978-1506362311 Case 16.2

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Northouse, Leadership 8e

SAGE Publications, 2019

Case 16.2: A Special Kind of Financing

Case Synopsis and Analysis

Central Bank is a small savings and loan institution that competes with 16 other institutions

for customers. It recently conducted a financial needs survey of those that live in their area.

The survey revealed that Muslims represented 8% of the population. However, few, if any

Muslims banked at Central Bank. Upon further investigation, the bank learned that principles

of Islamic finance forbid paying or receiving interest. Under Islamic law, money is only a

medium of exchange and should not be used to make more money.

In order to attract Muslim customers, the bank decided to offer two new types of mortgage

financing, which essentially has the bank purchasing the home and leasing it to the customer,

or selling the home to the individual at an agreed-upon markup rate that allowed the

customer to make installment payments. Both of these plans were consistent with Islamic

beliefs, because money was used to buy something tangible but not used to make more

money. The banks new plans grew quite popular in time, but some expressed disapproval

because the plans targeted a specific Muslim population.

This case study allows students to see the impact culture may have on leadership and leads to

interesting discussions about ethnocentrism.

Learning objectives:

• Students should understand the impact of culture on a business and leadership.

• Students should understand the role of ethnocentrism in business contexts.

Answers to questions in the text:

1. Why do you think banks in the United States have been slow to offer financing

expressly for Muslims?

Students may answer this question any number of ways. Banks may have been slow

2. Do you think it is fair to offer one minority group a special banking opportunity?

Students will disagree on this. It could lead to an interesting debate (see Exercise 1

below).

Northouse, Leadership 8e

SAGE Publications, 2019

3. How does ethnocentrism come into play in this case?

Ethnocentrism is the tendency for individuals to place their own group (ethnic, racial,

or cultural) at the center of their observations of others and the world. Banks in the

4. How does in-group collectivism relate to Central Bank’s finance plans?

In-group collectivism refers to the degree to which people express pride, loyalty, and

cohesiveness in their organizations or families. It is concerned with the extent to

5. How do you think the other banks in the community will react to Central Bank?

Northouse, Leadership 8e

SAGE Publications, 2019

Potential teaching approaches:

Below is a way to structure a class based on Culture and Leadership and Case Study 16.2:

• Large-group discussion about students’ experiences across the globe (as a leader,

within a multinational organization, and/or simply traveling abroad).

• Lecture on culture and leadership.

• Read Case 16.2.

• Consider a debate (Exercise 1 below) on the case study.

• Discuss Questions 1–5 in the case study as a class

• Consider doing exercises listed below.

Exercises for this case study:

1) Small-group or large-class debate on the ethics and appropriateness of Central Bank’s

actions: Some students may believe Central Bank’s new offerings were unethical or

2) What did Central Bank do right? What can others learn from them?

Students should assume the role of leader, and create five to seven leadership maxims

or quotes based on this case study. For example:

3) Knowing and understanding customers is a valuable process in the business world.

Take this case study a step further, how can the bank further engage with the Muslim