Islamic Finance Concepts Little Known To Many

Fewer than half of respondents in a survey on Islamic financial products conducted in Brunei in 2008 said they did not understand the concepts behind products offered by financial institutions that adhere to Syariah principles.

The survey, carried out from April to November 2008 by Arne Hj Matali, a lecturer Universiti Islam Sultan Sharif All (Unissa) Faculty of Syariah and Law, found that approximately 45 per cent of the 650 respondents did not understand the concepts behind products on offer by Islamic financial institutions.

Only 26 survey respondents understood the concepts behind Islamic finance products well, while 336 had moderate understanding of said concepts. ‘Two hundred twenty-seven or 34.9 per cent of (respondents) lacked understanding (of Islamic financing products) and the remaining 61 had no understanding at all;’ he said.

Azme informed participants of yesterday’s international Conference on Islamic Finance 2010 that a majority of the respondents were Muslims (98.6 per cent) and that 96.3 per cent were of Malay descent.

In his paper, the lecturer said that eventhough Islamic banks have operated in the Sultanate far the past 15 years, many members of the community still openly questioned the effectiveness of Islamic banks while others felt that Islamic banks were not capable of providing the same services offered by conventional banks.

He attributed this to the lack of public understanding on the various financing concepts used by Islamic financial institutions. “The community does not know and understand how each of their products are calculated, giving them the wrong impression,” he said. “They also lack sufficient knowledge on Islamic banking,” he added.

Asked what were his suggestions on tackling the problem, Azme said the banks should first hold seminars to allow those in the industry to not only meet their customers but also explain how their products work. “This will be a meet-and-greet session to allow them to explain to their clients how the financing processes arc carried out,” he said.

Islamic banks’ staff and personnel will have to equip themselves with Islamic banking knowledge and that there should be improvements in “less than satisfactory” services such as ATM operations, lack of space and car parks. He told The Brunei Times that more than 400 respondents of his survey said they felt that new products should be offered by Islamic banks in addition to existing ones.

“But personally I think it is mom important for customers to know more about the existing products and the principles behind them before introducing new products. This will help avoid confusion,” he said. With this in mind, Azme reminded the Sultanate’s community that they should not only think of themselves when it comes to Islamic financing products.

“You must also remember that the profits made by these financial institutions are not only for their sake but for the good of the community as well,” he said.

“The profits might be higher when compared to conventional banks, but this is because Islamic banks are newer and therefore in need of more mature funds to promote and expand their products.” said the lecturer. 

source : TBT


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