ABA Banking Journal - November 2007 - (Page 52)
ETHNIC MARKETING Disinterested banking Avoiding “reba” in all its forms, Ann Arbor’s University Bank establishes a foothold in Islamic banking in America “ I have a complaint…” the business executive started off. He was meeting banker Stephen Lange Ranzini a little while after a celebration the bank had hosted to mark a great CRA rating. Little did the banker know at the time that those four words would end up taking him on a nearly five-year odyssey that few American bankers have experienced—or, likely, have even conceived of. An unserved market knocks In 2003 FDIC gave $86.8 million-assets University Bank an “Outstanding” CRA rating. It came about in no small part because Ranzini, for a time, made it his mission in business life to call on every black minister in Ypsilanti, Mich., the town next to his bank’s home of Ann Arbor. In all, he’d visited 42 minority clergy, bringing each one the message that the bank wanted to serve their congregations and their churches. Other institutions had avoided expanding their business in Ypsilanti. Ranzini, president and chairman of a bank that lives by niche marketing, saw an opportunity, and he reached out. Indeed, today, one in ten of University Bank’s customers resides in Ypsilanti. But, getting back to the celebration, FDIC had praised the bank in its report, and the banker and his staff were feeling good, surfing a little wave of favorable publicity. “We were really proud,” recalls Ranzini. And then that executive came to see him. “I have a complaint,” he said. “You’re an ‘Outstanding’ bank. But you’re not serving my community.” Ranzini asked where the bank fell short. The customer told him he was a Muslim. Ranzini was confused, as the bank did By Steve Cocheo, executive editor have Muslim customers. Michigan has large concentrations of Muslims and Muslim-Americans. “What don’t we have? What don’t we offer?” the banker asked. It wasn’t what the bank didn’t have, but what it did: banking products and services that violated Islamic religious law, making them off-limits to the devout. “All of your products have interest,” the man told Ranzini, referring to loans, deposits, and investments. Ranzini says he simply blurted out, “How could you do a banking business without interest?” How, indeed? On a subsequent visit, the fellow brought an Islamic banking consultant with him, who has worked with the bank since. Interest—“reba”—is forbidden under Islamic law. Ranzini learned that serving the Islamic market hinges on finding the answer to the interest question, and more, and has built his search into a significant new line of business for his bank. Islamic banking products, including deposits and mortgage alternatives, represent a market of potentially $2 billion in the U.S. and $500 billion worldwide, according to research Ranzini cites. Tapping this market has been anything but simple. Along the way, Ranzini has encountered challenges in product design; training; processing; business structure; human resources policy and employee relations management; compliance; and more. Some elements of Ranzini’s efforts border on the diplomatic—“I have learned enough Arabic to engage in all the pleasantries,” says the banker, who is Catholic. Ticklish matter of reba Ranzini received his board’s authorization to venture into Islamic banking readily enough, but that hurdle, as it turned 52 NOVEMBER 2007/ABA BANKING JOURNAL www.ababj.com/subscribe.html
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