Consumer Awareness of Car Financing in UAE Banks - Literature review Example

Consumer Awareness of Car Financing in UAE Banks Name: Institution: Consumer Awareness of Car Financing in UAE Banks Introduction Recent financing strategy studies show that the United Arab Emirates (UAE) banks are major players in financing consumers, especially in the purchase of personal cars. However, a research gap exists, whereby, a lot of consumers are not aware of the implications of outsourcing car financing systems of the UAE banks in buying personal cars. Research is needed to assess the consumer understanding of the significance and implications of using the UAE banks’ systems in obtaining cars to aid the consumers in making well-informed decisions before outsourcing car financing in UAE banks. Literature review In the Ringim & Yussof (2014) study conducted to assess the preference of consumers towards Islamic banking systems, the study utilized qualitative data from previous researches and conducted a quantitative study of questionnaires to interview people in Islamic nations of the Middle East and Far East Asia on their view between the Islamic banking systems and conventional banking systems. The findings revealed that people from nations with high population of Muslims such the UAE prefer Islamic banking systems based on religious beliefs rather than economic aspects. In the recommendations, the banks needed to focus on consumer satisfaction and delivery of quality services. This article provides background understanding of consumers in UAE, whereby, the consumers are motivated to spend their money according to Sharia and they trust the finance systems of the UAE banks. Therefore, they are inclined to explore any outsourcing system provided by the UAE banks so long as it is an Islamic bank. The article is important to the research topic because it establishes that the UAE consumers are less aware of the implications of using UAE banks’ loans in the purchase of cars. In a nutshell, the article provides the background information needed to formulate research methodology. Alternatively, Naser, Al Salem & Nuseibeh (2013) conducted a study to assess the awareness of the consumers and their satisfaction with the products and services of the Islamic banking systems. They used quantitative questionnaire methodology to assess the understanding of Islamic bank products and satisfaction of Kuwait Finance House (KFH) customers. In the findings, Naser, Al Salem & Nuseibeh (2013) revealed that the customers are quite satisfied with Sharia management of the bank and they are less aware of the negative implications of the bank products because anything conducted according to the specifics of Sharia are not only worthy, but also trustworthy. Although this article focused on the assessment of the awareness and satisfaction of Kuwait’s KFH customers, it also provides the research with the expected or prospected outcomes of the study (hypothesis) on the consumer awareness of car financing in UAE. This implies that most consumers in UAE are not concerned about the implications and incisive understanding of the car financing system, but rather they are focused on the benefits of the system because they believe that such systems with reference to Sharia. In a nutshell, the article enables the research to construct viable objectives, research rationale and hypotheses. In an online publication, Sadafy (2011) revealed the increased unawareness of the UAE population about the loaning implications of the UAE banks. Sadafy (2011) showed how Emiratis are spending the borrowed money from banks on non-essential products. In this regard, he indicated that Ali Katiri, an expert on consumption and the owner of the “the Arab Consumer Network” website suggested that over two-thirds of the domestic borrowers are unaware of the dangers of massive borrowing from banks and spending on lavish products and services. This publication is important to the research because it shows that special programs are not yet put in place to enhance or promote the awareness of outsourcing from banks. This means that the research is needed to establish better programs that can be used by the government and non-governmental groups in increasing awareness of the implications of borrowing from the UAE banks for the purchase of cars. It is based on the fact that, according to the publication, Ali Katiri called for the government to intervene in spreading awareness so that Emiratis can make a well-informed decision before seeking financial loans from the banks. In a nutshell, the publication provides insights on how the research needs to analyze and discuss its findings. Finally, in a more recent publication, Hunter (2013) noted that there are increased debt fears over the excessive borrowing of Emiratis from UAE banks in the purchase of luxury cars. The UAE banks of which majority are Islamic banks have recorded high profits that have surpassed the previous years. The high rate of borrowing is attributed to the increased consumer confidence in the banking systems. However, the systems of massive