International Journal of Islamic Financial Services Vol. 2 No.4 A STUDY ON ISLAMIC BANKING EDUCATION AND STRATEGY FOR THE NEW MILLENIUM - MALAYSIAN EXPERIENCE Abdul Halim Abdul Hamid & Norizaton Azmin Mohd Nordin It is estimated that one billion people in the world adhere to the Islamic faith and becoming more devout by the day (Barakat and Sarver, 1997). At a growth rate of 15 percent a year, Islamic banking has $65 billion in assets. However, this is less than 1 percent of bank assets worldwide ( Wilson, 1995). The next millenium could witness a tremendous growth in Islamic banking. For example, in the United States, the financial needs of the country’s Muslim community are estimated at about $80 billion, as a result of demand by Muslim immigrants to that country (Ahmad, 1998). Despite 15 percent growth of Islamic banking elsewhere in the world, Islamic bank in Malaysia is still groping to achieve a market share of 5 percent by the year 2000. As at June 1998, Islamic bank total deposits are only RM10.04 billion as compared with RM420.8 billion deposits in the whole banking system. This means that Islamic banking’s share in terms of deposits in the Malaysian banking system, comprises only 1.06 percent. Economic downturn in the Asian region is part of the reason, apart from the weak marketing strategy (Haron, Ahmad and Planisek, 1994). However, the Islamic bank’s education strategy are is equally important. Education in Islamic banking and finance has been neglected as far as Islamic banks are concerned. Therefore, the purpose of this research is to examine Islamic banks’ strategy in educating the public about their existence and products. With 53 percent of Malaysian population being Muslims, it is appropriate to ask why Islamic banks can capture only a 1.5 percent share in terms of deposits. A study conducted in Malaysia in 1994, regarding knowledge about Islamic banking showed that almost 100 percent of the Muslim population was aware of the existence of the Islamic bank. However, out of these, only 27.3 percent completely understood the differences between Islamic bank and conventional banks; and only 38.7 percent patronize the Islamic bank strictly because of religion. A similar situation occurred in Singapore, where only 22.6 percent of Muslims deposit money in Islamic banks solely because of religion (Gerrard and Cunningham, 1997). One of the contrib- uting factors to this absence of awareness among Muslims is the lack of understanding of Islamic banking. A study conducted in Singapore showed that only 20.7 percent know the meaning of ‘Riba’ and 31 percent know the meaning of Sharia’h. The study also showed that only 3 percent can explain accurately the meaning of Ijara, Modaraba and Musharakah. Surprisingly, no one could explain accurately the meaning of Murabaha (Gerrard and Cunningham, 1997). Therefore, this research will also examine Malaysian Muslim knowledge of Islamic banking and its products, as well as their awareness in adopting Islamic principles as a way of life. The reasons behind this lack of knowledge about Islamic banking is extremely important in drawing up a new education strategy for Islamic banks for the next century. With this new finding, it is hoped that the management of Islamic banks will put some effort into educating the public not only about their services and their products, but also adopting Islamic principles in their customers’ financial activities. Introduction “IQRA’” is the first word in the holy Quran revealed to mankind which means read. Wise men used to say, give a man a fish and you will feed him a day but give him the fishing rod and you will feed to his lifetime. Both this quotation emphasised the importance and vitality of education to man. When the first caramel drink was founded in 1886 in a chemistry lab, no one would ever imagine that this ‘weird’ soft-drink will someday be a multi billion dollar beverages, but now the word “Coke” or “Coca-Cola” is a common synonym to a refreshing cooling beverages. What is the secret of this success? Was it due to the ‘magical’ caramel drink? Why does Pepsi Co., in 1996 spent USD500 million just to change the colour of its logo? The answer to all the above was education. Coke would never reached its stage right now if they were not educating the customer about their product. Pepsi Co., were willing to spent that huge sum just to ensure that their customer was not swept away by Coca-Cola, where the latter was hosting the Olympics Games at the home-town of Coke in Atlanta, Georgia, USA. The mass logo colour change by Pepsi is a way of educating the customer that Pepsi is still around