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.
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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 medical-site.info's%medical-site.info the financial matters with sharia, Islamic banking and finance was still . Islamic banking products and services collected questionnaire data.
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.
However, the religiously preferred mode of Islamic finance — profit and loss sharing PLS — must wait for the project invested in to come to fruition before profits can be distributed.
Since profit or loss cannot be determined for short periods, no return is given on funds deposited for short periods. They have issued fatwas opinions allowing Islamic banks to deposit funds in interest-bearing accounts, particularly in foreign countries, because these banks have no alternative investments at the necessary maturities.
Typically, however, they place conditions on such fatwas, such as requiring that the unlawful gains be used for religiously meritorious purposes such as charity, training, or research. Such fatwas are particular to the circumstances in which they are issued. Challenging the basic premise of Islamic banking, Muhammad O. Farooq argues that the "preoccupation" of Islamic banking with the abolition of any and all interest comes at the expense of the "bigger picture" of pursuing economic justice in general, citing the Quranic injunction against concentration of wealth: "What God has bestowed on his Messenger and taken away from the people of the townships — belongs to God — to his Messenger and to kindred and orphans, the needy and the wayfarer; in order that it may not merely make a circuit between the wealthy among you.
The world in reality is full of exploitation: child exploitation, sexual exploitation, labor exploitation, etc. Interest is probably, if any, a small component in accounting for global exploitation. Yet, the proponents of Islamic economics and finance are fixated with interest. He finds it curious that while polemical works promoting Islamic banking and finance commonly assert that interest on loans exploits the poor and Muslims, there are few if any empirical or focused studies on the subject of exploitation or injustice in Islamic economics.
Since venture capital operates on the same principles as profit and loss sharing although VC does not avoid haram products , its use could potentially "bring major benefits" to Egypt and other poor Muslims countries seeking economic development. According to researchers Frank Vogel and Frank Hayes, the four schools Madhhab of Sunni fiqh Islamic jurisprudence have not come closer to agreement in Islamic banking.
They apply "Islamic teachings to business and finance in different ways. Disagreements on specific points of religious law occur both between those four schools and within them. Furthermore, shari'a boards sometimes change their minds, reversing earlier decisions.
That is because they say: Trade is like usury: but Allah has permitted trade and forbidden usury Allah will deprive usury of all blessing, but will give increase for deeds of charity, for He loves not any ungrateful sinner O you who believe, fear Allah and give up what remains of your demand for usury, if you are indeed believers.
If you do it not, take notice of war from Allah and His messenger, but if you repent you shall have your capital sums; deal not unjustly, and you shall not be dealt with unjustly.
And if the debtor is in difficulty, grant him time til it is easy for him to repay. But if you remit it by way of charity, that is best for ou if ou o l k e.
Islamic banking is based upon the principle that the use of Riba interest is prohibited. This prohibition is based upon Sharia2 ruling. Since Muslims cannot receive or pay interest, they are unable to conduct business with conventional banks Gerrard and Cunningham, To service this niche market, Islamic financial institutions have developed a range of halal3 interest-free financing instruments that conform to Sharia ruling, and therefore are acceptable to their clients Malaysian Business, Dec.
However efforts are going on to replace the conventional interest-based banking system with the interest free 2 Islamic laws 3 Products that fulfill the criteria laid out by Islam of being acceptable for use. Apart from religious dimension, the case against interest has been examined by many researchers Aziz, The idea of Islamic banking goes back to as early as the 7th century, but it was only commercially implemented in the last century Jonge, There is a common understanding among business management researchers that, the rapid growth of Islamic banking at the time when the ethical banking movement is gathering new momentum is not a matter of sheer coincidence.
Scott contends that Islamic banking has shown that it is financially sustainable because it is recording phenomenal growth rates across the world at a time when most businesses in the finance sector are struggling to survive. The Muslim population forms the niche market that Islamic banking targets and Zineldin reports that this is a powerful market for customized goods and services as it has the highest income outside the Western World, Australia and Japan.
All these factors indicate that, unless something unusually catastrophic happens, Islamic banking will continue to be financially viable business as it has a growing effective market. The spread of Islamic banking in other parts of the world, among non- traditional Muslim population puts this system of banking in stronger position regarding financial viability Zaher and Hassan, Modern Islamic banking was started way back last decades of 19th century with establishments of some interest free banks in Egypt Kahf, These organizations are not so successful due to various reasons.
In first half of 20th century there are various academic initiatives by different scholars like Naiem Siddiqi and Mahmud Ahmad , Muhammad Hamidullah , , and across the globe to explore the concept of Islamic banking.
A more elaborate explanation was given by Mawdudi in They have proposed an interest free banking system based on the concept of profit and loss sharing. Moreover, most of this work is focused on banking. A self-administered questionnaire was used to ascertain the attitudes, behavior and patronage factors of bank customers both Islamic and conventional. The study found that bank customers at least in Jordan were generally aware of Islamic banks and their methods.
Later, Omer surveyed Muslims in the UK on their patronage factors and awareness of Islamic financing methods. The main finding was that a high level of ignorance prevailed among Muslims in the UK concerning Islamic finance principles. This is generally consistent with findings elsewhere in the literature that Muslims living in a notionally Muslim country have a greater awareness and knowledge of Islamic banking than immigrant Muslims. That said, although UK Muslims were largely ill informed about Islamic methods of finance, religious motivation comprised the most significant factor in their strong preference for Islamic banking services.
Metwally also used factor analysis to study the attitudes of Muslims in three Arabic dual-banking systems Kuwait, Saudi Arabia and Egypt towards Islamic banking. The results indicated that Islamic banks did not significantly differ from conventional banks in the benefits and costs of bank products and services and that Islamic banks equaled conventional bank in terms of staff competency and speed of the services. On this basis, and similarly to Omer , it was concluded that religion was the primary factor in the choice of an Islamic banking institution.
