If in about 40 years, an industry is unable to create a concrete and unified human perception about what it stands for, there must be something inherently wrong in the approach it communicates and propagates its mission.
Marketing gurus say, perception does not change over time; once it’s formed, it’s formed (unless it is shaken from its root).
So what does the above mean for Islamic Finance industry? What can it do to up its perception game (so to speak)? In the 21st century, visionaries and experts say, the key to success is building long term ‘trust’. Nothing else will matter. If this key ingredient is not achieved, businesses will suffer badly.
Here are 7 bullet points that can potentially help the widely misunderstood Islamic Finance to look to the future in an aspiring way.
1. K12 Literacy
Basic principles of Islamic Finance or prohibition of riba, gharar, maysir etc. historically has not been a subject matter of dinner table discussion for even the most conservative Muslim household at least in the last 100 years. This is due to the fact that Islamic concepts and ethics in financial transactions were totally missing from all sphere of life. Why? Because the curriculum that has been adopted by mainstream educational system around the world is a secular curriculum inherited from the British educational system. That happened due to natural course of history which is nothing unusual or surprising. But what is kind of unacceptable to a millennial generation is the idea of not having a different curriculum that can fulfill the needs of its future. The pace of change is extremely slow in this area if the global context is considered. The idea of Islamic Finance, if to be materialized in a wider global context, there must be dedicated teams to create K12 financial and Islamic Financial literacy curriculum that can be adopted widely across countries that have vested interest in this growing financial segment. The key for success in this endeavor is carefully considering the differences of opinions and keeping the common elements that are agreed upon and leaving the disagreements aside for forming the curriculum.
“The General Council for Islamic Banks and Financial Institutions (CIBAFI) reported that ten percent of the 6,000 fatwas issues by different IFIs with over 100 Shariah scholars were not consistent across IFIs (Iqbal & Mirakhor, 2007).
2. Historical Explanation
In order to understand the present, it makes more sense when we read the history that gave birth to the present. Islamic Finance industry cannot just present what it does now without giving the context of the past and a vision for future to its audience if it really wants to demystify its concepts. Community awareness events on Islamic Finance must include a detail picture of the pioneers’ thought process, how they began, how changes came throughout the years through what measures, and what are the plans for future. Often individual thoughts are underestimated when community events are organized. People are more thoughtful, intelligent, and analytical than we presume them to be, so it will be unwise for the industry to think otherwise and present only the jargons of the industry and convince people to buy into the idea without giving full context. That didn’t work widely and will not work for the millenial generation.
3. Scholarly Transparency
Transparency is the precursor of trust. Without transparency, trust cannot be built or earned. If the average people and stakeholders do not know the rationale behind each fatwa (Islamic legal verdict) even if they understand the rationale or not, they will perceive it as lack of transparency and whenever there is lack of transparency, it is impossible to build long term trust. There are two methods that can be applied by the industry in this regard:
a) For major announcements or major changes in the previous legal ruling on areas that may affect products and services industry wide, the Scholars who collectively arrive to the verdict, may collectively announce their fatwa with basic explanations from usul al fiqh (Principles of Islamic Jurisprudence), so that average people as well as stakeholders know the Scholars’ rationale at least at a high level. This announcement may be presented as a press conference, recorded as video, published widely and/or broadcasted live.
b) For the Shariah legality of each product, the fatwas ( Islamic legal verdicts) must be accessible by average people and stakeholders so that they understand the rationale behind each product permissibility. Every financial institution that offers Islamic Financial products must disclose fatwas for each of their products in their websites. The absence of this is largely responsible for widespread mistrust and misunderstanding. Unless this transparency is established, the Islamic Finance industry cannot expect anything better or different.
“I think every Shariah Scholar I’ve ever talked to would love to see fatwa freely available. But the industry criticizes them for this. The Scholars would love to circulate all of the fatwa, but when they get hired by different companies, there’s always a confidentiality provision that says they can’t circulate the fatwa or anything else. It’s the industry that is limiting the transparency, not the Scholars. It’s a fascinating thing because if the scholars had their way, the industry would actually develop more rapidly, quite a bit more rapidly, If you could circulate all the fatwa, we could all study the rationale behind them and learn from them. We could have more harmony in decisions.”
