Perceptions of Islamic finance : a study among Muslims in Gauteng

Abstract

Islamic finance has received considerable attention; therefore, this study intends to explore Muslims' thoughts and perceptions towards Shariah-based products in the South African context. It has been no more than 14 years since modern conventional banks in South Africa have offered Islamic finance products. This study intends to gain insight into consumers' perceptions and level of knowledge and understanding of Islamic finance to better understand consumers' needs. Based on Islamic religious texts, dealing in interest is clearly prohibited. Although many Muslims may appear to purchase products offered by conventional banks, it may be out of dire need rather than by choice. Failure to provide products based on pure economic principles of Islam may result in unfavourable criticism. Studies like this one would assist in educating Muslim consumers and could aid developers of these financial products to meet the needs and requirements of such consumers. The primary objective is to establish the general perception of Muslims in the Gauteng Province towards Islamic finance offered by conventional financial institutions and recommend teachings and the development of future compliant financial products. The target population is Muslims residing in the Gauteng Province of South Africa. Gauteng is the most densely populated province in South Africa and comprises the second most Muslims in the country at 2.4% (318 432) of the total people within the country. Therefore, a sample size of 271 was calculated using the Raosoft sample size calculator. Furthermore, an online-based survey instrument with close-ended questions with the aid of a five-point Likert Scale was implemented as the data collection method. A quantitative analysis was conducted using statistical software, namely; Statistical Package for Social Sciences (SPSS) and expertly conducted through the utilisation of the North-West University’s statistical consultation services. The majority of participants were aged between 23 and 54 years old, representing 80.7% of participants’. It was established that over half of the participants, at 53.2%, used Islamic finance products prior to the study.

This study indicates that Muslims in the Gauteng Province are poorly educated in the Islamic financial services sector. Participants’ had little to no understanding and knowledge of Islamic finance. However, as their knowledge and usage of Islamic finance products and services increases, their understanding also increases. However, Muslims in Gauteng perceive Islamic finance products and services as a necessity even though they may not understand or have full awareness of the products and services in the region. Therefore, this study indicates a significant potential for growth in the Islamic banking sector. Perceptions gained from this study will assist researchers, financial institutions, and other role players in understanding the Islamic finance consumer market better.