Time for change in Islamic finance

Reading the article Why are we seeing so many corporate scandals?  
By Prof. Dr. Amit S. Mukherjee  I liked the questions that Prof. Amit raises.
The queries resonated with the planner in me and I found them to be interesting. I say interesting because, whilst the erosion of trust has impacted quite heavily on the financial sector and probably enabled the growth of technology based financial solutions or FinTech, these questions are very valid across all industries including the Islamic finance industry.

Here are the questions Prof. Dr. Amit raises:

  1. Have we rethought how we work in a digital age when work increasingly requires large doses of unseen discretionary effort?
  2. Have we redesigned processes and structures to surface problems before these become crises?
  3. Have we allowed the free flow of key information to distributed decision makers?
  4. Have we created collaborative, learning-focused cultures?

Looking at the environment, in which the Islamic finance industry is operating, currently makes these questions quite critical, from an organizational perspective, with regards to sustainability of the various business models
in operation.

There are three key issues that get highlighted when one runs the above mentioned questions through business continuity thinking.

Starting with talent management & development and its allied areas of
learning & development, given the necessity of managing increasing numbers of Millennials, entering the workforce, along with providing gender diversity and equality coupled with ensuring professional development of the existing employees, the need to develop and incorporate digital and its various usages in work and its processes assume significant importance.

This leads into the second key issue of leadership competency.

On one hand erosion of trust, in financial institutions is at an all-time high, on the other technology in the form of social media has made the world a very small place where real-time personal engagement and word-of-mouth recommendation is given preference over any corporate statement or communication. This has created a need for a different type of leadership competency requirement. The control & command leadership style of yesteryear simply does not work in a world where knowledge and technology are driving the comparative advantage for an organization. There is a serious need for industry leadership to be empathetic and transparent in order to create engagement with society and employees simultaneously in order to develop social capital for the organization, from a business continuity perspective.

Thirdly is the issue of technology and its impact.

FinTech, in its various forms, has already impacted the conventional financial sector greatly by disrupting the historical business models. The driving force behind this technology usage and acceptance is the development of the smart phone technology and the need for the layman to have direct and quick access to finances. Add to this the developments taking place in the Islamic economy industry verticals, such as the increasing demand for innovative financing by the start-ups and entrepreneurial ventures, and you have a potential scenario of the Islamic finance industry losing out on big-time growth opportunities as these opportunities will get fulfilled by new financial start-ups who are agile and able to collaborate faster, as maybe required, with the changes in the regulatory landscape.

Whilst asset growth, increase in Islamic social responsible investment and convergence of ESG and Islamic finance are occurring  we, the individual organizations of the  industry, need to create strong sustainability and continuity plans to protect ourselves from further economic upheavals which are still bound to happen. 

Quoting Dave Ulrich‘Wars are won through organisation and you have victory by being in it together.’

This can only happen when we focus on people—employees, customers and partners—and look at the experience we deliver to them and the social issues we solve in order to create and retain engagement and build social capital in our mission for business sustainability.

 

 

 

Are organizations really focused on learning and developing the talent pool that they have?

For any organization the competitive edge, in today’s business environment, comes down to the culture and the strategy it has. Culture is developed through the employees or talents an organization has and not through its products or services.

In the educational sector one would assume that this aspect of organizational development would be a given based on the premise that the core business of any educational institution is to develop talent that makes a significant impact in business. Yet, is this really taking place?

In the usual for-profit organizations, where profitability is the end objective of all activities, learning is often lost in the daily rush of what needs to get done. Just to clarify learning and training are two different things.  As a result of not having learning in focus organizations end up losing sight of developing its critical asset—people.

Do Islamic finance educational institutions have the same issue?

Having now spent over five years in this sector my opinion is that the Islamic finance educational institutions have the same malaise as their regular educational counterparts as well as their commercial industry counterparts. The malaise is one of continuing to do what has been done and keep hoping the results are different.

The Islamic finance industry now has a fair number of tech based education service providers in addition to the usual brick & mortar institutions. All of which have come about in the last decade and a half due to the growth of this industry. Yet none of these organizations are, as yet, able to showcase the employee learning benefit that is directly co-related to the institutions business. Whilst both education and professional training requirements, in the industry, has grown there still lacks a concise talent development plan based on learning development that comes through the job role. The 2015 report—
The Human Capital Challenge: Shaping the Future—by Simply Sharia
Human Capital
is an eye-opening read on this context.