borrowing from banks to spend on cars are negatively affecting the population because people are living by spending every pay cheque in settling the bank loans. In the long run, many Emiratis are destined to owe the UAE banks. This publication provides the recent prospects on the dangers of borrowing massively from UAE banks without fully understanding the bank product packages and the long-term implications. Although it focuses on binge spending of Emiratis on luxurious products especially cars, it necessitates the credibility of carrying out the research. In other words, it justifies the research on the consumer understanding of the significance and implications of using the UAE banks’ systems in obtaining cars to aid the consumers in making well-informed decisions before outsourcing car financing in UAE banks. Conclusion In conclusion, the literature review reveals the nature of binge spending of Emiratis on luxury products including cars by borrowing massively from the UAE banks. The binge borrowing results from the consumer confidence that the Islamic UAE banks provide product packages based on the understanding of Sharia. Many consumers are unaware of negative implication of binge borrowing. The literature review provides a study gap to assess the consumer understanding of the significance and implications of using the UAE banks’ systems in obtaining cars. The objective is to aid the consumers in making well-informed decisions before outsourcing car financing in UAE banks. The hypothesis is that many Emiratis are unaware of UAE banks’ car financing implications. References Hunter, G. S. (2013, July 24). Debt fears mount as lending growth doubles in UAE | The National. Debt fears mount as lending growth doubles in UAE | The National. Retrieved October 21, 2014, from http://www.thenational.ae/business/industry-insights/finance/debt-fears-mount-as-lending-growth-doubles-in-uae Naser, K., Al Salem, A., & Nuseibeh, R. (2013). Customers Awareness and Satisfaction of Islamic Banking Products and Services: Evidence from the Kuwait Finance House. International Journal of Marketing Studies, 5(6), p185. Ringim, K. J., & Yussof, I. M. (2014). Assessing The Insight of Muslim Account Holders’in Conventional Bank To Purchase Islamic Bank Products. Journal of Emerging Economies and Islamic Research (JEEIR), 2(3), 1-21. Sadafy, M. A. (2011, December 24). Most in UAE borrow to splurge, says expert. Emirates 24/7. Retrieved October 21, 2014, from http://www.emirates247.com/news/emirates/most-in-uae-borrow-to-splurge-says-expert-2011-12-24-1.434210 Consumer Awareness of Car Financing in UAE Banks Introduction Intensive borrowing of the Emiratis has recently hit the major news headlines both domestically and internationally. Research findings reveal three quarters of Emiratis are increasingly cashing out their credit cards in luxury car showrooms thanks to the product tariffs of the UAE banks that allow massive borrowing. However, there are concerns over the channels of increasing consumer awareness on car financing by UAE banks. Research is needed to evaluate the existing consumer awareness on borrowing massively from banks to purchase cars to establish a viable awareness program and prevent un-informed borrowing of the Emiratis from the UAE banks. Literature review In a study conducted by Saini, Bick & Abdulla (2011), the authors investigated the consumer awareness level and the frequency of using products of South African Islamic banks. They employed a quantitative survey methodology that used questionnaires to interview the Muslim population on factors that influenced them in choosing Islamic banking products over the conventional banking products. In the findings, the authors revealed that many Muslims in South Africa are aware of the banking products in Islamic banks; however, they prefer conventional banks over Islamic banks based on various factors such as bank charges, efficiency, and the extensiveness of bank networks and availability of teller operators. Although this article focused on the consumer awareness of Muslims in South Africa, it plays an important part in evaluating the influence of religion used by the marketing of Islamic banks such as those found in UAE. It reveals that the Muslims with a learned background prefer quality service delivery and satisfaction over religious beliefs in banking. Since many Emiratis are not yet exposed to the trends of globalization, they tend to trust religious aspects over the impending outcomes of economy and the article aids the research in establishing the hypothesis and outcomes of the study. Contrarily to Saini, Bick & Abdulla (2011), the research conducted by Khan & Asghar (2012) to assess Pakistan’s consumer awareness and the attitude towards Islamic banking showed that many Pakistanis welcome the ideology of Islamic banking. Khan & Asghar (2012) used descriptive research methodology by employing questionnaires to collect data from two major Pakistan cities. The findings of the study showed that the increased preference by Pakistanis on Islamic banking is due to their eagerness on