Consumer Behaviour Towards the Islamic Banking – “Customer Satisfaction with Islamic Marketing Ethics and Islamic Banking Industry

Recent achievements in Islamic banking do not indicate an advance in the jurists interpretation of riba. Writings on riba have been extensively concerned with the expositions of riba, but with disquisitions about riba. Thought about riba, and any other Qur’anic penetrative codes, must be a story of movements in outlook and ever-changing ideas, and developments taking place in contemporary social sciences. Its province is destined by God, may he be exalted, in a way to be determined and re-determined in the course of time by drawing insights from different branches of human science. The subject of riba, and other divine codes in Qur’an regarding dealings and transactions is such that no cohesive delineation of the scope can be regarded as final.

Besides, the company can issue shares, and hand out the dividends, or issue bonds and pay the interest; moreover, taking a loan from the bank with interest is an alternative. However, in Islamic accounting, the interest is not allowed, which prevent the company from raising the fund through last two options. Thus, the Mudaraba is widely applied in Islamic economies. Mudaraba is a kind of partnership which one party provides money to a commercial enterprise, and the funds are managed by a third party based on Mudaraba investment management agreement. For example, the depositor can authorize the Islamic bank to manage their funds, and get profit from the return on the funds invested.

Islamic banking is a controlled institution based on the principles of sharia Islamic rules on transactions made. This means that the Islamic banking system does not accept or allow payment of benefits based

In addition, Islamic bonds are still far superior as compared to conventional binds, underpinned by the following factors: • Fairness and transparency. The financier and customer share the risks and rewards based on an agreed profit-sharing ratio. The roles and responsibilities of the parties to a contract are also explicitly disclosed and transparent. Asset-backed transactions. Islamic financial transactions must be backed by an underlying tangible asset or legitimate productive activity. This discourages over-exposure of the financing facility beyond the value of the underlying asset, and hence provides continuous security to the investors Ethical investment. Islamic finance prohibits the charging or paying of interest, and imposes restrictions on unethical and speculative financial activities

Financial equity is a standout amongst the most critical lessons of Muslims. As indicated by the Qur 'an, the essential mission of all messengers of God was to set up equity in this world (Al-Hadid 57: 25). Most the Qur 'anic lessons are guided towards empowering individuals to live with each other in peace and to satisfy their shared commitments genuinely and steadfastly to guarantee equity and general prosperity (falah). Inside the domain of this mission of the Messengers, the Qur 'an predicts, and which is all well and good, that treachery drives eventually to demolition (Ta-ha 20: 111).

Sadly, Islamic banks and financial institutions are seen as the weak link in the Wes. The wrong perception is about inadequate anti-money laundering (AML) and internal controls. Moreover, in Islamic institutions, the heavy reliance of the industry on cash transactions and on trust within the business communities of Muslim countries have been key areas of concern for Western regulators and institutions.

Money can be defined as any thing that is generally acceptable as a medium of exchange. It can also be defined as a third commodity that is introduced between two other commodities to facilitate exchange. Money can therefore be looked at as an instrument that helps in fulfillment of contracts, discharge of debts and as a standard of deferred payment. Due to the obligation of people to accept money in the discharge of debts, money is often referred to as legal tender.

The Central Bank of the UAE was established in 1980 (Crystal & Peterson,2017). It is the UAE’s highest financial regulator. The Central Bank works with the state by directing changes in Monetary, Banking, and Credit-based policies appropriately. It implements those policies in accordance to the state’s current Financial and Economic needs. Moreover, the Central Bank aims to stabilize the economy and the current exchange rate by maintaining gold and other foreign currency reserves. The UAE Central Bank, “prohibits lending an amount greater than 7 percent of a bank's capital base to any single customer” (United Arab Emirates - Banking System, n.d). Furthermore, Islamic banking in the UAE has shown a boundless level of progress due to no interest fees per Sharia Law. The UAE Islamic Financial Sector was estimated to be worth around 127 Billion US Dollars in 2014, it is also the third largest Islamic market by value after Saudi Arabia and Malaysia (John,2015). In November 2011, the Central Bank introduced the IBAN system, its main purpose was to ease the process of automatic money transfers and improve the accuracy and speed of payment transactions (Standard Chartered Bank of UAE, n.d).

India’s banking sector has grown very fast over these years. India has a large web of banking it has 26 public sector banks, private sector consists of 20, and there are 43 foreign banks which is a good sign for banking sector. Also it consists of 61 regional banks. There has been a noticeable expansion in dealings through ATMs, and also with internet and mobile banking banks has shown tremendous growth.

It regulates public and private behaviors and actions of people” (Mulcahy). Sharia law consists of an exceptionally broad topic span and has been interpreted many ways, especially on unclear points. Mulcahy said “Although the word of Sharia cannot be altered, like any other religious text it should not be interpreted word for word. This has obviously not been the case and has led to religious extremism and a strong split between Muslims”. The rules of Sharia are single-handedly what distinguish Islamic Accounting from other methods.

In context of modern economics, Islamic banking is a completely new concept for most of people in this domain. The Islamic bank established in 1963 in the city of Mit Ghamr, Egypt is believed to be the first of its kind, even though it was not publicly characterized to be so due to political persecution. The Egyptian government at that time used to be hostile to any activities that are believed to adopt any Islamic approach and duped them to be unwanted fanaticism. The bank’s first administration board was chaired by Mr. Ahmed Al Najar and remained in business until 1967. This experience was later replicated in 1975 by the first bank to be openly branded Islamic, the Dubai Islamic Bank, which was an integrated bank offering all of its financial and investment services according to Islamic Sharia guidelines. As a result of the success of this new type of banking, 267 Islamic banks were established in 48 countries around the world yielding a volume of business surpassing $250 billion estimated by The General Council for Islamic Banks and Financial Institutions CIBAFI (Arif 1988).

Musharakah, Mudarabah, Istisna’, Salam, Ijarah and murabahah is the main contract with their customers to use in providing facilities for Islamic banks. Possible classification , these contracts may be: Islamic pattern of non- debt financing (Musharakah and Mudarabah) and debt creation mode ( the Other ) . A third possible classification : Original Islamic mode of financing (Musharakah, Mudarabah, Istisna , Salam ) and financing of "reinventing " mode (Ijarah and murabahah).

Islamic banks present equity funding with risk distribution for a project . Losses are shared mutual based on equity contribution, whereas profit is shared on the basis of pre-decided proportion.

Now that, Islamic law has been defined and explained in detail, Islamic Banking can be observed further. There are four rules that govern investment behaviour in Islamic banking (Suleiman 2001):

Abiding to Shariah in an overview is Prohibitions of riba, gharar and maysir, this is what distinguish Islamic finance from its conventional counterpart (Ayub, 2007). As an alternative, Islamic financial system have interest free loans, Islamic joint-ventures (musharakah/mudarabah) and trade or lease-based (murabaha/ijarah/salam) financing structures (Azmat et al. 2015). Contemporary Islamic financial institutions have developed, and continue developing, products that mirror the classical Islamic products, and evade from the association with riba, gharar and maysir (Kamla & Alsoufi 2015).