Consultative Group to Assist the Poor (CGAP)

Islamic banking consumers prefer not to choose between Islamic and conventional products

A recent study on Islamic microfinance by the Consultative Group to Assist the Poor (CGAP), Yale University and Tameweelcom found less price sensitivity by some consumers and a lot of focus on simplicity in product offerings and Shariah compliance. Consumers of financial products are in general price sensitive and as costs increase, demand goes down. It turned out that about 30% of Muslims always prefer a Shariah-compliant product with little price sensitivity. When given the option to choose between Islamic and conventional banking products, consumers are less likely to make a choice than if presented with only one of the products. The authors attribute this finding to the 'paradox of choice'. If a conventional bank thinks they can maintain market share by starting an Islamic window to offer Islamic products alongside conventional products, they may end up turning off consumers.

MICROFINANCE PAPER-WRAP UP: “Emerging Perspectives on Youth Savings;” by Tanaya Kilara and Alexia Latortue; published by CGAP

The paper by Tanaya Kilara and Alexia Latortue addresses the topic of familiarizing poor individuals with savings programs. This is particularly important at early ages. Financial providers can offer tailored savings suitable even for young people from low-income families. Potential opportunities and obstacles which financial providers encounter are examined closely.

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