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kuwait
Figure 2: Dealing with another bank in case of new attractive offers
Customers of Islamic banks, total sample 411
53% possible loss in customer retention
1
47% 42% 11%
Figure 3: Preferences in case of agreeing to deal with another bank
Customers of Islamic banks, sample 215
Undecided=19%
1
80% 19%
Customers of conventional banks, total sample 411
54% possible loss in customer retention
Customers of conventional banks, sample 224
Undecided=34%
2
45% 41% 13%
2
45% 34% 8%
Customers of Islamic and conventional banks, total sample 822
53% possible loss in customer retention
Customers of Islamic and conventional banks, sample 439
Undecided=27%
3
46% 41% 12%
3
62% 27% 5%
Stop dealing with bank
Stay with bank regardless
with other offers
Do not know
Stay with bank but deal
with the other bank
the respondents indicate that they will stay dealing with their banks
regardless of attractive offers from other banks; 11% indicate that
they will stop dealing with their banks and move to other banks with
attractive offers; 42% say that they will stay with their banks but deal
with the other bank with attractive offers; and, 1% do not know what
they will do. This means that Islamic banks in Kuwait are exposed
to 53% of loss in customer retention when there are attractive offers
from other banks. The case for conventional banks is almost the
same (section 2 in Figure 2). They are exposed to 54% loss in their
customer retention (41% + 13%). However, the general tendency
of all bank customers in Kuwait represented by the sample of the
survey (section 3 in Figure 2) that 53% of them will deal with other
banks when there are attractive offers even by stop dealing with
their banks (12%), or while stay dealing with their banks (41%).
These findings lead to a very important question: of the 53%
customers who will deal with banks other than their main banks,
what is the proportion representing those who will opt for Islamic
banks in comparison to the proportion of those who will opt for
conventional banks? The answer of this question will validate the
ideological loyalty map illustrated in Figure 1.
Validating the ideological loyalty map
For customers of Islamic banks who say they will deal with other
banks with more attractive offers (215 persons including those
who will stay with their main banks and deal with the other banks
in addition to those who will stop dealing with their main banks
and move to the other banks with attractive offers) 80 % say they
will move to another Islamic bank; 19% say that they have no
preference; 1% will move to conventional banks; and less than 1
% say they do not know (see section 1 in Figure 3). These results
indicate that the loyalty for the Islamic banking will increase if
it is supported by attractive offers and services. Additionally,
the ideologically undecided Islamic banks’ customers formulate
about 19% of the total Islamic banking customers in Kuwait.
As illustrated in section 2 of Figure 3, for customers of conventional
banks who say they will deal with other banks with more attractive
offers (224 persons including those who will stay with their main
banks and deal with the other banks in addition to those who
will stop dealing with their main banks and move to the other
banks with attractive offers) 57% say they will move to an Islamic
bank; 34% say that they have no preference; 8% will move to
conventional banks; and less than 1 % say they do not know.
For all the banks’ customers in Kuwait (439 persons including
those who will stay with their main banks and deal with the other
banks in addition to those who will stop dealing with their main
Conventional
Islamic
banks and move to the other banks with attractive offers), 68%
say they will move to an Islamic bank; 27% say that they have no
preference; 5% will move to conventional banks; and less than 1
% say they do not know as illustrated in section 3 Figure 3.
When comparing the results displayed in section 3 Figure 1 and
section 3 Figure 3, it appears that the loyalty for Islamic banking is
to increase by 4% (from 64% to 68%) for all customers of banks in
Kuwait when Islamic banks has attractive offers and services than
those in conventional banks. Although the 4% is a missed value for
Islamic banks in Kuwait, the loyalty to Islamic banking in general is
high amongst customers of both Islamic and conventional banks
in comparison to the loyalty to conventional banking. In fact, the
loyalty to conventional banking is exposed to a decrease by 4%
if Islamic banks provide more attractive offers and services. As
for the undecided customers, they represent about 27 % of the
total customers of Kuwaiti banks, a matter that make it harder for
conventional banks in terms of competiveness with Islamic banks.
Strategic implications
• Since the loyalty to Islamic banking stems mainly from
ideological belief, Islamic banks are required to invest more
in their Shariah compliance systems to maintain credibility.
• Since Islamic windows in conventional banks are not legally
allowed, conventional banks are to face greater competitiveness.
In fact, undecided customers are the most viable
prospective for greater competitiveness between Islamic
and conventional banks.
• Conventional banks are under pressures of losing customers
because more than 50% of their customers believe
Islamic banking is better.
• Apparently, the customers of conventional banks have more
weight than the customers of Islamic banks. The weight
here is represented by the size of customer deposits and
financing facilities. In this regard, there is an opportunity
for Islamic banks to attract more of the weighty customers
of conventional banks provided that the weighty customers
are not governmental bodies who deal with banks based on
political economic policies.
• Larger and older Islamic banks in Kuwait are exposed to
a loss in their customer base to smaller and newer Islamic
banks. In this regard, the quality of the service, pricing, and
other customer attraction factors will be the core for competitiveness
between Islamic
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Do not know
No preference
Naser Al Ziyadat is director of strategic planning, M&R for Islamic
Finance Consulting – Kuwait. He can be contacted at nz@mandr.
com.kw.
February 2013 31