revival , seek to finance, invest, and save, in ways that do not use interest and "the standard debt-contract".
Efforts to provide truly Shariah-compliant substitute for interest — "participatory" or "profit and loss sharing" financing" — fail because "in most situations" there is an asymmetry of information between in the financer and financee, making this mode of finance unprofitable.
Not willing to let this obstacle stand in the way of cashing in on a huge market of pious Muslims, major banks then look "for scholars willing to certify conventional instruments as being Shariah-compliant," rewarding the most accommodating scholars with more business.
The result is "a fairly wide" range of financial products and services that "closely" mimic conventional ones, but come with Sharia certification adding an additional layer of transaction costs.
These "generally speaking", do not have adequate training in maqasid intent or purpose of shariah, leaving them unable to evaluate the masalih benefits and mafasid harms of some financial products; nor do they the economic training to conduct the necessary analysis of what the consequences would be of widespread use of complex financial transactions such as tawarruq which allows cash to be lent to a borrower with "shariah compliance" but with greater complexity and cost than with a conventional loan.
Dar and J. Presley , for why PLS instruments — namely mudaraba and musharaka financing — have declined to almost negligible proportions include: There is a strong incentive for the bank's client to report less profit than is actually earned, because the higher the declared profit, the more of the client's money will go to the financing bank.
This puts the use of PLS at a disadvantage to fixed income modes for a bank. Property rights in most Muslim countries are not properly defined, which makes the practice of profit-loss sharing difficult.
The conventional banks Islamic banks compete with are firmly established and have centuries of experience. Islamic banks are not yet sure of their policies and practices and feel restrained in taking unforeseen risks. The PLS is not suitable or feasible in many cases such as short-term resource requirement, working capital needs, non-profit-generating projects such as in the education and health sectors.
In some countries interest is considered a business expenditure and given tax exemption, but profit is taxed as income. Thus clients of the business who obtain funds on a PLS basis have to bear the financial burden in terms of higher taxes they would not if they took out a loan and paid interest. There were, at least as of , no secondary markets for Islamic financial products based on PLS. Mudaraba, one of the forms of PLS, provides limited control rights to shareholders of the bank and "creates an imbalance in the governance structure" of PLS.
Aside from disadvantages to lenders, one critic of Islamic banking, Feisal Khan, argues that widespread use of PLS could have severe harm to economies. He notes that if banks took "a direct equity state in every enterprise" as called for in mudaraba and musharaka, credit would contract and central banks would be unable to use the usual ways of expand credit — buying bonds, commercial paper, etc.
While purists such as Usmani are correct that murabaha and other fixed income instruments that have crowded out PLS are essentially conventional banking by another name, if they were banned and replaced by the more "authentic" profit and loss sharing, central banks might be helpless to prevent contraction of economies and extreme joblessness. In Arabianbusiness. Often the commodity is completely irrelevant to the borrower's business and not even enough of the relevant commodities "in existence" in the world "to account for all the transactions taking place".
Al Nasser complains that "Shariah authorities demonstrate excessive confidence in their subjects when it comes to dealing with parities in the industry", and Shariah audits are needed "to bring about transparency and ensure" that the institutions "deliver what they have committed to their customers". Furthermore, when external Shariah audits are carried out, "many of these auditors frequently complain about the amount of violations that they witness and cannot discuss" because the records they have examined "have been tampered with".
Islamic banker Harris Irfan states "there is no question" that benchmarks such as LIBOR "continue to be a necessary metric" for Islamic banks, and that the "overwhelming majority of scholars have come to accept this, however imperfect a solution this may seem",  but Muhammad Akram Khan writes that following the conventional banking benchmark LIBOR "defeats the very purpose for which the Islamic financial products were designed and offered" in the first place.
A study using "the most recent econometric techniques" of the long-term relationship between term-deposit rates at conventional banks and "participation banks" i. Islamic Banks in Turkey found three of four participation banks term-deposit rates "significantly cointegrated" with those of the conventional banks, and that the "causality" of the Islamic banks rate of return following the conventional banks was "permanent".
Liquidity[ edit ] Islamic banking and finance has lacked a way to earn a return on funds "parked" for the short term, waiting to be invested, which puts those banks a disadvantage to conventional banks.