Is it difficult to have learning-at-work in the educational institutions?

The environment, for educational institutions, has undergone drastic changes in the past six to eight years. Tech adoption has impacted on the behaviour and on the expectations of value in the educational sector. This directly impacts the business models employed by educational institutions and its service offerings that it puts out. On the former probably the existing business models aren’t, anymore, able to deliver to the demands of the environment today. On the latter the Islamic finance industry, as a whole including its ancillary services, of which the education sector is one, has yet to take on board these dynamics.

The net result is that there has been a lack of innovation, in developing and delivering education services that aid the industry in going forward and creating significant developments that in turn become the content input for learning, both at an educational level and in professional development.  This is not to be mistaken with the plethora of technical training programmes available for industry professionals and their educational counterparts. The lack of innovation has created a void in the learning development of professionals in developing innovative idea, services and process that directly have significant societal benefits.

Historically all it has created is employee turnover with the same people moving around within the organizations in the industry in a region. As employees leave one organization and go into another, unfortunately, their skills sets and cultural behaviour remains as it were.  They leave simply due to lack of recognition, adequate reward and self-development. Or they remain and start becoming a drag on the organizations efforts in moving forward.

As employees leave they seek re-employment, within the sector with the same skills and process management and leadership techniques. The recruiting organizations end up filling in their manpower requirement based on archaic functional job requirements and not based on aptitude, attitude and leadership competency which are based on their business strategy. End result is that the employee obtains a slightly higher trades salary and the organization fills in its headcount with the hope that the outputs would be obtained.

Alas in today’s environment is this a sustainable long-term solution?

Have the courage to disrupt the norm

The fear of attempting the new has to be harnessed and the only way to do so is to acknowledge it and collaborate with a win-win end benefit in mind. The commercial organizations of the industry and educational institutions have to combine in order to create a learning environment at both places with the single-minded objective of developing their respective talent pool. Without this they would soon find they are unable to attract quality employee talent.

Perhaps I am being harsh in my assessment.

In my end of the world, as I scan the region for examples of innovative, home-grown, talent focused strategic initiatives that clearly demonstrate a focused business continuity plan in play; I find significant examples in the core STEM sectors. Examples that create strong learning environments for employees and through which innovative initiatives are generated as services for the organizations customers.

But in the Islamic finance education sector there seems to be a bit of vacuum
where such developments are concerned.

Organizations that operate in the higher education and professional development sectors have a significant responsibility in developing and providing a learning environment that clearly aids its employees and customers to provide innovative approaches to their respective businesses.

Without accepting, acknowledging and acting on this responsibility an organization cannot expect to be successful and sustainable in the long run.

 

 

Culture gives the Competitive Edge

By: Shatha Al Maskiry and Joy Abdullah 
visual courtesy @carlarieger
visual courtesy @carlarieger

Culture– that all elusive and hard to describe organizational element that fuels how an organization performs– has had a lot written about itself. Yet there is no one-size-fits-all formula that can be applied, across board, for leaders to have the right cultural climate that results in increasing profitability for the organization.

Change in work culture has become a buzz word for many organizations in the Middle East today.  However the organizations are still challenged to effect change failing to appreciate that a written statement with a handful of glamorous values plastered on walls will not do the trick.

The major shortcoming is that change is greatly undermined in terms of the effort, time and investment required. Change is an organizational wide transformation and we have seen it fail because it is not mandated by leadership nor is it communicated through practice in a consistent manner. Diffusing change requires partnership with the workforce and the organizational values must be closely aligned with the strategy and growth plans. If leadership does not lead cultural change, then the mass would; and in most occasions, they would disintegrate it into a collection of varied sub-cultures that are misaligned. This results in a culture of crumbs.

The reasons why change initiatives, in the Middle East, have often failed is because middle management impede it, and fail to see why they must invest a significant amount of their time as change champions.  They fail to see the necessity of leveraging their interpersonal skills and eloquently communicate what is in it for the employees  in order to create a inspiring engine to make the employees the agents of change; as no real change can be realized without involving all stakeholders.

