Differences in the Banking Business of German and Arabian Culture


Term Paper, 2014

14 Pages, Grade: 1,7


Excerpt

Table of Contents

1 Abbrevations

2 Introduction

3 Analysis and Comparison of Cultures

4 Differences in the Banking Business

5 Conclusion

Bibliography

1 Abbrevations

Abbildung in dieser Leseprobe nicht enthalten

2 Introduction

The national crisis of the American banking system developed to a multinational crisis of the financial world and finally ended in an international implosion of the world’s economic system. The experts discuss how to stabilize this system in order to avoid a further collapse and critics reveal that the current crisis is the proof of failure of our traditional banking system. As a consequence of the financial crisis in 2007, a higher attendance of discussing alternative banking systems aroused the interest of this paper.

The Islamic banking sector survived that crisis without having any insolvencies and governmental help as it could be observed in the western world.[1] In contrast to the western banking system, the modalities of financial transactions are characterized among many other features by its connection to real economy and abdication of interest-bearing or speculative investments. Currently Islamic Finance is not widely spread in non-arabian countries, although over four million Muslims are living in Germany at the moment.[2] This fact can be explained particularly with regard to obstructive legal norms, open questions of regulation as well as a lack of specialists for the implementation.[3]

This term paper will deal with the question wether the “Islamic Banking” could represent an alternative the predominating system in Germany. One aspect of this thesis will be if the Islamic system could replace the German one in the future. Firstly each culture will be analyzed and afterwards compared on the basis of Hofstede’s cultural studies. The main part will take care of the practical application of the theoretical elements by a result evaluation and critical analysis of the above-mentioned thesis. In section four a conclusion will be drawn as well as an outlook will be given on future development potentialities in the field of “Islamic Finance”.

3 Analysis and Comparison of Cultures

The attempt to provide a manifold picture of national culture has bothered many researchers in the last decades. Between 1967-1973 and again in 1987 Geert Hofstede, a dutch social psychologist and pioneer of cultural studies,[4] has investigated a large database raised by over 116.000 IBM_employees from more than 70 different countries to find out to what extent work attitudes were influenced by different culture and why motivation concepts did not achieve success comparably in the examined countries.

In the first instance Geert Hofstede emphasized four dimensions to characterize a specific culture: “Power Distance”, “Individualism”, “Masculinity” and “Uncertainty Avoidance”.[5] Later on he expanded his theory by the dimensions “Pragmatism” and “Indulgence”.[6] All the theories were built up in a six-dimensional model, which characterizes each analyzed country by an individual score.

Firstly this papers focuses on the dimension “Power Distance”, which can be defined as “the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally”.[7] Secondly the dimension “collectivism versus individualism” will be applied. “Collectivism” describes a strong developed and often lifelong loyalty to a community, where the common welfare is more important than the self-actualization of an individual.[8]

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Comparison of German and Arabian Culture

Source: Own dipiction based on data from Geert Hofstede, Geert J. Hofstede, and Michael Minkov, Cultures and Organizations: Software of the Mind; Intercultural Cooperations and its Importance for survival (United States of America: Mc Graw-Hill, 2010).

3.1 Analysis of German Culture

With regard to the PDI, the German culture scores low with 35 and is thus ranked in the international comparison on place 65-67 from over 76 countries.[9] Due to the ranking the imbalance between people living in Germany is rather low. In family life or in the educational system, parents and teachers educate the children comparatively as equals. Therefore the younger generation is generally encouraged to become autonomous members of society. As a result of this educational background children tend to leave the parental home quiet early. Thus they are not likely to nurse their parents when they become old.[10] In a working environment the hierarchical system of companies shows the different possibilities of taking power. But on closer inspection the organizations are often highly decentralized which means that power and influence is distributed on various people. Furthermore the lower ranked employees are often involved in the process of finding a decision or finding a solution.[11] Separation of powers is also the most important indicator of the German political system. The executive, legislative and judiciary power should control each other to reduce governmental force. Additionally the right of co determination within democratic election provides less inequality in society.[12]

With a further view on Hofstede’s work, German culture can be characterized as a truly individualistic one, with a score of 67 ranked on place 19.[13] This classification underlines the already pictured relationship in family and working place. The society is affected by the freedom that everyone can express a private opinion and by the pursuit of wealth. Individual interests are predominant in German culture rather than the common good and thus children are taught to think in egoistic terms of “I“.[14] Referring to the economical system that is the reason why the state just provides the necessary regulatory framework and pass former state owned enterprises into private hands. Autonomy and self-actualization are both very important values engraved in people’s minds.[15]

