A recommendation from a friend, family member, or colleague is the most common way Muslim consumers hear about Islamic Finance products, as Gatehouse Bank’s Islamic Finance Consumer Report 2019 has shown.
The research, which we believe is the first of its kind, highlights the astonishing fact that nearly half of all Muslim consumers have never used a Shariah-compliant financial product — and this rises to 53 per cent of women.
This is a massive figure and we wanted to find out why this is and what we and other Islamic banks need to do to increase engagement.
Work harder and smarter
On the face of it, the opportunity for Islamic banks is significant in the UK.
Outside of the Middle East and South East Asia, the UK is the leading Western Islamic Finance centre and its 2.8 million Muslim consumers contribute £31bn to the UK economy and boast spending power of £20.5bn.
But our research highlighted that we need to work harder and smarter to reach what many would view as our core market.
The problem isn’t awareness, as 77 per cent of Muslim consumers are familiar with Islamic finance products.
It’s not the quality of the products or how happy existing customers are with them. Of those we surveyed, 68 per cent of users and 21 per cent of non-users said they looked at Islamic Finance very favourably.
Sceptical about ethics
So, if products are attractive and customers are happy with the service, why have almost half of Muslim consumers never used a Shariah-compliant product?
One of the key areas of investigation in our research was delving into the reasons people opt for Islamic financial products in the first place.
The study revealed that word of mouth is the most powerful tool.
A television or newspaper advert is significantly less valuable than advice from a trusted person, which is why the latter was cited by 39 per cent of people as the reason they would choose an Islamic product.
Consumers also questioned just how much the products offered by Islamic banks really followed Muslim values, with two thirds saying they were sceptical about how ethical these institutions were.
Like other Islamic banks, Gatehouse follows a strict set of ethical principles and we do not support activities that breach Shariah principles such as gambling, alcohol, tobacco or arms trade.
However, this figure goes to show that, as an industry, we are not doing enough to explain to consumers how our products work and fit with their religious beliefs.
Making people aware of Islamic finance is a major challenge for the sector. Our data revealed that only 53 per cent of non-users know anything about it, and only 35 per cent view it favourably.
Despite Islamic Finance being available in the UK since the 1970s we need to continue to explain how our products and services work and can help consumers to achieve their financial goals.
Even when people are aware of our industry, the perception is not always positive — though 85 per cent of those who had used Islamic finance said their experience had exceeded their expectations.
Another big issue highlighted was accessibility. Two thirds of those we asked said they found Islamic finance products hard to purchase and 62 per cent said they were difficult to compare.
By conducting this research, we have taken the first step to finding out what our customers and potential customers want, how we can serve them better, and how we can get the message out about our products to new consumers.
I was astounded by how little data there was regarding Muslim consumers in the UK and I believe this lack of understanding is one of the main reasons we’re not reaching more of them.
If, as an industry, we do not know or understand Muslim consumers, we will not be able to engage with them and in turn grow our customer base.