For industries and their organizations across Middle-East and ASEAN region, business is a colonial legacy brought about through the presence of the multi-national organizations. Independent businesses spawned by employees of these corporates operate with similar cultures as the owners were used to during their employment days.  The result of which is having businesses operating with yesterday’s tools and expecting a different result.  

Aren’t we expecting a bit too much?

The colonial legacy, of Middle-East and the ASEAN regions, passed on what is primarily a very individualistic cultural business style.

Whereas the social culture, of both regions, are more community oriented with rigid hierarchy based on age. In the Middle East, it is also based on a diverse spectrum of factors because of imported talent of various nationalities from various fields and cultures.  

Into this enters behavioural changes which people have had due to the global financial crisis of 2008 and rising adoption of technology. Social media, for one, has made the world a much smaller place and has led to the rise of self-interest based communities. Word-of-mouth referral has become a norm for success and failure of a business.  Yet across businesses in these two regions we are yet to see a concerted focus on culture and its resultant impact on business strategy.

Asia today is the economic growth center for the world.  Along with the twin economic tigers—China & India— the Islamic economy, centered out of Middle-East with its hub in Dubai, is adding to the economic growth and impacting across industries.

The Middle East economies have also put a concerted effort in attempting to diversify away from petro dollars. This is a major challenge that cannot be overcome unless there is emphasis and focus on a new type work culture.

A culture that is highly transformational in nature with a set of values that engages and builds bridges for and with the employees in order to mould a
mind-set that is agile enough to serve the current challenges of the new economy with a special focus on productivity and innovation.

This impact is felt by thousands of businesses, corporate and SMEs involved in generating this economic growth and, in turn, by the consumers in these regions. All of this has a direct impact on the culture that employee, entrepreneurs, leaders and their businesses display today.

Globally we are seeing how established industries are being disrupted by new businesses based on the culture they identify and put in place. The one common denominator for success across these organizations is the culture that they create to drive sustainability of their operations.

 Can we achieve new results with old methods?

With 4 generations—Baby Boomers, Gen X & Y and Millennials all in the workforce now– and each generation having very distinct behaviours, developed through socio-cultural and  educational conditioning, can we expect an organization to have engaged employees who are all on the same page with regards to organizational goals and its linkage to them individually?

There are several cultural gaps in Middle East and ASEAN organizations; hierarchy still exists, lack of flat communication, leadership always runs short of time or spend too much time fire-fighting, and there is a general theme where lack of trust and confidence in each other has become the norm until proven otherwise.

Although diversity is part of what compliments a cultural change, it has been a challenge at several organizations where diverse interpretations of events affect everyone very differently.

We need to look at new scenarios, perhaps disruptive ones, and benefits of the same to each generation, to create a culture that allows for a common purpose to be shared across these generations of people in the workplace. It all boils down to giving the people the value they deserve in developing the business.

How can we create new scenarios that actually work in creating an impactful culture?

  1. Respect: Senior leadership behaviour, in organizations, should communicate equal respect for male and female colleagues.
  2. Voice: Move away from the ‘master & slave’ attitude towards a more open ‘partnering’ attitude which provides an environment for employees to voice thoughts and ideas.
  3. Conversations: Create more opportunities for face-to-face in person, or through technology, interactions or conversations where issues successes and failures are openly discussed for its learnings and not to point blame. The more an organization talks, informally on work, the more engaged the employees get. This creates accountability as people want to do their work so that it helps their colleague.
  4. Trust: Create trust through the conversations, by bringing diverse people and skill-sets together on key business projects, and taking their point of view and making them accountable in delivering the agreed goals for the business.
  5. Passion: Recognise the ones with passion for the business and praise them for their initiatives and drive.
  6. Creating Culture: Culture is created either consciously or unconsciously. It exists. We know of it and actually do something to make that culture behave in a manner that is beneficial to the business or not is what defines success today. One may question and ask—how do I create culture as I am not in a position of authority to do so — the answer is that you can create culture in your unit, department, and work section if you consciously decide to do so.

The collective experience and behaviors of the employee is what sums up the organizational culture.

