Extra Time

This article appeared in the Opalesque Islamic Finance Intelligence March 2011 issue.

Industry Snapshot: E.P.L. in Islamic Finance – Education (Extra Time)

Post the global financial crisis, the business world has been transformed drastically in more ways than one. Industries have had to, quite literally, pull up the hand-break, come to a screeching halt and turn on a dime, in terms of adapting to the changing socio-economic scenario.  Irrespective of whether the businesses are in B2B (business to business) or B2C (business to consumer) functions, many of the golden rules have had to be cast aside and new game rules learnt in order to simply ensure survival.

The Islamic Finance industry is not impervious to these changes.  In fact the industry is at a crossroad: Does it carry on as it has (and probably) fades away in time, gets relegated to a ‘regional financial management facility’, or does it absorb the changes around it and re-aligns to the realities and grow?

The editorial article of OIFI’s January issue -Islamic Finance Incommunicado- (see reference link) aptly summed up the current state of affairs in Islamic Finance by saying “It seems that Islamic finance is getting a makeover”.  There definitely exists an issue of awareness and perception of ‘Islamic Finance’ both from within the industry and at the outskirts at the consumer/retail level.  This is substantiated by this short news item entitled “Islamic Finance still faces challenges” (see reference link) where Professor Volker Nienhaus, an academic under the Securities Commission-Universiti Malaya Visiting Scholar Programme says the following:

  • “more people were looking at Islamic finance because it was more resilient and efficiency.”
  • “But the Islamic finance practiced now is not much different from the conventional system,”
  • “A lack of participatory finance, like low retail penetration, is another stumbling block,”

This boils down to a lack of “education” (i.e. awareness and comprehension) of what exactly is the value proposition of Islamic Finance.  In order to survive the industry has to adapt and grow. To do this, it needs to re-focus itself on to what the consumer wants.  The key lies in the industry being willing to be “consumer-centric”. At the end of the day, in any industry, the consumer is the reason one is in business (see reference link) and it is critical to identify a strong ‘value proposition’ that connects with the consumers at different levels. Without a well-articulated and robust value proposition there is no strategic platform for a commercial enterprise to have sustainable growth. Without growth there is no future.  In this scenario, it’s important to note that the consumer in this case is the individual decision maker for an organisation (B2B) who also is interested in his personal financial management (B2C).

Read the full article here

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