Banks aim to spur growth with Ramadan marketing

Emirates NBD PJSC of Dubai is waiving payments on personal loans for the holy month of Ramadan. Maybank Islamic Bhd in Kuala Lumpur started automating charitable donations. Jakarta-based PT Bank Syariah Mandiri sponsors a television slot teaching Islamic banking.

Marketing campaigns aimed at reminding the world’s 1.6 billion Muslims to follow the teachings of Prophet Muhammad that ban receiving interest have increased as the global economy recovers this year, according to the Pan Arab Research Center in Dubai. Advertising spending by financial services companies in the Arab region is likely to grow by 40 per cent this Ramadan when compared to the previous season, it estimates.

“As cautious optimism returns, the banking sector is engaged in brand-image building exercise and Ramadan offers the much needed platform for these promotions,” M Shaharyar Umar, an analyst at Pan Arab Research, said in an emailed response to questions on August 28. “Consumer spending increases during the period as well.”

Muslims refrain from food, drink and sex during day in the fasting month, which began this year at the sighting of the crescent moon on August 11. Gulf states will celebrate the Eid holiday, which marks the end of Ramadan, next week.

Banks in Turkey, a secular nation where 99 per cent of the 77 million population is Muslim, are also participating in the marketing. Yapi & Kredi Bankasi AS, the Turkish bank part-owned by Italy’s UniCredit SpA, has had a 50 per cent increase in loan applications this Ramadan compared with the rest of the year, Mehmet Cemalcilar, the head of marketing and individual banking, said in an interview on August 19.

Banks need their customers to gain confidence in shariah-financing to sustain growth in an industry estimated by the Islamic Financial Services Board to expand 15 per cent annually. Created in the 1970s, the industry’s assets may quadruple to $2.8 trillion by 2015 from about $700 billion in 2005, the Kuala Lumpur-based regulator estimates.

Noor Islamic Bank, a lender owned by the Dubai government, will likely see its consumer finance business such as auto and business loans increase between 10 per cent and 20 per cent during Ramadan from other months during the year, John Chang, head of Noor’s consumer banking, said an interview on August 25 in Dubai.

"We see a spike in the auto-finance business, small-business finance, and a marked improvement in credit card spending as well,” Chang said.

In the United Arab Emirates, flexible and shorter working hours along with family gatherings during Iftar, or the breaking of fast at sunset, have prompted banks and retailers to step up their ad campaigns to attract Muslims, Umar said. The Ministry of Labor reduced the working hours for the private sector in the Gulf nation to six hours from eight, state-run Wam news agency reported on August 10.

To entice customers, Emirates NBD, the UAE’s biggest bank by assets, is postponing installment payments on personal and auto loans as part of its Ramadan offerings, the bank said in an e-mailed statement on August 15. Net income in the second- quarter dropped 53 per cent to Dh398.2 million ($108m) from a year earlier, the bank said July 26.

“As with all successful promotions, special packages and offers made by the bank during Ramadan do result in generating the desired level of customer interest, and hence there may be increases in revenue and business numbers,” Shekhar Krishnamurthy, the head of retail assets and liabilities at Emirates NBD, said in an email on August 19.

“In most households, expenses do generally go up in Ramadan as people spend more on food items or entertain family and friends for Iftar,” he said. Muslims account for 96 per cent of the 4.8 million people in the UAE, according to estimates from the US Central Intelligence Agency.

The spread between the average yield for emerging-market sukuk and the London interbank offered rate narrowed to 380.7 basis points on Sunday from 380.8, according to the HSBC/Nasdaq Dubai Sukuk Average Spread.

Islamic bonds, which are based on the exchange of asset flows rather than interest, returned 3.9 per cent so far this quarter, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index. Debt in developing markets gained 6.7 per cent, JPMorgan Chase & Co’s EMBI Global Diversified Index shows.

The yield on Malaysia’s 3.928 per cent Islamic note due June 2015 fell 1 basis point, or 0.01 percentage point, to 2.756 per cent on Sunday, and is down about 20 basis points this month, according to prices from Royal Bank of Scotland Group Plc.

Banks in Indonesia, the world’s most populous Muslim nation where more than 192 million practice the faith, are offering limited-edition products to generate Ramadan-linked revenue and publicity. Indonesia introduced a law two years ago to allow financial institutions to offer services that comply with Shariah principles, 25 years after Malaysia.

Islamic banking assets totaled $93bn in Malaysia in 2009, or 20 per cent of the total, compared with 2.9 per cent in Indonesia, according to central bank data. About 60 per cent of Malaysia’s 28 million people are Muslims.

Bank Syariah Mandiri, the Islamic unit of Indonesia’s largest bank by assets PT Bank Mandiri, collaborated with a local TV operator for a show aimed at promoting Shariah- compliant banking for Muslims during the fasting month.