Islamic finance is part of the Islamic economy. The state of the global Islamic economy report details each of these sectors, the correlation within the sectors and highlights the increasing need for the current silo approach, between the sectors, to be eradicated. The report highlights the challenges that face the growth and development of the Islamic economy primary among which is consumer education.
The Islamic financial services industry is now a $1.6 billion global industry and is stated to be a $2 trillion industry by end 2014. Yet less than a fifth of global Muslims use Islamic financial products!
Quoting from the global Islamic finance report (by PWC)—“ Islamic banking itself has emerged as a practice catering for the middle and upper middle classes of the societies it operates in. Large consulting firms are advising such banks to increase their market share by effectively competing with their conventional counterparts by exploring how to tap the segments of society being underserved or completely ignored. This is not on the priority list of Islamic banks and financial institutions. Hence, while there is a lot being spent on marketing and advertisement, there is no Islamic bank in the whole world with any significant budget for research and development.”
At ground level there is the issue of understanding among mass. This has led to differing awareness and perception of Islamic finance. A probable reason for this could be the lack of a clearly articulated value proposition of Islamic finance that could aid in the understanding of the benefit Islamic finance has, to the man on the street.
The key lies in the industry willing to be “people centric”. At the end of the day, in any industry, the consumer is the reason one is in business. It’s 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.
So can Islamic finance be people centric?
This may seem easier said than done. But it’s not impossible.
How do we bring this about?
General Mass Awareness!
Improving mass awareness is critical in ensuring that the Islamic finance industry grows through acceptance of is value proposition.
Mass consumers would drive growth for the industry through acceptance of the retail products. But now, the retail market has its own set of complexities. Depending on the geographical market, awareness and comprehension, of Islamic Finance varies from negligible to aware but not convinced and coupled with that comes specific biases based on sociocultural conditioning. There is, unfortunately, not a one-size fit-all strategy for educating the mass. In each end market one will have to adapt according to the needs of the consumer.
However, at an industry and organisational level, it is possible to undertake a financial literacy education campaign, that targets primary school children and upwards. A campaign that focuses on the salient points of investment, savings, individual financial management from the perspective of Islamic finance and, most importantly, the value proposition of Islamic finance.
The content (of this campaign) would be the key in ensuring increasing awareness and comprehension and would need to ensure it:
- demystifies Islamic finance and clearly puts forth a rational value benefit
- highlights what is the benefit of key retail products
- simplifies the investment products and communicates transparently on how the ‘back-end’ works
In terms of delivery of the campaign a multi-media approach, with emphasis on social media use, would be necessary in order to allow the mass to interact with selected industry practitioners and enable:
- feedback–which would help measure improvements of the educational campaign–
- let the practitioners to know the ‘pulse’ of the mass i.e. what are their financial needs
The benefits for the industry in doing this:
- Strategically such a campaign will position the organisations supporting and leading it as the “go-to” source for the consumer. Thus creating a pool of potential customers.
- It would enable the Islamic financial institutions to identify what the consumers want in terms of investment and retail products and thus ensure product portfolio profitability.
We need to have the commitment to do this.
Where does this commitment come from?
The industry bodies & organisations need to put a stake in the ground where their long-term development is concerned. Organisations need to evaluate their long-term strategic direction and identify key areas that each could champion.
Based on the identified key areas specific performance collaborations, between the industry organisations and academia, need to be put in place to ensure performance.
The question that needs to be answered at this stage is—‘To be people centric or not to be?
Will this provide it a sustainable growth?
Would global organisations want Islamic financing?
Should the industry develop a strong retail base in order to ensure this sustainability?
Question that require some hard thinking now in order for effective growth to be sustainable for people & organisations.
Education of the masses will assist in this growth and ensure preference for Islamic financial products.