3.2 Analysis of Arabian Culture

According to Hofstede’s results the PDI constitutes over 80 among the Arabian countries.[16] Furthermore individual countries like the United Arab Emirates or Saudia Arabia peak with a score of 90 respectively 95.[17] This data reveals that Arabian people accept command structures in which everybody has a place and which do not require any justification. This hierarchy can be seen in all organizational parts of their lives, e.g. in family, at school, at the workplace or in their governmental system.[18] Respect for and obedience to the elder generation are two important characteristics of family life.[19] This inequality continues in the teacher-student relationship, in which corporal punishment can be used in order to correct wrong or disrespectful behaviour.[20] With regard to “Power Distance” in the workplace, the mental attitudes shown towards parents or teachers are pursued in the way of how to treat the superior authority in a company. Subordinates demand strict instructions in order to be able to work. Qualifications like independent working and thinking are not widely spread within the Arabian working class whereby companies are in need of a large supervisory system.[21] Due to the widely spread self-conception of living in dependence and given structure, inequality is shown traditionally in the political systems of Arabian countries. The system often consists of only one political party or God-given authority. Even after a revolution developed from a growing averseness to an authoritarianism mismanaging their country, Arabian societies tend to fall back into old structures, because the new, powerful people reign in the same dictatorial way like their predecessors.[22]

As another result of Hofstede’s theory the Arabian culture can be defined as rather collectivistic. This is described with a score of 38 on the IDV (Individualism Index) and the 41th place in the global ranking of 76 nation’s total.[23] Beyond this average value, particular countries like Saudi Arabia score much lower with 25, which means that the society is particularly collectivistic.[24] The Arabian culture takes the view that individuals are members of a group and thus everybody should think in collectivistic terms of „we“. So it is not surprising that the living together in Arabian countries is mostly affected by loyalty, which represents one important value of a person’s life. Therefore the breaking of loyalty towards the so-called “in-group“ is one of the worst acts an Arab can do.[25] Regarding the aspect of family life the relatives are living together and resources like groceries or money are shared among each other. Another typical characteristic of this culture can be seen in the avoidance of direct confrontations and the rectified expression of opinion.[26] In consequence of the described perception, the political leadership in those countries has a large influence on the economic system. Companies are mostly not owned by individual investors but by rich sheik families.[27]

3.3 Comparison of German and Arabian Culture

After the analysis of both cultures considering the two dimensions of Hofstede’s theory, the following part will emphasize the main differences in order to work on the initial question of the paper.

In contrast to the Arabian culture scoring quite low on the IDV and which is defined as collectivistic, the German culture is definitely individualistic with a score of 67. Due to the restrained role of the state, Hofstede points out that there is a strong correlation between economical success and “the pursuit of self-interest by individuals“.[28] This statement can be proved by comparing the years 2013 GNI per captiva of Germany and randomly elected Arabian countries. Whereas Germany generates a GNI per captive of 46.100 US dollars, Saudia Arabia produces 24.210 and the Iraq only 6.130 US dollars.[29]

Referring to the PDI, the Arabian people show a greater acceptance of inequalities within their society. They accept the fact that power and decision-making are based on traditional structures and religious backgrounds. Thus everyone occupies its allocated place.[30] By comparing the PDI´s results it can be recognized why the persuasion “Islam” is the basis of Arabian life and plays a key role to the people living in these societies. The word “Islam” derives from the Arabian verb “aslama” meaning “to bow down to something or someone”.[31] Relating to the persuasion the Muslim “bows down” to his god Allah. The Islamic doctrines prescribe a system of norms providing strict behaviors to all areas of live. They represent an ethical ideal and demand the Arab to act and live responsible towards themselves and their fellow human being.[32] This religious relationship fits to the high PDI score and underlines the Arabian need of belonging to a group and of subordinating to someone. Theoretically this religious aspect is the same in Germany regarding the Ten Commandments. But in contrast to Islamic people, Germans do not live devout. With regard to the differences in the banking business, which will be analyzed in the next chapter of the paper, religious faith takes an important role.

4 Differences in the Banking Business

The capitalistic banking system predominating in Germany focuses basically on the financial aspect of business dealings. In contrast Islamic banking brings the social, moral and religious dimensions more in line with the financial aspect. Therefore the principal purpose of financial actions centers equality and social justice in order to extent the common good of the Arabian societies.[33] To understand Islamic Banking it is necessary to deal with the religious fundamentals including the Islamic law “shari´ah“ as well as “profit-and-loss-sharing“ transactions and elementary prohibitions, which built up the framework.[34]

Going deeper into the principles of banking, the interest income is the main reason in the conventional world of finance, why somebody is lending money to others. In contrast the most important Islamic norm is the ban on interest, also known as “riba“ and thus it is forbidden to use money as a product whose purpose is earning money. It should be rather used in its primary function as a medium of exchange or measuring unit. Hence this rule helps people not to become heavily indebted and to avoid unjust enrichment caused by financial assets.

[...]


[1] Vitali Lysenko and Rainer Elschen, “Islamic Banking – Vorbild für ein künftiges Bankensystem?”, in Der Werdegang der Krise: Von der Subprime- zur Systemkrise, edited by Rainer Elschen and Theo Lieven (Wiesbaden: GWV Fachverlage GmbH, 2009), p. 298.

