A study of the knowledge and acceptance level of islamic banking among muslim consumers in Singapore

Abstract

Islamic banking and finance has emerged since 1970s as an alternative to conventional banking based on riba. To date, it continues to capture the interests of both Muslim community and non-Muslim investors worldwide. Its success is partly attributed to its unique branding such as interest-free and ethical banking. Singapore, predominantly a non-Muslim and secular country, aspires to introduce and integrate Islamic finance in its financial sector. Given Singapore’s strength in asset management along with its excellent regulatory, operating environment and institutional capabilities, the world’s fourth top financial center is poised to develop Islamic banking and finance. One of Monetary Authority of Singapore’s early amendments in banking regulation was to remove additional stamp duties on Islamic financial transactions such as Sukuk and Murabaha, to ensure a level playing field between Islamic and conventional banks. Past studies conducted in Singapore have found poor public understanding of Islamic banking. Therefore, the objective of this study is to ascertain Muslim consumers’ knowledge in particular; as well as their acceptance in embracing Islamic banking. 300 survey forms in a questionnaire format was distributed to Muslims serving at various Muslim organizations in Singapore. The findings observe, firstly, moderate understanding of Islamic banking concepts among consumers. Secondly, their positive willingness to accept Islamic banking comes with some underlying concerns and preference. Thirdly, Muslim consumers attitude do not vary much to the masses where preference for serviceoriented features in retail banking is concerned. In conclusion, the results of this survey could help banks in Singapore understand the needs and preferences of their target segment, and customize their strategies accordingly to capture the market.