Conventional banks are able to borrow and lend by using the interbank lending market — borrowing to meet liquidity requirements and investing for any duration including very short periods, and thereby optimize their earnings. The prohibition of interest does not mean that capital is costless. In Iran and Pakistan, the Islamic banking system has been adopted at the macro level of the economy.
Many Muslim countries, such as Bahrain, Dubai, Kuwait, Saudi Arabia and Malaysia, have adopted a dual interest-based and interest-free banking system. In countries where Muslims are a minority, such as the UK, Denmark, the USA, Australia, Singapore and South Africa, some interest-free banks or investment institutions have been established and some interest-based banks have begun offering interest-free banking products.
Researchers have identified "significant variables" which influence consumer behaviour, a multitude of decision strategies and a vast reservoir of knowledge about consumer decisions. As consumers move through these stages, they experience internal and external influences ranging through culture, social class, personality and motivation.
The issue of understanding how customers select banks is important, assisting banks in identifying the appropriate marketing strategies needed to attract and retain customers Almossawi, One of the major influences on Islamic banking is religion, as consumers want to deal with Shariah-compliant banks.
Consumer decision-making on the choice of a bank is influenced by personal, psychological, external or social factors. Individual decision-making always occurs in a social, cultural, environmental or class context, as human beings interact and need to consider other people's responses Blythe, External factors include culture, age, reference by friends, family, social class and subculture, and marketing activities Hawkins et al. Social factors include family, social groups, reference groups and word-of-mouth communication.
Internal influences deal with selfconcept and the subsequent lifestyle, based on psychological and physical influences like personality, values, emotions, memory, perception and motives Hawkins et al, Personal factors or influences are the consumer's internal inclinations as to whether or not to engage in the relationship with the banks.
Banking is a service, so word-of-mouth communication, past experiences and personal needs play an important role in both the choice of a bank and the evaluation of its performance. Table 2 below highlights some of the factors that influence consumers in their choice of a bank. In a study conducted in Bahrain, the youth segment indicated that the five most influential factors for bank selection were in the following order: convenient ATM locations, the availability of ATMs in several locations, bank reputation, hour availability of ATM services, and the availability of nearby parking space Almossawi, The least influential factors were: the employer using the same bank, and recommendations by friends and relations.
Muslims lack understanding of Islamic banking and its requirements. In Singapore, only In a South African study by Abratt and Russell on the criteria used by consumers in the selection ofa private bank, it was found that price was an important criterion, modified by trust, service quality and the availability ofthe bank.
Convenience was the fourth factor, while social or personal influences were the least important. This is in contrast with findings in a study conducted in the USA, in which convenience was shown to be the most important factor Blackson et al. In another study conducted on the urban informal lower income sector in South Africa, it was found that the important factors in the patronage of banks were the friendliness of bank personnel, location near home, the speed of transaction, fast and efficient service, communication with the bank manager, and low service charges; recommendations by family and friends was rated lowest in the patronage factors Saunders et al.
In a study exploring the determinants of bank selection across the USA, Taiwan and Ghana, the results indicated that, in the USA, convenience was the most important factor, followed by competence, recommendation by peers, and free banking with no bank charges Blackson et al.
In Taiwan and Ghana, competence was the most important factor; the second factor for the Ghanaians was recommendation by peers, whereas for the Taiwanese it was convenience Blackson et al. On the other hand, the provision of fast and efficient services was one of the most important criteria in bank choices Amin, In conclusion, personal and social factors influence the choice of bank.
Banks need to know which factors are important when developing strategies that would meet the needs ofthe customers. This type of research provides information on understanding consumers as well as insights into factors that influence purchase decisions. For this research, only Muslims aged 18 years and older who had a relationship with a bank were approached.
Initially, the researchers had intended to survey both Muslims and non-Muslims, and then to compare the data from each group. The questionnaire for the pilot study was adapted from the study by Gerrard and Cunningham , which was conducted amongst Muslims and non-Muslims in Singapore. The questionnaire was pre-tested to create reliability. However, the pilot study indicated that almost all non-Muslims were unaware of Islamic banking, finance and investment products and their applications.
