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
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?
or 4) they may be risk averse.
Students may have others ideas as well, which can be discussed as a class.
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: Theory and Practice, Seventh Edition: Instructor Resource
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 United States have
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
5. How do you think the other banks in the community will react to Central Bank?
Students may disagree on this. However, if the plans are profitable, one would suspect that other
banks will adopt similar finance plans.
Potential teaching approaches:
Below is a way to structure a class based on skill theory and case study 16.2:
Northouse, Leadership: Theory and Practice, Seventh Edition: Instructor Resource
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: