In my day job I’m getting more opportunities to see the acute need of a robust financial system, not just by emerging economies, but also by what used to be the developed (or first world) countries.
Industry after industry has had to tackle the massive socio-economic change that the financial crisis brought about amongst consumers. Massive lay-offs and unemployment brought about a huge squeeze on the individual consumer’s wallet resulting in significant changes in buying decisions. 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 possibly, stay embroiled in a constant state of ‘talking’ but ‘no action’) and get relegated to a ‘regional financial management facility’, or does it absorb the changes around it and adapt itself to the socio-economic realties and grow?
At a public lecture forum–Global Calls for Economic Justice: the potential of Islamic finance— Prof. Dr. Volker Nienhaus explained the socio economic benefit and the potential of Islamic finance to be a mainstream financial system.
However, at ground level, there exists an issue of awareness and perception of ‘Islamic Finance’ both from within the industry and at the consumer level.
One of the reasons for this is, probably, the lack of a clearly articulated value proposition of Islamic finance which would aid the awareness and perception of Islamic finance to the man on the street. This boils down to a lack of “education” (i.e. awareness and comprehension).
The industry has to adapt in order to 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” and in identifying clearly what the consumer needs. At the end of the day, in any industry, the consumer is the reason one is in business 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.
Can Islamic Finance be consumer centric?
Perhaps this may seem easier said than done. But it’s not impossible. The key ingredient, in order to achieve this turnaround is commitment. Commitment in understanding the global socio-economic trends and in providing necessary education to people in order for them to have a clear understanding and thus, the correct, perception of Islamic Finance.
Where do we get this commitment from?
The organisations (commercial, regulatory and standards bodies) that makes up the Islamic finance industry needs to put a stake in the ground where industry development is concerned. At the various levels of the industry, these organisations need to evaluate their long term strategic direction and identify key areas that each can champion.Based on the key areas the organisations should then identifyspecific collaborations (that are delivery and performance oriented) with leading academic institutions. This would:
- Increase the competency and knowledge of industry practitioners through sharing of the developments across juridistictions.
- Bring in industry practitioners to teach students thus ensuring a talent pool that ready to hit the ground running and contribute to the organisations.
- Sponsor commercial research (for the academia) with the objective of improving products, processes & regulations.
How do we bring this about?
Watch this space for the upcoming post on how do we bring this about.
- How Blue Ocean Strategy can help the Islamic Finance Industry (benefitpoint.wordpress.com)
- GROWTH: Islamic Finance Unbound (project-syndicate.org)
- Opinion:Is Islamic Finance a failure? (noorislamicbank.wordpress.com)