Abstract
Islamic finance presents a new avenue as a novel alternative to the conventional financial set-up in this country. The purpose of this study is to find out the prospects of Islamic banking in India. The objectives of this study have been met by conducting a survey to elicit the responses from retail customers of both private and public sector banks in four cities of South India. The survey was carried out among both Muslims and non-Muslims to find out about the awareness levels, patronage, motivation and perception towards Islamic banking in India. The results reveal that the respondents have a favorable perception towards Islamic banking, especially from the city of Hyderabad, since it has got a lot of institutions that run courses on Islamic banking. In the current study, it is found that Islamic banking is having low level of awareness among the respondents. However, the attitude towards adoption of Islamic Banking seems encouraging, as reflected in the study. The findings of this research gain significance due to the fact that this sample represents a segment of the entire population of South India and thus, acts as a pre-cursor to a detailed study involving various other such demographic denominations. The future directions for this research could be carried out by drawing such clusters across the rest of the country. This may help to understand and get a better and broader perspective of the need for Islamic banking and hence, its prospects in India.
Highlights
Islamic banking is any banking activity of a financial institution which operates on the basis of and according to the principles of Islamic law (i.e. “Shariah”)
The results reveal that the respondents have a favorable perception towards Islamic banking, especially from the city of Hyderabad, since it has got a lot of institutions that run courses on Islamic banking
There is no significant difference between the demographic variables of the respondents and perceptions of male and female with regard to the general perception and awareness of Islamic banking
Summary
Islamic banking is any banking activity of a financial institution which operates on the basis of and according to the principles of Islamic law (i.e. “Shariah”). The last Prophet of Islam, Muhammad (Peace Be Upon Him), was the first to start the principles of Islamic finance, when he started doing his business as a silent partner (Musharakah) with his beloved wife, who was a rich lady and had been earlier widowed twice. He permitted people to use sale on credit without interest The revelations of the verses Quran clearly prohibited dealing in interest and indulging in gambling It is from here onwards, the earliest principles of Islamic finance were formulated
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