Prospects of Islamic Banking in the United States : A Survey of Muslim Americans

Abstract

and Key Findings Islamic Banking is a rapidly growing industry worldwide. Its raison d'etreis primarily due to the Islamic prohibition of Riba, commonly translated from Arabic as interest, coupled with the need of practicing Muslims to become engaged in the modern global economy.This paper seeks to address the current utilization of Islamic Banking services in the United States. Based on the results of a survey that was conducted at New Jersey mosques, the paper suggests that American Muslims consume conventional banking services at rates quite similar to the general American population. There is also some evidence that Islamic Banking is a pan-Islamic phenomenon: it is not clearly limited to a certain ethnicity, age group, education level or religious identification. This can be interpreted as good news for the Islamic Banking industry in the United States, as it means that its market potential is not significantly limited by any of these factors. However, this may also prove to be a double-edged sword, if the Islamic Banking industry in the United States is unable to strongly differentiate itself from the conventional banking industry, and therefore cannot generate a large and loyal clientele. 1.Outline The paper starts by briefly recapitulating the origins and development of the Islamic Banking system, with specific emphasis on its emergence in the United States. Next, the literature review highlights some findings and observations from other relevant works. Finally, the results and analysis of a survey that was administered at a few mosques in New Jersey will be provided, in order to get an idea of the current usage of the conventional and Islamic Banking industries by Muslims in the United States, in order to determine if there are any demographic factors that are linked to a higher utilization of Islamic Banking services, as well as to predict the future growth prospects of the Islamic Banking industry in the United States. The survey that is analyzed in this paper is concerned with Islamic Banking in the United States. While there has been some limited availability of some Islamic financial services on a minute scale in the United States for around thirty years, Islamic Banking only began to see significant participation from the Muslim American community over the past ten years or so. However, there may be a sizeable untapped market for the Islamic Banking sector in the United States. The primary target population for Islamic Banking in the United States would be Muslim Americans, although the target clientele may extend beyond that in the future, especially if Islamic Banks offer services competitive with those offered by conventional banks. Estimates of the