Banking

International Journal of Islamic Financial Services Vol. 5 No.4

CONVENTIONAL VERSUS ISLAMIC FINANCE: STUDENT KNOWLEDGE AND PERCEPTION IN THE UNITED ARAB EMIRATES
Jorg Bley and Kermit Kuehn

This research investigates the relationship between university student knowledge of relevant financial concepts and terms in conventional and Islamic banking, the impact of religion and language, and other individual variables on preferences for financial services. Data from a university graduate and undergraduate business students (n = 667) from the United Arab Emirates was used to investigate the role of financial knowledge, religion, and language on self-reported attitudes and preferences for financial services. Results suggest that knowledge of conventional banking terms and concepts was higher among these students than was Islamic banking terminology. Arabic language was the primary predictor of higher Islamic banking knowledge, as well as a significant, though weaker, predictor of lower conventional banking knowledge. The more education completed tended to improve financial knowledge of both conventional and Islamic finance. Finance students tended to have higher overall knowledge of both financial systems. Further, religious sincerity, not better knowledge, was the strongest predictor of preference for Islamic banking services. Implications of the research are discussed. Introduction The Islamic financial services sector is estimated to be growing at double digit rates, involving over 200 financial institutions with assets estimated to exceed US$200 billion (Al-Dhahiri, Al-Khamiri, and Al-Hamli, 2003). While the growth has been most noticeable in Arab Muslim markets, the potential has impact beyond these fertile markets to non-Arab Muslim and non-Muslim consumers and businesses as well. Yet, our knowledge of consumer motivations for choosing Islamic versus conventional banking services is modest and the research to date is limited and ambiguous on these key issues....