Islamic Finance Evolution
By Joy Abdullah
P
ost the global financial cri-
sis and the resultant reces-
From anti-social to pro retail sion, marketers across the
globe are unanimous in ac-
Social Media as a growth knowledging that the consumers
have had significant changes in the
driver in Retail Islamic
way they are interacting with brands
and organisations. One of the key
factors for this change is the rise of
Finance social media usage and the group
exchange taking place through on-
line and interest based communities,
What do consumer marketing and retail Islamic Finance have in common? which has blurred the geographical
Well, for starters, retail Islamic finance can take a leaf (or rather the entire borders of communication.
book!) out of consumer marketing and utilise that available body of knowl-
edge to develop business strategies that are consumer centric in order So how does social media, with its’
multitude of interest-based commu-
to achieve organic growth. Or more specifically, utilise social media as a
nities, drive growth for the retail Is-
means of engaging with the consumer and achieving growth. lamic finance category?
Let’s start at
the very beginning.
The Islamic finance industry has,
so far, neglected retail banking de-
spite the fact that retail banking can
provide it with a funding base more
stable than the current, main whole-
sale and investment business. Ana-
lysts say a number of retail custom-
ers would switch from convention-
al banks to Islamic banks for pure-
ly religious reasons but customers
would move if it was understood
that Islamic retail financial products
provided better earnings. “Unfortu-
nately most Islamic retail banks do
not appeal to this big segment in
the market place,” Sameer Abdi told
the Reuters Islamic Banking and Fi-
nance Summit in Bahrain.
Islamic Finance, post the glob-
al financial crisis, has continued
its’ steady ascendance across the
globe. But each end market (coun-
try) presents differing positions in
terms of market maturity. This is
coupled with issues on standardis-
ation, regulations and products that
appear to be a “me-too” of the con-
ventional retail products. The net re-
sult is this: a retail consumer mar-
ket that is bewildered and perplexed
50 www.islamica-me.com
Business islamica Magazine
and without a full understanding of
what is the benefit of a particular Is-
lamic finance based retail product
and not finding any easy means of
obtaining this information!
In this bewilderment, one common
element that clearly comes through
is the scant knowledge and research
in the sector that has been impeding
its expansion.
Senior industry leaders have been
crying out for increased levels of ed-
ucation, awareness and change of
perception. Daud Vicary Abdullah,
Global Leader of Islamic Finance at
Deloitte said, “ I would like to press
on with my theme of E.P.L. – Edu-
cation, Perception and Liquidity –
as I sense that most things that are
happening in the world of Islamic Fi-
nance revolve around these three
important key-note themes.” “It
is evident that Islamic Finance In-
stitutions (IFIs), largely driven by
commercial goals, have not done
enough to converse the fundamen-
tal nature of educating and com-
municating Islamic Finance’s social
and economic value propositions.
Moinuddin Malim, CEO of Dubai -based
Islamic banking entity Mashreq-Al-
Islami, for his part said, “The only
factor that is causing a hindrance
towards the growth is lack of aware-
ness. Islamic banking is in its infan-
cy stage being just 35 to 40 years
old. There’s a lack of awareness
about it, so more time and money
need to be spent on research and
development. The growth that has
been seen so far has been due to
demand, but there are areas which
need to be strengthened, especially
the expansion of a product and ser-
vice base for all segments, to com-
pete effectively with the existing fi-
nancial systems.”
Given this clamour for education,
awareness and a change in percep-
tion, let’s take a quick look at why
retail Islamic Finance is essential
www.islamica-me.com 51
Islamic Finance Evolution
and how retail actually makes log-
ical and profitable business sense:
1. Organic Growth:
As a profit making business enti-
ty (and every Islamic retail banking
entity is a profit making enterprise),
generating organic growth is a key
strategic area to focus upon. How
do we achieve organic growth?