spending their financial products according to the provisions of Sharia (a marketing characteristic of the Islamic banks). The study concluded that in order to outdo the conventional banks, the Islamic banks in Pakistan allowed massive borrowing. Although this article assessed the consumer awareness and preference towards Islamic banking in Pakistan, it reflects the current state of intensive borrowing by Emiratis due to the systems established by the UAE banks on borrowing. This shows that the UAE consumers have confidence in the UAE banks’ products which influences massive borrowing. The article establishes that religion is behind the ignorance of many Emiratis in seeking information before borrowing bank loans to purchase luxurious cars. In a nutshell, the article is important to the research as it provides the methodological approaches of collecting data. With reference to the Khan & Asghar (2012) findings, the 2012 Emirates 24/7 online publication reported on the increased rate of borrowing from the UAE banks by the Emiratis to spend on luxurious products such as houses, jewelry, clothing and cars. In the publication, Sadafy (2012) explained that Khalifa Mustapha Al Tinaiji, the head of Sharja Executive Council refused the council’s proposition of expanding the government-initiated grant programs that promote establishment of better housing structures for Emiratis. Khalifa stated that the programs do not increase awareness on the borrowing strategies of the Emiratis rather it increases the chances of borrowing massively from the bank. Khalifa pointed out that many of the applicants for housing grants already owed UAE banks more than Dh400000 borrowed for the purchase of luxury cars. Therefore, the refusal of the housing grant program is not enough to curb the intensive borrowing of the Emiratis. The publication is important to the research because it reveals the lack of necessary structures that the research needs to find to support consumer awareness of car financing in UAE banks. In simple words, the publication calls on the necessity of establishing appropriate awareness strategies, particularly the use of media in advising Emiratis on borrowing form UAE banks. Finally, the most recent publication by Haine (2013) on the advantages and disadvantages of using bank loans to purchase cars revealed that the UAE banks (RAKBank, Mashreq and Abu Dhabi Islamic Bank) benefits a lot from the massive borrowing of the Emiratis. Haine (2013) noted that many Emiratis borrowed RAKBank, Mashreq and Abu Dhabi Islamic Bank loans to purchase second-hand cars without seeking appropriate information on the repercussion that result from failure to settle the bank debt within the specified time. The banks charged higher interests and confiscated the properties when the consumers failed to the repay the bank loan within the specific time. It does not matter if this publication focused on only RAKBank, Mashreq and Abu Dhabi Islamic Bank as the representatives of the UAE banks, the true picture portrayed in the reporting is the necessity of evaluating the existing consumer awareness on borrowing massively form banks to purchase cars to establish a viable awareness program and to prevent un-informed borrowing of the Emiratis from the UAE banks. In a nutshell, the publication justifies the necessity of the research. Conclusion In conclusion, the articles and the publications revealed that there are no major strategic frameworks established in UAE to promote consumer awareness of car financing in UAE banks. Basing on the literature review, the research question is whether there are frameworks that promote consumer awareness of car financing in UAE banks, the objective is to find an appropriate strategy of increasing consumer awareness on bank loan products, and the hypothesis is that religious beliefs are viewed as informal awareness strategies in UAE. The implications are that the research findings may face criticism from the banking sector and the consumers’ organizations that benefit from massive borrowing of Emiratis. References Khan, H. N., & Asghar, N. (2012). Customer awareness and adoption of Islamic Banking in Pakistan. Interdisciplinary Journal of Contemporary Research in Business, 3(9), 359-366. Saini, Y., Bick, G., & Abdulla, L. (2011). Consumer awareness and usage of Islamic banking products in South Africa. South African Journal of Economic and Management Sciences, 14(3), 298-313. Sadafy, M. A. (2012, March 6). Housing grant to Emiratis will not reduce their debt: official. Emirates 24/7. Retrieved October 21, 2014, from http://www.emirates247.com/news/emirates/housing-grant-to-emiratis-will-not-reduce-their-debt-official-2012-03-06-1.446802 Haine, A. (2013, August 31). Pros and cons of used-car loans at RAKBank, Abu Dhabi Islamic Bank and Mashreq | The National. Pros and cons of used-car loans at RAKBank, Abu Dhabi Islamic Bank and Mashreq | The National. Retrieved October 21, 2014, from http://www.thenational.ae/business/industry-insights/finance/pros-and-cons-of-used-car-loans-at-rakbank-abu-dhabi-islamic-bank-and-mashreq Read More