Sharia compliant banks will need to significantly improve customer service if they are to compete with mainstream banks, a survey by Ernst & Young has said.
The poll of 4,000 Gulf residents by Ernst & Young found that, despite strong interest in Islamic finance, customers found banks lacking in transaction speed and service quality.
While customers want Islamic options, this must be backed by the service and standards prized in the mainstream banking market, said Salmaan Jaffery, head of retail banking, Ernst & Young Middle East.
“The key message I’m giving Islamic banks is that they’ve benefited from very strong demand, and that has explained their rapid growth. But that window of opportunity where customers are going to be forgiving and say, ‘It’s a new industry and there weren’t many providers,’ that window is closing very rapidly,’ he said.
Many Islamic lenders emerged relatively unscathed from the global financial crisis, prompting a rise in their popularity, Jaffery said.
“Clearly, the Islamic banking market, whether wholesale or consumer, has continued to grow very strongly. We saw very good liability generation and some asset growth in the wake of the crisis, as there was a perception that Islamic banks were less speculative and safer.”
The poll indicated that Sharia sensitive consumers would switch banks in favour of Islamic lenders, driving attrition across the region. Some 21 percent of overall respondents said they’d switched to Sharia compliant banks, with the largest segment coming from Kuwait.
“Islamic banks are becoming bigger, they’re joining the mainstream and they’re competing with the same pool of customers. So they’ve got to get their act together, the honeymoon period is over,” Jaffery said.