Establishing Islamic Financial Cooperative Credit Unions in the Gambia: Potentials and Prospects

Abstract

Contemporary financial dealings are part of business lives. Conventional banks were the key players in the financial system and thus determinants of the interest rates. The financial industry in the Gambia was mostly dominated by foreign banks that were profit-business-oriented. The high charges of interest on loans gave prompted the introduction of financial cooperatives in the Gambia on the philosophy of “people helping people”. However, financial cooperatives are non-profit financial institutions that are owned, managed, and governed by their members. The financial cooperatives sector in the Gambia is playing a vibrant role in uplifting the livelihood and standard of living of their general members through the provision of cash loan schemes at the lowest interest rate. The financial cooperative sector in the Gambia is a conventional base established in 1996 with the support of the Irish League of credit unions, in Ireland. Since then, the credit union has benefitted its members in every sector of economic activities such as agriculture, health, education, business, etc. The credit union movement has registered more than seventy thousand members and issued loans amounting to millions of dalasis every year. The membership growth is expected to rise yearly hence the common bonds of most of the credit unions are open. However, the increasing number of microfinance institutions and foreign exchange bureaus attracts the need for diversification in the financial cooperative movement. The birth of the contemporary Islamic financing system in the global financial industry has attracted the attention of the global Muslim and non-Muslim communities and the Gambia is no exception. As a result of the ongoing awareness and embracing of the Islamic finance industry, there exist two Islamic microfinance institutions and an Islamic commercial bank licensed by the Central Bank of the Gambia to offer Sharia finance products and services. This initiative has paid a lot of attention to the financial system players in the Gambia. However, to discover the potential and prospects of establishing Islamic financial cooperatives in the Gambia, the credit union members’ attitudes/perception and their influence on behavior can be an important step in understanding the psychological factors affecting members’ views on Islamic financial products and services. The study attempted to provide such an understanding by elaborating on Ajzen’s theory of planned behavior (TPB), which is a widely applied theory in modeling behaviors. The theory of planned behavior describes behavior as a consequence of attitude towards the behavior, subjective norms, and perceived behavioral control. Therefore, this thesis aims to research the financial cooperative members’ view on the Sharia-guided banking method by providing data collection and a literature review. The quantitative data collection will indicate the application of members’ opinions on establishing Islamic financial cooperatives in the Gambia which is significant in the determination of its potential and prospects. Using a survey questionnaire, data were collected from a total of 100 members within the five biggest credit unions and the apex body. The TPB model of direct factors was found to be fitting showing attitude and perception towards behavior and perceived behavioral control as predictors of intentions and intention and believed as a stronger predictor of the use of Islamic financial products and services. The literature review provides an overview of some historical records of the contribution of Islamic financial cooperatives and microfinance institutions to poverty alleviation in developing countries.