Almost half of Muslims have never used Islamic finance
The bank said the figure – which rises to 53 per cent among Muslim women – underlines the challenge faced by Shariah-compliant finance providers.
Gatehouse’s Islamic Finance Consumer Report also found that seven in 10 (71 per cent) Muslim consumers believe that Islamic finance is dedicated to the interests of the community, while 61 per cent believe it works hard to better serve its customers.
An impressive 85 per cent of existing Islamic finance consumers said their experience with Islamic finance exceeded their expectations.
What is Islamic finance?
Islamic finance is a financial system that operates according to Islamic or Shariah law. Earning interest is not allowed – whether you are an individual or a bank. To comply with these rules, interest is not paid on Islamic savings or current accounts, or charged on Islamic mortgages.
Instead, savers earn a share of expected profits while mortgage borrowers lease their property from the bank and pay for it in instalments.
A report in April by Moneyfacts found that Islamic banks are increasingly occupying the top spots in the savings account tables, particularly in the one and two-year fixed bond sectors.
Barriers to adoption
Gatehouse claims its 2019 Islamic Finance Consumer Report is the first study of its kind to unpick the barriers and drivers to adoption of Shariah-compliant products by Muslim consumers in Britain.
A key recommendation of the report is that the industry better communicates what makes its products Shariah-compliant, after finding that more than three-fifths (61 per cent) of consumers were sceptical about how Islamic the products really are.
Gatehouse said awareness and perception of Islamic finance among non-users of Islamic products is one of the industry’s biggest obstacles to overcome, with only 53 per cent of non-users knowing anything about it, and only 35 per cent of non-users viewing it favourably.
The study also found that, while 71 per cent of people surveyed thought that Islamic finance was trustworthy and ethical, some 60 per cent found it difficult to purchase, and 62 per cent thought it was hard to compare options.
Charles Haresnape, CEO of Gatehouse Bank, said: “Our report highlights that providers of Shariah-compliant finance are missing out because of a largely untapped market for their products.
“If nearly half of all Muslim consumers have never used Islamic finance that means hundreds of thousands of potential customers are waiting to be reached. A key lesson is that we and the whole industry need to do a better job of reaching out to the Muslim community and explaining the benefits of Shariah-compliant products.
“Most importantly, the research shows we need happy customers and faith leaders to become community advocates for Islamic finance because word-of-mouth is highly valued among Muslim consumers.”