In recent years, there can be little doubt that Islamic Finance has made significant strides forward. Malaysia, for example, now has over 10 per cent of its market populated by Islamic Financial Products. However, there is still a long way to go. About 20 per cent of the world population is Muslim. Unfortunately, this ratio is not reflected in the proportion of funds, which are managed in Shariah-compliant products globally, which is approximately one in 25.
Part of the challenge involves enhancing economic development in Muslim countries, so that citizens of these countries have sufficient net disposable income to be able to enter into banking system. While this may form the basis for a longer-term strategy, there are a number of things which can be done now. A top priority would be to develop an integrated marketing strategy to attract a broader global customer base of both Muslims and non-Muslims to the value proposition of these products.
The Islamic Banking Community will need to develop a strategy around the four fundamental marketing components of pricing, product, delivery channel and branding, in order to meet the ever demanding customer needs. This is detailed below.
Pricing and Product
- Obtain adequate information on customer and market profile to develop a better understanding of customer needs and behaviour. The old adage of “know your customer” really rings true there.
- Develop comprehensive and innovative capital market instruments. The promotion of primary and secondary instruments and trading will be critical to the sustainable growth of Islamic finance.
- Provide sufficient number of well trained and well qualified subject matter experts. People who can lead “needs based selling” to customers.
- Provide a broader range of retail Islamic products and services. More R&D is required here.
Delivery Channel
- Develop an extensive distribution network. This should not overlook the power of the Internet.
- Invest in the technology needed to support. IT is a business critical tool.
- Consider each customer as a “valued customer”. No matter what channel they use.
- Ensure the participation of the supporting industries such as Takaful and Islamic Wealth Management. The power of bundling products.
Branding and Promotion
- The tailoring and branding of promotional strategy to respective countries and cultures. Speak to peoples’ listening.
- Develop Islamic financial products “Value proposition” and eradicate misconceptions about Islamic finance held by non-Muslims. Get the message across that there is good business here.
- Raise the level of understanding, awareness and acceptance of the Islamic Banking system. A job for us all to do.
What conclusion can we draw? Well for a start, the building blocks have been set up to drive the Islamic Banking Industry into the mainstream. Long-term success will depend on our ability to provide a sound value proposition to Muslims and non-Muslims alike. In setting about capturing a larger share of the market, we must work on appealing to a broader customer base via an integrated global marketing strategy for Islamic Banking. There is much to do and not a moment to lose!
**This article was first published in The Halal Journal Mar/Apr 2005 edition, and was written by Daud Vicary Abdullah (Director Financial Services Deloitte Malaysia).