~ Michael J.T. McMillen, Islamic Finance Lawyer, in ‘Global Leaders in Islamic Finance’
4. Live Event Broadcast
The numbers of Islamic Finance conferences are increasing every year since last decade. In these conferences experts gather and try to sail the boat of Islamic Finance. Afterwards summary from the conferences go out in the form of press release. This is a medieval approach to information dissemination which lacks transparency and is not a sustainable way to promote the cause of Islamic Finance. It takes insignificant investment to broadcast an event live to the world today. If Islamic Finance wants to widen its appeal, it must get out of its 20th century promotional efforts and come to 21st century. It will work two ways – a) broaden the appeal by making detail information and ongoing progress available worldwide and b) create transparency – two areas Islamic Finance has been struggling with.
[Side Note: Those who are unable to find career in Islamic Finance, can easily create a mobile optimized online platform to host such live broadcast of events – take this as an entrepreneurial venture, things are more easily attainable today than we think; please go ahead, pick a niche and do something rather than venting on lack of jobs. Provision follows when cause is sincere. For strategic know-how, we are just an email away.]
[Good News: Some refreshing changes came recently. 10ICIEF for the first time in history took effort to LIVE stream the event. First day didn’t work at all and the second day Arabic events only, however the step itself speaks volumes of positive change. CISI also marketed their Islamic Finance event live streaming with a price tag on it. Some positive at least. WIEF Cordoba Roundtable was also live streamed last week. The next step would be to launch mobile optimized publishing platforms for these recordings.]
One of the pressing challenges in Islamic Finance industry is the lack of consistency in legal rulings of Islamic Financial products. Since Islamic Finance started with regional initiatives with interpretations from local school of thoughts for financial transactions, it succeeded within the local environment. However when the industry goes global, it becomes challenging because of the diversity of interpretations in addition to the diversity in the external environment such as legal, financial and government structure, socio-political atmosphere etc. within which a country operates. The external environment also affects the interpretation which leads to the diversity of opinions. Therefore there is no easy way out to bring full consistency across borders. However, it is a necessity to bring a level of consistency in the rulings and the basis of product structures if Islamic Finance can present itself as a solid mainstream alternative to conventional financial products. The key to success is bringing all Scholars across borders in one table with each country’s legal representatives. Before talking business, legal harmonization is needed as this harmonization in return will bring business. It may be difficult, but not impossible if done with good faith keeping a clear picture of the future in vision board.
6. 21st Century Language
The age old definition of the purpose of communication is ‘to get across your message to others clearly and unambiguously’. There are four elements of a communication: (a) WHO is saying it (b) WHAT is being said (c) HOW it is being said (d) to WHOM it is said. In order to make the communication successful, all four elements need to be taken into careful consideration. Marketing is nothing but communication that is mastered with excellence to fulfill its purpose of influencing behavior. When it comes to marketing of Islamic Finance, it seems like only (b) is taken into consideration ignoring the (a), (c), and completely forgetting the (d). The result? It takes 40 years and still scratching heads to solve fundamental issues. So what can be done to change course? Fortune 500 companies become Fortune 500 because of several primary reasons, one of those being heavy investment in figuring out the ‘WHOM’, crafting powerful ‘HOW’ based on the goal of ‘WHAT’, and getting the best ‘WHO’ to accomplish their goals. HOW is more critical than the WHAT and that is the most ignored area in Islamic Finance and therefore requires the most attention and investment. In order to do that, Islamic Finance industry needs to understand that 21st century human beings don’t like to READ much, a sad and ironic reality, but it is the REALITY. They like to WATCH and HEAR. Therefore the communication HOWs need to be crafted with this kind of WHOM in mind.
7. Risk Sharing – The Bottom Line
A wise saying goes like this – ‘children listen with their eyes’. The reality is, it’s not just the children, it’s all adults and every human being. We can hear as much as we possibly can, but it doesn’t make any change in behavior unless example is shown in real life. Risk sharing is such a thing in Islamic Finance that is only spoken and not exemplified. If Islamic Finance really wants change in perception, change in consumer behaviors in favor of it, then true risk sharing needs to be exemplified and glorified with stories of success. It may be a far cry, and that is why innovation is needed and innovation can’t happen without facilitating the nourishment of the creative ‘minds’, and that can’t happen until this is realized – ‘if we keep doing what we have been doing, we will keep getting what we have been getting’ followed by taking swift measures and altering strategies for developing amazingly innovative minds.
Author: Sadia Karim, Founder & CEO, Yurizk
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