In Egypt, Hegazy compared the demographic profiles of four hundred customers of two banks: the Faisal Islamic Bank and the conventional Bank of Commerce and Development.
The results showed that This suggested that the choice of an Islamic bank is based, in part, on a religious motivation. Two subsequent studies also examined perceptions of Islamic banking in Malaysia — generally viewed as the largest centre for Islamic finance outside the Middle East. Hamid and Nordin focused on the awareness of Malaysian customers towards Islamic banking within the context of the wider promotion of Islamic education.
They found that most Malaysians did not differentiate between Islamic and conventional bank products and services, though the majority had sufficient knowledge of the existence and services offered by Islamic banks in Malaysia. In Singapore, Gerrard and Cunningham also considered attitudes towards Islamic banking, though in the context of a banking system where no Islamic banks were yet present.
While the survey results showed, as expected, that non-Muslims were completely unaware of Islamic methods of finance, Muslims fared little better. Metwally considered the role of socioeconomic and demographic characteristics in the process of bank selection in Qatar.
Two studies on the perceptions and understanding of Islamic finance deserve special note. A finding was that while Arabic Muslims displayed a high level of knowledge of Islamic financial terms and concepts, non-Arabic Muslims students had a higher level of knowledge of conventional banking.
Recently a study by Akhtar and Akhter is about the differences in the perception of university employees about Islamic banking in India. Differences were found in the level of awareness about Islamic banking as an alternative to conventional banking. Six out of these eight terms are used by Gerrard and Cunningham Two terms Sukuk and Takaful are added for this study. The respondents were asked to indicate if they knew what the term meant on a four point scale where zero indicates fully unaware and three indicates that fully aware of the term.
Initially there were 30 statements on which a pilot study was conducted and 11 statements are shortlisted after factor analysis. Out of these 6 statements are to meant to check level of awareness and 5 statements are related to attitude of respondents towards Islamic banking.
The third section contains two situation specific questions to check the response of the respondents in those specific conditions. The fourth section contains standard demographic questions, such as gender, age and religion. For this study, data was collected through an exploratory sample survey of respondents from four B class cities of northern India.
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.
The results are given in Table 8 below. The data was further analysed using the distribution fitting algorithm methodology Stacey, The factors were analysed and the means and t-values were determined and ranked. The factors with positive means indicated that the factors are important in the choice of banks while those with negative means were deemed to indicate that the factors were either inconclusive or not significantly important. The p-values were in line with the mean results for the rankings of factors, except for the efficient services factor, which had a low mean and high t value.
The results show that lower bank charges, an extensive ATM network, lower administration and efficient services are important factors in the choice of banks.
The results indicate that these factors are significantly important. This is consistent with a study conducted in Malaysia, where the most important factor for Muslims when selecting financial institutions was fast and efficient service Haron et al.
Fast, efficient service had the highest t-value, although its mean was fifth on mean ranking. Other factors, the availability of internet banking, lower interest rates on overdraft and higher profits on investments are inconclusive. On the other hand, financial planning assistance, recommendations, telephone banking and higher interest rates on savings are significantly not important.
From the results of the distribution fitting algorithm approach, the mean indicates that lower bank charges are important in the choice between an Islamic and a conventional bank, which differs from the study done in the USA, which found that fast, efficient service was the most important factor Blackson et al. There is consensus that higher interest on savings, Internet banking, higher profits on investments and financial planning assistance are least important in the bank attributes.
The results indicate that telephone banking and recommendations by friends or family are negatively related to the choice of banks. Using the p-value results, Internet banking, lower interest rates on overdrafts and higher profits on investment, as well financial planning factors, are not significantly important in the choice of a bank.
The results indicate that only about 20 per cent of the respondents used interest - free investments, which include savings, equity funds, unit trusts, and investments. Furthermore, there is no significant relationship between a religious Muslim person and the use of Islamic banking services. The main factors influencing the choice of banks identified in this study are fast and efficient service, lower bank charges, the availability of ATMs, lower administrative charges and an extensive branch network.
In this South African study, it can be deduced that consumers' choice of a bank depends on fast and efficient service see Table 9. The other important attributes were lower bank and administration charges, and extensive ATM and branch networks.
One in two Muslim consumers in South Africa conduct multiple banking, of which The reason for using both conventional and Islamic banks is that conventional banks do not offer Shariah-compliant investment and finance products. The Muslim consumers intend to invest in Islamic investments and raise finance from these banks.
There is a discrepancy between the intended behaviour and awareness and actual behaviour in using Islamic banking. The study fills an important gap in the literature, that of exploring the awareness of Islamic banking and the attributes customers require from the Islamic banks.
With a population of over 1 million South African Muslims, it was hypothesised that all Muslims would use Islamic banks, since these banks are in the country. It was found that the majority of Muslims are aware of Muslim banks but do not use them. The usage rate is very low, the main reason being that Muslim customers are looking for efficiency, ATM availability and accessibility. With this information, Islamic banks should not overemphasise and rely on the religious factor as a strategy in their effort to attract more customers Haron et al.
The study suggests that Muslim banks have to understand their potential customers and develop products that will meet their needs. Potential and current customers must be educated in the principles of Islamic banking.
The banks should offer fast, efficient service, as this was a highly-rated customer requirement. The important attributes identified by this study ought to be addressed ifthe performance by the banks is to meet customer expectations. Other studies could focus on increasing consumer awareness of the services Islamic banks offer, particularly to South Africans. A qualitative study could also be carried out to probe the motivations for using or not using Islamic banks.
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