An Empirical Analysis Of Marketing Activities in Indonesian Islamic Banking Industry

Abstract

ABSTRACT
Despite the fact that Indonesia is a predominantly Muslim country, the market share of Islamic banking sector in Indonesia stands around 4 percent in 2011 (Indonesian Central Bank, 2012:127). Although a plethora of study regarding the Indonesian Islamic banking industry has been conducted, not many of them touch the issue of low market share from marketing perspectives.

This research aims at exploring and examining the marketing developed and utilised by the Islamic banking industry in Indonesia. In doing so, this study aims at measuring the perceptions, attitudes, and opinions of the participants having accounts in Islamic banks in evaluating various dimensions of Islamic banking marketing in terms of process, consequence and outcome as well as their general perceptions on Islamic finance and banking. The study also aims to evaluate the marketing of Islamic banks through the norms of the Islamic moral economy as well as the perceived practices of marketing activities.

During the process of primary data collection, 1063 questionnaires were gathered and were divided into three categories: conventional banking only depositors (412 respondents), dual banking only depositors (523 respondents), and Shari’ah banking only depositors (128 respondents). In addition, interviews were conducted by leading individuals from the Islamic banking industry. Apart from that secondary data collection was also conducted from various secondary sources.

In general, one could argue that the three group of respondent share similar demographical characteristics. For Shari’ah banking only depositor, the only difference lies in respondents’ marital status, while for conventional banking only depositor, the difference lies in the income. In addition, almost all respondents prefer to bank with local Shari’ah bank. The primary reason for this is neither nationalism nor Halal and Haram issue, but rather the excellence of the product. In overall, respondents who are married, Muslim, highly educated, and have a domicile in Java are likely to go for Shari’ah bank. Knowledge regarding Shari’ah bank is also explored and it is shown that the amount of particular areas of knowledge gets better as with attachment to Shari’ah bank. Furthermore, respondents’ perceptions on several issues are also presented. In general, respondents perceive Shari’ah bank as positive except when they think that Shari’ah bank is only for the needy. Nevertheless, contrasting opinions could be seen on the perceptions regarding Shari’ah banking product: the more respondents get attached to Shari’ah bank, the more they perceive Shari’ah bank’s depositing product to be competitive. However, the more respondents get attached to Shari’ah bank, the more they perceive Shari’ah bank’s housing and vehicle financing product to be uncompetitive. On the issue of advertisement, the more respondents get attached to Shari’ah bank, the more positive is their opinions towards the statements. Moreover, when asked on the perceptions of advertisement characteristics, all respondents showed encouraging views. The same views are held regarding the actual experience with Shari’ah bank. Finally, the results regarding the perceptions in actual service and advertisement of Shari’ah bank vary across the three respondent groups.

In light of these findings, this research proposes that the industry applies greater transparency by having national Shari’ah rating system. In addition, the industry should concentrate more on the non-price aspects. Furthermore, Shari’ah banks should launch more innovative products and communicate those products in accordance to Shari’ah. Moreover, improvement in employees’ salary, training and facilities should be made in order to amplify the quality of service. Also, socialization should be conducted regarding the fact that the industry is not religion-specific.