Best practices from consumer mar-
keting show this can be done:
• by offering a number of products
that are needed and useful to the
consumers AND
• that facilitate their lifestyles AS
WELL AS
• by cross-selling the products
Customers have evolved in their
need for financial services and in
the current, post recessionary eco-
nomic scenario, they are looking
for financial products and services
which are inexpensive and yet pro-
vide them with a higher return on
their investments. The key here is to
remember:
• An existing retail customer is some-
one who is already favourable and pre-
disposed towards the retail brand AND
52 www.islamica-me.com
• It’s less expensive to increase us-
age from an existing customer than
it is to acquire, educate and create
usage from a new one.
Thus, by interacting with the exist-
ing customers, and listening to them
to understand their needs, the exist-
ing products can be cross-sold (at
a lower cost) and additional prod-
ucts that have a captive market can
be introduced. Cross-selling is a fre-
quently and commonly used tech-
nique in consumer marketing in or-
der to maximise the brand’s share of
consumers’ wallet and to keep brand
loyalty while ensuring growth in mar-
ket share and revenue contribution.
The opportunity in retail Islamic fi-
nance is to improve service stan-
dards and deliverables in terms of
communicating the ‘value proposi-
tion’ of the brand better while simulta-
neously reducing all operating costs.
But current consumer offers (in re-
tail Islamic banking) have often just
been a clone of what the convention-
al banks offer i.e. with limited training
on how to “fit” a product based on the
potential consumers’ need.
2. Consumer Segmentation
It’s critical to take into account that
consumers (Muslims and non-Mus-
lims) are individual people with spe-
cific, individual needs and lifestyles.
These needs change as the con-
sumer proceeds through his/her
various milestones in life (first job,
getting married, having the first kid,
buying a house, etc.) At each of
these milestones in the consumers’
life they have a pressing need for
banking products and services that
‘benefit’ them and are not a general
“one-size-fits-all” types.
Consumer marketing dives deep
into consumer segmentation in or-
der to target specific groups to ful-
fil a need that they have and create
a competitive advantage as well as
establish a brand differentiator. Re-
tail Islamic finance has yet to make
effective use of such in-depth con-
sumer segmentation (which can be
based on various socio-economic
and cultural parameters) and anal-
ysis on product sales and consum-
er buying behavior. In practice, re-
tail Islamic finance broadly has two
segments:
a) Premium services for the HNW
(High Net Worth individual) and
b) The rest of the target consumer
population.
By researching and segmenting the
consumer groups strategically (i.e.
marketing objective to be in sync
with the business objective and thus
identify the types of consumers that
would be most profitable and sus-
tainable) and analysing the con-
sumers’ lifestyle (to identify poten-
tial product requirements), behavior
and preferences (of types of bank-
ing services), the retail marketing
team can identify potential product
requirements and forecast consum-
er profitability (for the organization).
This kind and amount of in-depth
analysis would clearly bring forth an
“opportunity cost evaluation” i.e. the
analysis will aid the retail marketing
team to clearly quantify and identify
which types of products or services
not to pursue. This aids in conserv-
ing resources which can be chan-
nelled back into other consumer en-
gagement activities in order to in-
crease the individual consumer prof-
itability.
3. Portfolio expansion
An additional advantage, of doing in-
depth consumer segmentation and
mapping their lifestyles and key mile-
stones in life, would be the ability to
foresee potential products that would
have a ready market. This would aid
in bringing about products that would
be viewed as innovative and paral-
lel to existing conventional products,
thus creating a product differentiator.
Simultaneously, the lifestyle analysis
of a consumer would enable the re-
tail marketing team to look at provid-
ing solutions through a suite of prod-
ucts taken together by the consumer
i.e. “package two or more products
and cross-sell” at a single charge to
the consumer. Such service inno-
vations would help tremendously in
expanding the retail product portfo-
lio while providing profitability.
The key to all this are the consum-
ers. Today, many consumers are us-
ing social media through which their
purchasing and brand relationship
behaviour are influenced.