Culture is just like personality and leadership must create the goals, strategies, experiences, interactions, and rewards from the values it preaches in a consistent manner as every experience is a piece of the bigger puzzle. History forms pieces of the puzzle just like language, events, stories and work practices also shape the desired culture. Impactful change is about giving and taking and it can be achieved through formal strategy, systems, and measures with ownership.

Culture change requires changing behaviors and breaking old habits and this is realized through collaboration, training and coaching. In order to continuously reinforce a strong and successful culture change it has to be modeled, taught, repeated, recognized, and rewarded. The end result should be shared values and productive behaviors to create a healthy and harmonious environment.

 

 


About the co-author: Shatha Al Maskiry is a country managing director of Protiviti in Oman. She has 18 years of experience spanning across various consulting roles from process re-engineering, talent risk management, and digital transformation. She is also a certified coach and active in social services especially in coaching youth and students.

 

Is the Islamic finance education sector in a stall?

Visual Courtesy: www.petricklaw.com
Visual Courtesy: http://www.petricklaw.com

The Islamic finance conference circuit has finally woken up to realise that organizational growth comes about through a focus on Human Capital and Talent Development. Better late than never. Yet one wonders if it is a bit too late in coming.

Courtsey @SimplyShariaHC @HuttonIF
Courtsey @SimplyShariaHC @HuttonIF
Courtesy: @SimplyShariaHC @HuttonIF @nafisalam
Courtesy: @SimplyShariaHC @HuttonIF @nafisalam

The Islamic finance education sector is highly fragmented. On one hand there is a plethora of established universities globally offering academic qualifications. On the other, there are a multitude of commercial education service providers delivering various professional qualifications. Global recognition of these qualifications is an output of how best an institution can show compliance of individual standards as required by countries. Increasing programme fees, cost of living, increasing preference of digital or e-learning and uncertain economic conditions are impacting quite heavily on the usual business model employed by the education service providers.

On the other side the industry has been acutely focused in the technical aspects of growing itself and trying to position itself as an alternative financial framework. Regulatory and product developments have primarily been the key areas of focus over the past decade. Other key areas of research, soft skills and talent development have not been on their radar.

The impact of this, on the education sector, is a massive one.  

Industry prefers to bring on board talent that has work experience and globally recognized qualifications. This has resulted in academic programmes and its co-related research being classified as theoretical and not providing the necessary skill-sets that the industry requires.

Couple this with the behavioural changes that has occurred, due to technological adoption and usage and economic conditions, and one finds the overall Islamic finance industry a bit out of touch with reality. Costs have brought about a demand for shorter and shorter programmes. The tech world has seen a huge rise in this area. One example is the nanodegree. Support from the Islamic finance industry in recruiting required talent on campus, by virtue of having a clear talent need and development plan that’s based on business strategy, has been sporadic and is based on regional relationships between academic institutions and industry organizations. Development of academic programmes based on data and cases from the industry are far and few. These are available as short-courses or executive programmes few of which have clear CPD (Continuous Professional Development) points and benefits linked to it.

Simultaneously the education sector is seeing significant changes with regards to programme content, delivery and accessibility. Globally ranked academic institutions have taken their general product offering to where the market is and have created business models that provide operational viability. The Islamic finance education sector, on the other hand like its industry counterpart, seems to look at hegemony as key. Staying rooted to theoretical education content across regions.

In a world where collaborative economy and disruption are now constants, such hegemony type of approach is akin to shooting down a dinosaur with a pea gun!

 Where is the Islamic finance education today?

Looking at all the talk, in public domain and the chatter in the conference circuit, one would have to surmise that the sector is, indeed, in a stall. Whilst a lot of great advice is being offered, everyone everywhere, across is the industry is waiting for some else to pick up the leadership and the associated risks. The impact is dropping rates of academic and private programme applications and lack of jobs for qualified graduates along with dearth of innovation and creativity in the industry.

Going forward the Islamic finance industry has to decide if it wants to play in the global stage or otherwise. If it’s the latter, it is a must that the industry invest in the education sector in order to develop knowledge, skills, innovation and talent as it will require in the coming decade.

 

 

 

 

 

Does Islamic finance have an economic and societal value?

Visual Courtesy: www.quotes.lifehack.org
Visual Courtesy: http://www.quotes.lifehack.org

As the world reels from a continuous series of financial, economic, humanitarian and natural crisis’s, the world of Islamic finance is growing. In the past decade the various projected global industry growth figures show this industry sector to be going up, up and away. Yet if one were to co-relate this growth with social development a direct correlation is, as yet, hard to find.

