Business islamica magazineISlamIC manaGEmEnT

sharI’ah-Based IslamIC fInanCe: from CopyCaTs To researCh-Based

For businesses today, having a competitive advantage is critical, in terms of business operations. More and more

brands have moved into having a ‘service- based’ advantage in order to differentiate the ‘brand offer’. To do this across many categories, this is at times tough to put in place. Tough, as it’s hard to identify or pin down the significant service offering or delivery which is unique to that brand itself and is sustainable enough for it not to be copied. Studying a few categories that the Ummah uses on a daily basis, one industry that emerges with a strong opportunity for developing a truly sustainable competitive advantage is the Islamic Finance Industry (IFI). From what I’ve been able to study in the retail industry, it seems that the operating principles have, primarily, been to re-package conventional financial products and make them ‘Shari’ah compliant’. There could be many reasons for this, but that’s not the purpose of this post. Across Islamic countries, the products IFIs offer also do not have much variation and all are tied up in a labyrinth of Shari’ah compliance, conformity, and confounding jargon.

But with a growing global Ummah which has strong disposable income and a penchant for utilizing their liquidity for ‘value for money’ products across markets, this simplicity and, leading from it, a clear brand identity in Islamic finance product development and

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one industry that emerges with a strong

opportunity for developing a truly sustainable competi-tive advantage is the Islamic finance Industry (IfI).

By Joy Abdullah

retooling islamic retail banking

The Islamic Finance Industry (IFI) has been developing their products and services by mimicking conventional finance and dressing them with a Shari’ah garb. The IFI that will meet the consumer and investor expectations is one based on behavioral and market studies. That essential part of conventional finance has so far evaded Shari’ah scholars.

Business islamica magazineISlamIC manaGEmEnT

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marketing seems to be sorely lacking, when it could actually provide the industry (as a whole) huge growth possibilities. Again, this could be due to the fact that finance (as an industry) was primarily a B2B (business to business) function and from the realm of this sector emerged Islamic Finance as an alternative channel of finance and ultimately did not actually develop as a retail product for clients of the conventional financial institutions, i.e. non-Muslim world.

However, now, with the convergence of Islamic finance into mainstream finance, the renewed interest in Islamic finance globally, and the resurgence of the Ummah, these factors appear to present both the Islamic finance Institutions as well as the corporations (in this sector) a unique scenario of developing a strong competitive advantage.But in order to develop this advantage a re-evaluation of merely the product make- up or marketing communications would not do. In order to create and deliver such a competitive advantage, the entire operational process of the business would need to be reviewed. This review is necessary so as to ensure that the end result in terms of the product and brand delivery match up to what the market needs, wants and can bear.

This becomes the starting point, in order to build such a competitive advantage. The CONSUMERS! By understanding what are the perceptions, awareness and comprehension levels of consumers for Islamic Finance and related product categories are, either the industry (as a body) or the businesses (that make up the industry) can develop products that are truly what the Ummah needs. Having this vital amount of information would allow the industry and the businesses to:A. Implement marketing programs which would increase the understanding of the benefits of Islamic financial products amongst the consumers and thereby increase acceptance (within the Muslim community as well as the non-Muslim community).B. Assist in new product development, which would automatically provide benefits that the consumer wants. Thereby the acceptance would be better.C. Re-develop/ re-design its operating standards and guidelines utilizing the original and true basis of Islamic finance and thereby be “Shari’ah-based”.By virtue of this, as an industry the IFIs would be operating their businesses not on the conventional “profit making form of disguised interest” platform but on the “benefit to society”

platform. And yet the businesses will be profitable by virtue of having consumer acceptance and higher comprehension of Islamic Finance.

The question now is who’s going to take that first big step and invest in the required qualitative and quantitative consumer research? Without this vital piece of information and knowledge, we will, at best be making educated guesses. And educated guesses, cannot replace, strong insights where marketing is concerned.Joy abdullah is an ENABLER who has dual expertise in strategic business planning and brand marketing. Such synthesis of strategic planning enables Joy to aid brands in having a strong reputation, clear image, and efficient delivery. By using ethics, values, governance requirements and desired brand objectives in corporate planning, Joy minimizes potential risks a brand may face, in developing the brand strategy and delivering the desired experience(to its stakeholders). He has strong knowledge of ASEAN & India markets. His articles focus on the importance of ethical brand marketing encompassing brand reputation management, employee-brand relationship and CSR. Comments and queries can be directed to joyabdullah@dailybaraka.eu

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Islamica magazine(english).pdf 10/27/10 2:53:31 PM