[2] Bundeszentrale für politische Bildung, „Die soziale Situation in Deutschland“, http://www.bpb.de/nachschlagen/zahlen-und-fakten/soziale-situation-in- deutschland/145148/religionszugehoerigkeit, accessed August 2014.

[3] Hans-Georg Ebert and Friedrich Thiessen, Das islamkonforme Finanzgeschäft: Aspekte von Islamic Finance für den deutschen Privatkundenmarkt (Stuttgart: Dt. Sparkassen Verlag GmbH, 2010), p. 11.

[4] Geert Hofstede, http://www.geerthofstede.nl/index, accessed August 2014.

[5] Geert Hofstede, Geert J. Hofstede, and Michael Minkov, Cultures and Organizations: Software of the Mind; Intercultural Cooperations and its Importance for survival (United States of America: Mc Graw-Hill, 2010), p.31.

[6] The Hofstede Centre, “Country Comparison,“ http://geert-hofstede.com/germany.html, accessed August 2014.

[7] Geert Hofstede, Geert J. Hofstede, and Michael Minkov, Cultures and Organizations: Software of the Mind; Intercultural Cooperations and its Importance for survival (United States of America: Mc Graw-Hill, 2010), p.61.

[8] Ibid., p. 92.

[9] Ibid., p. 59, table 3.1.

[10] Geert Hofstede, Geert J. Hofstede, and Michael Minkov, Cultures and Organizations: Software of the Mind; Intercultural Cooperations and its Importance for survival (United States of America: Mc Graw-Hill, 2010), p.68.

[11] Ibid., p. 74.

[12] Ibid., p. 78.

[13] Ibid., p. 95, table 4.1.

[14] Ibid., p.130.

[15] Ibid., p.125.

[16] Ibid., p. 57, table 3.1.

[17] The Hofstede Centre, “Country Comparison,“ http://geert-hofstede.com/saudi-arabia.html, accessed August 2014.

[18] Geert Hofstede, Geert J. Hofstede, and Michael Minkov, Cultures and Organizations: Software of the Mind; Intercultural Cooperations and its Importance for survival (United States of America: Mc Graw-Hill, 2010), p.66.

[19] Ibid., p. 67.

[20] Ibid., p. 70.

[21] Ibid., p. 73.

[22] Ibid., p. 77.

[23] Ibid., p. 96, table 4.1.

[24] The Hofstede Centre, “Country Comparison,“ http://geert-hofstede.com/saudi-arabia.html, accessed August 2014.

[25] Geert Hofstede, Geert J. Hofstede, and Michael Minkov, Cultures and Organizations: Software of the Mind; Intercultural Cooperations and its Importance for survival (United States of America: Mc Graw-Hill, 2010), p.91.

[26] Ibid., p. 107.

[27] Ibid., p. 130.

[28] Ibid., p. 128.

[29] World Development Indicators database, World Bank, 1 July, “GNI per captiva 2013“, http://data.worldbank.org/data-catalog/GNI-per-capita-Atlas-and-PPP-table, accessed in August 2014.

[30] Geert Hofstede, Geert J. Hofstede, and Michael Minkov, Cultures and Organizations: Software of the Mind; Intercultural Cooperations and its Importance for survival (United States of America: Mc Graw-Hill, 2010), p.83.

[31] Eberhard Dülfer , Internationales Management in verschiedenen Kulturbereichen, (Oldenbourg Wirtschaftsverlag GmbH, Munich 2001), p. 337f.

[32] Mustafa Ashrati, Islamic Banking: Wertevorstellungen – Finanzprodukte – Potenziale (Frankfurt am Main: Frankfurt School Verlag GmbH, 2008), p. 6.

[33] Vitali Lysenko and Rainer Elschen, “Islamic Banking – Vorbild für ein künftiges Bankensystem?”, in Der Werdegang der Krise: Von der Subprime- zur Systemkrise, edited by Rainer Elschen and Theo Lieven (Wiesbaden: GWV Fachverlage GmbH, 2009), p. 287.

[34] Dietmar Ernst, Bilgehan Akbiyik, and Ali Srour, Islamic Banking and Islamic Finance (Konstanz und München: UVK Verlagsgesellschaft mbH, 2013), p.19.

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Details

Title
Differences in the Banking Business of German and Arabian Culture
College
University of Applied Sciences Essen
Grade
1,7
Author
Year
2014
Pages
14
Catalog Number
V384958
ISBN (eBook)
9783668598782
ISBN (Book)
9783668598799
File size
564 KB
Language
English
Tags
differences, banking, business, german, arabian, culture
Quote paper
Stephan Hoppe (Author), 2014, Differences in the Banking Business of German and Arabian Culture, Munich, GRIN Verlag, https://www.grin.com/document/384958

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