Is there an anomaly?

Within the global Islamic finance industry the strain of growth is starting to tell on the business models in use as issues of talent, technology and socially responsible investments are now the topics of discussion in industry conferences. Couple this with the developments occurring in the mainstream finance industry where areas like social responsible investment, alternative currency  and crowdfunding are drawing the organizations to view the disruptions taking place and review their business strategies and models.

On ground, technology has empowered people to be able to seek intellectual, financial and managerial collaborations, generating entrepreneurship and a mushrooming of small businesses. The financial industry, as a whole, is looking at the way investment is changing and the way finance is being run.

Against such a backdrop Islamic finance is beginning to look isolated and bereft of a clearly defined economic and societal value.

Decades ago as Islamic finance came in, as an alternative financial system, organizations took the system for use within the regulatory environment that existed. Regulations changed over time to accommodate market sentiments and with those changes organizations seemed to focus on compliance and not on the purpose of their business.

Therein is the anomaly!

The global industry undertook Islamic finance activities based on their then business models and processes. Models that focused on shareholder return of dollar value as primary objective not social or community development and, thus, it was business-as-usual.

Is there light at the end of the tunnel?

The many financial, environmental, economic and sociopolitical crises, coupled with the advancement and adoption of technology, over the past 20 odd years has brought about seismic shifts in the common man’s buying behaviour. Trust in organizations has eroded given the many scandals. A clearly recorded increase on the dependency of word-of-mouth reference, with regards to engaging with organizations, has come about. Resulting in organizations needing to have specific competencies that simply weren’t in existence 20 years ago. Social media usage has resulted in organizations having to depict simply and authentically their business purpose.

Institutional business has come to the realization that it’s people who make the deals. People who want to work with credible, honest and trustworthy counterparts. Trust has come a full circle and is now at a premium. At the same time, Boards are driving organizations to be more socially responsible and to ensure that the eco-system where a concerned business operates benefits from the services of the organization.

This provides an ideal setting for Islamic finance which, inherently, has economic and societal benefit in-built in its ethical use. Let me clarify through an example—a conventional bank would evaluate various parameters when opening a new branch, in a remote area, including cost-recovery and present a cost-benefit analysis to its board when recommending opening a new branch. The decision would be based on the return its investment would earn and the period in which it would occur. Currently an Islamic bank or financial institution would be doing the same.

But therein is the opportunity!

For an Islamic financial institution the purpose of business is not profit but providing, ethical, financial service to the community. Profit is a secondary objective coming after the benefit to the community has been established. Thus an Islamic finance institution opening a new branch in a remote area should be driven by the societal responsibility of providing services in an area where no such service is available. This involves disrupting the current business models and thinking fresh on the purpose of an Islamic financial institutions business and developing strategy from it to generate required financial gains.

Such gains will encompass developing the eco-system in which the business operates bringing about economic and societal benefit that would not only benefit Muslims but the society at large and enable Islamic finance to show a tangible and distinctive value-benefit.

 

I’d be delighted to learn of your views on the opportunity that the global Islamic finance industry has and how organizations could capitalize on the same. Please feel free to share your observations.

 

 

Winds of change blowing on Islamic finance

A distinct trend emerging in the global Islamic finance industry is the rising number of professionals opting out of the corporate rat-race and entering entrepreneurship. 

The question is why?
  • Does this have a correlation with lack of talent development in the industry?
  • Or with the lack of Islamic finance being used by other industries?
  • Or a lack of professional standards where technical competencies are concerned?
  • Or a lack of vision within the industry?
  • Or the lack of convergence between Islamic finance & the Halal industry?
  • Or simply the lack of tangible progress?

Food for thought for  later as the global Islamic finance industry is, indeed, getting affected by all these issues and needs to address them quickly.

From the professional perspective, to get an insight into what’s driving professionals in the industry to trade-in a secure pay-check for the uncertainty and flux of entrepreneurship, I met up with Mr. Shakeeb Saqlain— CEO of IslamicBanker.com .

Here’s the interview published in Business & Finance April 2015 issue: