ISLAMIC FINANCING

Design Management Issues In Developing Sharia Finance Products For A Mainstream UK Market

Table of Contents

Chapter 1: Introduction1

Background of the study1

Problem Statement2

Purpose of the study3

Rationale of the study4

Significance of the study6

Chapter 2: Literature Review8

Chapter 3: Methodology22

Research Design22

Interivews and setting24

Sampling and Paticipants24

Data Collection25

Resources25

References26

Chapter 1: Introduction

Background of the study

Islamic ?nancial products o?er new opportunities for institutions to address previously unexplored consumer and business segments. Institutions o?ering Islamic ?nancial services have increased in number and availability thanks to a growing demand by certain segments of the world's 1.3 billion Muslims for shari'a-compliant products. Currently, more than 265 Islamic banks and other ?nancial institutions are operating across the world, from Jakarta (Indonesia) to Jeddah (Saudi Arabia), with total assets of more than $262 billion. Islamic banks aim at addressing the needs of new segments by creating a range of Islamically acceptable products, the development of which pose signi?cant challenges arising from the need for shari'a compliance in addition to regulatory complexities. Marketing such products is another challenge in light of competition from conventional banks and the need for innovative products.

The introduction of Islamic ?nancial products across the world has been in response to the growing need of a signi?cant segment of the marketplace that refused to deal with interest-based instruments. This development has helped ?nance the operations of small and medium enterprises that were unable to gain access to credit facilities owing to their lack of collateral and the small size of these loans, making costs higher. Conventional banks rely extensively on the creditworthiness of clients before granting a loan, while Islamic banks emphasize the projected cash ?ows of a project being funded, culminating in the emergence of various Islamic ?nancial services as a signi?cant contributor to the development of local economies and meeting consumers' needs. In certain societies, conventional banks are viewed as depriving the society of economic balance and equity because the interest-based system is security-oriented rather than growth-oriented, thereby depriving resources to a large number of potential entrepreneurs who do not possess su?cient collateral to pledge with banks. There are many individual consumers and entrepreneurs in Islamic societies who believe that the interestbased conventional banking system leads to a misallocation of resources. It is believed that conventional banks are more interested in the pledge of collateral and in securing interest payment regardless of the pro?tability of the project funded.

Problem Statement

Islamic banks share the same marketing challenges faced by consumer banks in UK . However, they also have their own challenges that are related to their business line and constraints. The biggest challenge to Islamic banks in UK market, most less than three decades old, is to compete with a well developed and mature conventional banking industry evolving over the past many centuries. They need to know how to market their products successfully. While there are areas where Islamic and conventional banks pursue similar marketing strategies, there are also areas where Islamic banks pursue di?erent strategies. Many individual and business consumers wish to have a guaranteed return on their investments and would ...