Attitudes of Libyan retail consumers toward Islamic methods of finance

Abstract

Purpose – This paper aims to analyse the attitudes of Libyan retail customers to Islamic methods of finance.

Design/methodology/approach – The study conducted a survey of 385 Libyan retail consumers. Descriptive, factor and discriminant analyses of responses were performed to identify principal factors affecting attitudes towards and the potential use of Islamic financial products and services.

Findings – The results indicate that while most respondents have at least some knowledge about some Islamic products, especially Musharakah (full-equity business partnerships) and Quard Hassan (interest-free benevolent loans), they are generally unaware of many other products. Nonetheless, most respondents (85.9 per cent) are potential users of Islamic methods of finance at the retail level, though potential use varying markedly according to age, level of education, employment, income and nationality. Factor analysis reduces the large number of variables that determine retail consumers’ attitudes towards Islamic methods of finance to just community service, profitability, religion and unique services. Discriminant analysis shows that religion and community service are the most important positive attitudes determining the potential use of Islamic methods of finance by retail consumers in Libya.

Research limitations/implications – The study is undertaken in a single national context, so there is no possibility of comparing the results with alternative financial systems in different stages of the adoption of Islamic finance. Research was completed in 2010, with the ongoing unrest in Libya precluding publication until recently.

Practical implications – Religious motivations rank highest in determining positive attitudes to Islamic methods of finance, and marketers should ensure that Islamic financial products and services strictly comply with Sharia. However, it may be possible to strengthen these positive attitudes by promoting that the community service role of Islamic finance is also important. Consumers also react favourably to marketing that either admits something negative about the product (e.g. Islamic finance is Sharia-compliant, but less profitable for depositors) or something positive about a competing product (e.g. conventional finance is more profitable, but cares less about the community). Marketers should emphasise the strengths of Islamic finance across the several sources of positive attitudes the authors have identified.

Originality/value – There is no published work on Libyan retail consumers and limited study of attitudes towards Islamic methods of finance more generally.