Today social media acts as the glue
holding like-minded individuals and in-
terests together across the globe. It’s
this individual interest area that can
be used to spread effective under-
standing of what is Islamic Finance.
Social media can be a mixed bag
of tricks. Utilising it, effectively, re-
quires having strong consumer in-
sights, based on the multi-cultural
aspects of the online communities
that are the foundation for an effi-
cient social media strategy.
Given the current debates on stan-
dards, retail product acceptance
across all borders, the need to focus
on liquidity management, and etc.,
the issue is can social media be an
effective way to spread the ideas/
logic of Islamic Finance to widen
the industry’s appeal and generate
mass acceptance?
To achieve this,
some steps are required:
1. Identify what are the key interests
of the primary target group—the
youth as they provide the opportu-
nity to develop long term customers.
2. Identify certain common, inter-
ests, such as online games. Take for
instance Sudoku which is not exact-
ly a social game but a logic-based
puzzle. Sudoku has an enormous
online following and has spread like
wildfire in countries such as Japan
and the UK.
3. Identify industry trends that youth
could follow or latch on to such Ap-
ple products, some of which have
become fashion statements in
terms of trendiness and that, in turn,
spawns tremendous word of mouth
online brand through discussion fo-
rums and blogs.
So how can Social
Media benefit Retail
Islamic Finance?
1. Stock-trading games: A Shari’ah-
compliant stock-picking competition
that can ignite interest at the col-
lege/university level – once again
a key target –ensuring the applica-
tion contains Islamic finance com-
ponents (i.e. cash is held/routed
through no-interest accounts, no
comingling of funds, etc.).
2. Trends: Highlight how Islamic
banking is growing and occurring in
different parts of the world. Put out
information on specific (and prob-
ably common) products such as
housing loans, educational loans—
how the contracts are structured;
why is there Takaful built-in into the
product; highlight the benefit of the
product vis-à-vis conventional prod-
ucts, and more.
Such applications
would fulfil two
critical requirements:
A. Initially, they will build greater in-
terest in the Islamic Finance indus-
try from amongst the College/Uni-
versity students. This brings in a tal-
ent pool considering a career and
Business islamica Magazine
enable the industry to have good,
forward thinking, solution-oriented
customers for whom to deliver prod-
ucts based on consumer needs.
B. Thereafter, the games and sim-
ulations will allow for non-industry
based consumers to also look at the
industry and its overall message.
Through such planned activity, re-
tail Islamic Finance products would
start being evaluated on their ratio-
nal (product oriented) benefits and
thereby appeal to the non-Muslim
community and be a part of main-
stream finance. Introducing such
options would enable the industry
to communicate with the youth in
their own language and interest ar-
eas thus drawing them to view (the
information), participate (by playing
the games or commenting on the
trends for e.g.) and start to have a
better understanding of what the Is-
lamic Finance industry is all about.
Such consumer fulfilment would
lead to engagement between the in-
dustry and end users. This engage-
ment would lead to, most important-
ly, a better knowledge of Islamic Fi-
nance leading to a demand genera-
tion which in turn would lead to the
development of products that the
market needs and thus provide a
sustainable and profitable business
operation for the IFI.
A strategic brand marketing profession-
al with expertise in business and brand
planning, Joy’s competency is in creat-
ing synergies in the business plan objec-
tives and assisting the brand to deliver
growth and profitability. Such synthesis
of strategic planning enables Joy to aid
brands in having a strong engagement
with brand stakeholders. He has writ-
ten many articles on the importance of
ethical brand marketing encompassing
brand reputation management, brand
risk, employee-brand relationship and
CSR. Articles, by the author, on Islamic
Business can be viewed at http://rewir-
ingbusiness.com/rewb-islamic-busi-
ness-centre/rb-islamic-business-blog/.
Joy Abdullah is a Senior Consultant at
Daily Baraka Ltd and can be reached at
joyabdullah@gmail.com.
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