Hijri New Year an occasion to migrate to Islamic banks
Director of the Islamic Business Undergraduate Program of the Faculty of Economics and Business at the University of Indonesia
Jakarta | Fri, September 29, 2017
The Jakarta Post
The market share of Islamic banks never grew more than 5 percent until the end of 2015, more than two decades after the establishment of Indonesia’s first Islamic bank. With such stagnant growth, it was often said that local Islamic banks were in a 5 percent growth trap. By the end of 2016, the market share of Islamic banks had risen by 5.13 percent, but this was not because of an increase in the number of new customers, but ventional regional bank in Aceh into Islamic banks.
Thes Situation raises a question as to why Indonesia, Known as the largest, Muslim-majority country in the world, with Muslims consisting 88 percent of the 2016 population of about 259 million people, shows such alow market share of Islamic banks.
If we compare our Islamic banking market share to Malaysia’s, the figure is quite ironic, in Malaysia, the market share of Islamic banks reached over though the neighboring country’s Muslim population is only 61.3 percent (18.88 million) of its total population of 30.8 million people.
To answer the above question, researchers conducted a qualitative and quantitative study of 1,200 Islamic banking customers that was sponsored by the Indonesian Financial Services Authority (OJK). The study showed that the majority of Indonesian Muslim consumers become customers of Islamic banks because of economic rationale (56.66 percent), because of both economic rationale and religious conviction (26.67 percent), because of religious conviction oly (10 percent) and the rest for ethical principles.
Futher quantitative analysis was conducted to understand whether banks’ external factors (product, price, location, promotion, people, process and physical evidence) or consumers internal or personal factors (religiosity, references from family or relatives, experience,etc) primarily influence Muslim consumers to switch or migrate from a conventional to an Islamic bank.
The result shows that it is consumers’ internal-personal factors that prevent them from migrating to Islamic banks. Based on the study’s results, of course it would not be easy for Islamic banks to conduct intervention on consumers internal or personal reasons.
It would be difficult and take a long time to educate consumers, and to convert the rational consumer into a religious consumer to increase Islamic banks market share.
Thus, as Muslim, we need to realize the obligation to raise awareness among Muslims to support and use Islamic banking services, as this not only lies in the hands of Islamic banks. It the obligation of every Muslim to reflect upon our own religiosity and to question our real actions that reflect our identity as Muslims in our daily economic lives and transactions, including supporting Islamic banks.
The Islamic New Year, or the Hijri New Year, which fell on Sept, 21,is good occasion for Muslims to reflect on their willingness to switch or migrate from a conventional to an Islamic bank. The Hijri New Year is the day that marks the beginning of the new Islamic calendar year, which began in 622 AD with Prophet Muhammad’s migration from Mecca to Medina known as hijrah. Even though the Hijrah happened 1395 years ago, the concept behind it is still relevant for discussion and applying to any dimension of the contemporary lives of Muslims.
The relevance of the Hijrah to cunsumers behavior regarding Islamic banking is as follows.
First, some consumers are not willing to migrate or to an Islamic bank, as they are worried about financial losses or the loss of the convenience the get from conventional banks. Based on the concept of Hijrah in Prophet Muhammad’s era, Hijrah means to abandon property and relations to support the nascent Muslim community.
Event though Muslims lost their property during the Hijrah from Mecca to medina, in the end, Hijrah to His cause will lead to prosperity. Thus , we need to realize that there a sacrifice will always be required in practicing any kind of Hijrah, including Hijrah from conventional bank to an Islamic bank. Convenience or certain financial gains might be too good to lose, but a Muslims should believe that His words are truth, as Allah says in the Quran:”Those who believe, and have migrated, and have struggled in the way of god with their possessions and their lives are in a greater degree with God; and these, they are the triumphant.”
Second, Hijrah reflects a transition phase, which signifies Islam as a way of life rather than merely an act of worship. After Hijrah, Islam shows its characteristics as a comprehensive religion that encompasses politics, social interaction,economics, and every other aspect of life. Interests, or riba, is discussed in the Quran which reflects the comprehensiveness of Islam in managing each and every aspect of life. Riba is prohibited in Islam, as it creates unjust and exploitative gains made through trade. Allah has forbidden riba because of the corruption it brings and the harm it causes to society in general and to the poor in particular.
Thus , it is important for any Muslim to comtemplate why we do not Hijrah or migrate wholeheartedly to Islamic banks,while the Hijrah is a conceptual potentioal that supports the development of Islamic banking following the celebration of Islamic New Year 1439 H. Happy Islamic New Year!
The Writer is director of the
Islamic Business Undergraduate
Program of the Faculty of Economics and Business at the University of Indonesia.