The research was then limited to Muslims only. A non-probability convenience sampling method was used, which could result in bias and a non-representative sample Galpin, Personal interviews were conducted using a questionnaire constructed to aid in the collection of data.
A total of questionnaires were distributed and responses were received, of which were complete and sufficient for statistical analysis. This was done by the field worker, who was one ofthe researchers. The measuring instrument was a questionnaire, which was completed by the respondents. The assumption was that the respondents would be competent in reading and understanding English, so they could select answers in the questionnaire.
Demographic data such as age, race, gender, income level, occupation and level of education were collected; nominal, ordinal, interval and ratio scaling measurements were used for data analysis. The research instruments asked questions in a manner which enhanced internal validity.
Descriptive statistical analysis was used to describe the data set and gain insights and understanding of Islamic banking. For further insight, the distribution-fitting algorithmic approach was used, which changes the ordinal level scales into interval level data Stacey, This approach is an alternative approach to analysing ordinal level response data, which involves fitting hypothesised distributions of the observed response data by calculating item means and standard deviations of the sample Stacey, In terms of education, 75 per cent of the respondents had had tertiary education; 90 per cent were employed, 36 per cent considered themselves to be very religious and 54 per cent somewhat religious.
The description of the sample base is given below in Table 3 : A question was posed to elicit respondents' understanding of the term Islamic banking.
It was found that Of these Furthermore, The other popular understanding was that Islamic banking was a way of investing in Islamic ethical investments. The results indicate that These findings bear correlation to the findings of studies conducted in countries where Islamic banking is offered. However, the findings of this study suggest that, while the level ofawareness is high, the level ofusage is low for transaction and finance products.
Bahrain has a high rate of investment usage, while South Africa has a lower usage rate of 20 per cent for investment products. In Jordan and Malaysia, Islamic banks offer transaction-type products and are used at a higher level than that for financing products. The results suggest that the usage level varies, depending on the type of product. In a study carried out in Jordan, Naser and A-l Khatib found that the level of awareness of Islamic banking was generally high, but that the usage level was much lower than the level ofawareness.
The results indicate that only 20 per cent ofthe respondents used these two types of interestfree investment products. The results indicate that the respondents used more banking products with the conventional banks.
Most of the respondents had current and transactional accounts, credit cards, ATM cards and cheque accounts with non-Islamic banks. The results also indicate that few of the respondents were using telephone banking. Overall, the respondents' used minimal products from the Islamic banks. The most popular products used at these banks are savings and investment accounts, and equity funds or unit trusts, where 20 per cent of the respondents use them respectively. Cheque books, ATM cards, credit cards and Internet banking are used mainly at the conventional banks.
The majority of the respondents did not use business or trade finance, had no overdraft, and did not use telephone banking.
In a study conducted in Malaysia on Islamic home financing, the deciding factors in order of importance were Shariah principles, lower monthly payment, transparency practice, interest-free practice and per cent financing Amin, On the number of banks used by the respondents, 50 per cent used more than 1 bank and 50 per cent used only 1 bank.
On the use of interest-free Shariah-compliant banks, A Chi-squared test was used to test the relationship between the religious levels assessed in the demographics section and the use of Islamic banking as opposed to conventional banking. The Chi-square test statistic of 5. The most important reason identified for using more than one bank was that conventional banks are used for transaction purposes and an interest-free bank for Shariah-compliant investment purposes see Table 6.
The results showed that The research indicated that 12 per cent used the Islamic banks because of the lower interest rates and 9.
Another 8. Respondents were asked to assume that they were planning to finance the establishment of a new business: 45 per cent stated that they would attempt to raise the finance through an equity partnership dealing with an interest-free bank.
About 25 per cent would attempt to raise the finance through an equity partnership dealing with a venture capitalist or other investor, 14 per cent did not know how they would attempt to raise the finance required, 14 per cent would attempt to raise the finance by means of a loan from an interest-based bank, and 2 per cent would consider other options in an attempt to raise the finance. In Indonesia, most Muslims use conventional banks and the cash machines because it is easier and more convenient.
When it came to car financing, 65 per cent indicated that they would attempt to finance such a purchase using interest-free or Islamic banks, 19 per cent indicated that they would use the interestbased banks, 11 per cent did not know, and 5 per cent gave other reasons. For purchasing a house or property on credit, 60 per cent indicated they would use interest-free banks, 27 per cent would use interest-based loans, 10 per cent did not know, and 3 per cent would use other sources.
