Ethical banking concerns prompt half of consumers to consider Islamic finance

50% of UK consumers would be willing to switch from conventional banking to Islamic finance if it offered comparable services, according to new research by Gatehouse Bank.

The UK’s Islamic finance industry has been growing over recent years and is now home to approximately 20 institutions providing Islamic finance products, including five fully Shariah-compliant banks.

41% of respondents had at least some awareness of Islamic finance. This closely correlates with ethical finance (38%) and green finance (37%), highlighting the alignment between Shariah principles and sustainable and ethical practices.

Unsurprisingly, Muslim consumers were more likely to have at least some awareness of Islamic finance, with over three fifths (63%) stating this. However, Muslim consumers were also much more likely to be knowledgeable about green finance (51%) and ethical finance (55%) too, further highlighting the interconnectedness between these types of alternative finance products.

When asked what would motivate them to choose Islamic finance, respondents cited alignment with their value system and beliefs (19%) and that providers are trustworthy and transparent (18%) as the most important factors. This rises considerably among Muslim consumers, with over a third (34%) choosing Islamic finance due to its alignment with their value system and beliefs, followed by a similar number of people (30%) who said that providers are trustworthy and transparent.

A finding consistent with Gatehouse Bank’s 2024 report is that those aged 45+ were much less likely to have knowledge of Islamic, ethical or green finance and the least likely to be open to switching to an Islamic finance provider. This is particularly prevalent for those aged 55+, with only just over 1 in 10 (11%) willing to make the switch. In comparison, over 6 in 10 (65%) of those aged 25-44 would be open to switching, followed closely by over 5 in 10 (55%) of those aged 18-24.

Interestingly, the research found that consumers who are willing to make the switch to an Islamic finance provider were motivated by similar factors, regardless of their age group.

Andy Homer, chief customer officer at Gatehouse Bank, commented: “It is encouraging to see that UK consumers are increasingly willing to consider alternatives to conventional banking and are placing greater importance on choosing financial providers that align with their personal values.

“As the Islamic finance sector continues to grow, both in the UK and around the world, consumers are benefiting from greater choice and accessibility. At Gatehouse Bank, we welcome this and are proud to play our part by offering transparent, ethical products that are open to everyone, regardless of their religious background.”