Challenges in Marketing of Islamic Banking Products in Malaysia

The history of banking is as old as Islam but the histoy of Islamic banking is only half a century old. It is agreed that Islamic banking started with a saving bank based on profit sharing in Mit Ghamr, Egypt in 1963. But, the first proper Islamic bank is deemed to be the Nasser Social Bank in 1971, again in Egypt. In 2013, after 50 years, there are about 400 Islamic banks and institutions in 53 countries with a fund based of USD 992 billion and asset based of USD 1.3 trillion. When Islamic banking started, Malaysia was busy with independence. Therefore, the start of Islamic banking in Malaysia was delayed by two decades. Malaysia passed Islamic banking Act in 1983 to start Bank Islam Malaysia Berhad with a capital based RM 80 million. The next three decades saw a tremendous growth. By 2013, there were 16 domestic and 5 international Islamic banks in Malaysia with an asset based of RM 442 billion, which does not include 15 Takaful operators. In spite of this tremendous growth, Islamic banking does not compare with conventional banking in terms of volume and acceptability. There have been studies which show that while 80% of the banking customers in Malaysia are aware of Islamic banking, but were not aware of Islamic banking products like Ijarah, Murabahah, etc. This conceptual paper brings out the challenges of marketing Islamic banking products in Malaysia and traces the roots of the problem to the lack of customer centricity.