Respondents were asked why they would use interest-free banking, and The results are given in Table 7 , Using the data in Table 7 , the distribution fitting algorithm approach Stacey, was applied to analyse the consumers' choice of banks. In most Islamic countries, various forms of penalties and late fees have been established, only to be outlawed or considered unenforceable.
Late fees in particular have been assimilated to riba. Whether and how to compensate lenders for the erosion of the value of the funds from inflation, has also been called a problem "vexing" Islamic scholars,  since finance for businesses will not be forthcoming if a lender loses money by lending. Suggestions include indexing loans opposed by many scholars as a type of riba and encouraging inflation ,  denominating loans "in terms of a commodity" such as gold, and further research to find an answer.
But the majority of financial institutions offering Islamic banking services are Western and owned by non-Muslims. Supporters of Islamic banking have cited this interest of western banks in Islamic banking as evidence of the strong and growing demand for Islamic banking and thus an "achievement of the movement". One conventional Malaysian Bank offering Islamic based investment funds was found to have the majority of these funds invested in the gaming industry; the managers administering these funds were non-Muslim.
In early during the housing bubble collapse, "not a single dedicated Islamic structurer or salesperson remained at Deutsche. Proponents such as Zeti Akhtar Aziz, the head of the central bank of Malaysia have argued that Islamic financial institutions are more stable than conventional banks because they forbid speculation  and the two main types in theory of Islamic banking accounts — "current account" and mudarabah accounts — carry less risk to the bank  as mentioned above.
In a current account the customer earns no return, and in theory there is no risk of loss because the bank does not invest the account funds. In a mudarabah account the Islamic bank carries less risk of loan defaults because it shares that risk with the depositor. In addition, according to one critic Mahmoud A. This introduces a host of other well-documented risk factors for the institution In the recent past, the Gulf region has witnesses its own episodes of speculation in their stock and real estate markets.
Finally, the Islamic financial industry has witnessed rapid growth with innovations of complex Shari'ah compliant financial products. Risks in these new Islamic financial products are complex, as the instruments have multiple types of risks In the Islamic investment house, Ar-Ryan collapsed causing thousands of small investors to lose their savings they were later reimbursed for their losses by an anonymous Gulf state donor  and dealing a blow to Islamic finance at the time.
In the management of Bank al Taqwa's failed.
It was later revealed that management had violated banking rules "invested in one single project more than 60 per cent bank's assets. They write that only "three or four families own a large percentage of the industry. This concentration of ownership could result in substantial financial instability and possible collapse of the industry if anything happens to those families, or the next generation of these families change their priorities.
Similarly, the experience of country-wide experiments has also been mostly on the initiatives of rulers not elected through popular votes. The difficulty, complexity, and expense of hedging these in the correct Islamic manner is such that as of , the Islamic Development Bank "was hemorrhaging cash as if it were funding a war.
It simply couldn't swap dollars for euros or vice versa on an ongoing basis without resorting to the conventional markets. In addition there will be costs associated with "the peculiar structure that Islamic banks use for late payment penalties". Consequently, their financing tends to cost more than, and the return on accounts tends to pay less than that of conventional products. These contracts follow classical texts and were created in a time when financial markets were very limited.
They are not equipped to "disentangle various risks" that "modern" financial markets and institutions such as " money markets , capital markets , options markets , etc. Visser credits the higher cost of Islamic ijara financing to its higher risk weighting compared to conventional mortgages under Basel I and Basel II international standard of minimum capital requirements for banks.
Kabir Hassan, efficiency of Murabaha -dominated Islamic banks is not high. Farooq are that industry problems and challenges are part of a " learning curve " and will be solved over time; unless and until the industry operates in an Islamic society and environment it will be hindered by non-Islamic influences and won't "operate in its essence".
In that year critic Timur Kuran  highlighted the industry problems the basic similarity of Islamic banking in practice to the conventional, the marginalizing of the equity-based, risk-sharing modes and embrace of short-term products and debt-like instruments , and a supporter Ausaf Ahmad defended the industry as early in its transition from conventional banking. Farooq and M.