The Millenials are coming – How Islamic Finance is preparing for it?

Sadia Karim Current Issues in Islamic Finance, Islamic Banking Leave a Comment

Couple of months ago I published a blog post “Is Islamic Finance suffering from linear thinking?” referencing a Goldman Sachs insight on millennials and their consumption patterns. GS now published a video about it. Watch video below.

When we talk about Islamic Finance industry, how do we define the word ‘industry’? Who are the stakeholders? Who are the consumers? Who are the service providers? What kind of services are provided? To who? What problems the industry is solving for the society or mankind? In what ways? How is the industry communicating to its stakeholders? Through which channels?

We know the answers, but sometimes asking again and again may help us reflect with new meanings and with new contexts.

I asked a group of entrepreneur colleagues and friends (potential Muslim consumers of Islamic Finance retail products and services but majority of who are yet to trust the service offerings of Islamic Finance and mostly reside in non-Muslim majority countries, and some are millennials) whether rebranding the name of Islamic Finance affect them in any way and what are their views about it. What came out from their answers are nothing new or surprising for the ‘industry’. These are what they expressed (rephrased in few cases for clarity, names ommitted for privacy):

****Caution: these are unfiltered thoughts, straight from hearts of those who expressed, and they represent average retail consumer group in mostly western countries. These also reveal the perception about IF from that consumer segment****

#1. “I personally think the IF industry needs to do a much better job in reaching the average Bilal and Sana. And focus much more on serving the needs of muslims rather than focusing around market share. Key to building a strong brand is niching and yes even though in that space halal and Islamic words are overused if the industry can have more social proof and endorsements from trusted scholars it will easily gain Ummah share plus the loyalty of muslims. I feel like the IF industry has huge potential but is lacking the few key elements to become successful and pioneer the finance space.”  (millennial male Muslim entrepreneur in Europe)

#2. “I think “Islamic banking” should keep its label. Islamic finance handled the financial crisis well, from my understanding. When Islamic banking becomes more affordable and a viable and available alternative to conventional financing, I think people will flock to it– even those people who scream about sharia law. That said, I think IB has ways to go before it’s the go-to for Muslims in the West and longer for non-Muslims. Have I used it yet? Nope– the opportunity hasn’t arisen. 0% auto financing is pretty sweet when you can get it. Also, the last time I asked an IB representative about obtaining a mortgage on a property that I own in order to start a business, I was shot down like a balloon with a dart. That was about 5 years ago.”  (Female Muslim Entrepreneur residing in North America)

#3. “I think the way forward is for genuine islamic finance to exist, then it could be branded in 2 ways- ethical and islamic. People will go to it in droves if it saves them money which it should do. I think it should keep its name. I have one account with xxxxxx (name of the institution ommitted) in the UK, when I tried to do banking with them every single thing required a 30 minute call to the head office and as a woman every time I called about my joint account with my husband they would not accept that I had access to the money and I had to go through extra hoops. I found them to be sexist even though I was the prime bread winner. I have never, ever had that experience from a non Islamic bank.” (Female Muslim Entrepreneur in Europe)

#4. “The industry can rebrand all it wants, if it isn’t solving needs cheaper, faster, more efficiently, or in a better way somehow, then It. Does. Not. Matter. in respect to truly appealing to any subset of people, Muslims included. When you watch banking commercials, the key message is that they are helping to make dreams come true and so on. The banks position as our Partners in creating, achieving, and leaving a legacy. What does IF actually position as? Playing the moral/ethical high horse card gets you but so far. And the fact that it’s created by Muslims doesn’t actually guarantee anything when it comes to money affairs, unfortunately…you’d still have to look into it very carefully.” (Female Muslim Entrepreneur in North America)

#5. “A friend of mine was disheartened when she took out an “Islamic mortgage” and her loan was sold to a business that she wasn’t sure was halal– this is the practice with most conventional lenders. What to do about her dissatisfaction and distrust?” (Female Muslim Entrepreneur)

#6. “….would you look at an islamic finance product which is going to cost more and at the end of the day you dont even know if its halal…. and the people selling it to you act like they are doing you a favour?” (Female Muslim Entrepreneur) 

#7. “From personal experience I don’t believe in Islamic Finance as it stands today in the market. This is the reason why I didn’t want to pursue a career in it since it seemed what I studied and worked are from two different worlds. I have full trust in the principles of Islamic finance as they are amazing and build and given by the most High. There is tremendous social justice and opportunity to grow and be prosper in a halal way. With regards to name and branding, I personally don’t think the name matters Islamic Banking is fine and there are many Muslims who will switch in case of the rewards and principles being sound. XXXXX (institution name ommitted) started with the assumption that every Muslim will switch but the name only doesnt work. You have to match the product, brand and customer service. Muslims are people like anyone else who need to make sure they get the best deal.” (Female Muslim Entrepreneur in Europe)

How will Islamic Finance industry address these issues (and misconceptions as it may be claimed in some cases)? Is switching focus from one consumer segment and looking towards a different group of consumers and highlighting sukuk, institutional investment figures or talking about financial inclusion solve the problems and is that approach sustainable given what the pew research states which is quoted often by the same industry?

It is not possible to please everyone, that is never a good strategy. However how will the priority be set with what big picture in the vision board? How will the communication strategies and educational / awareness strategies be changed to remove any misconceptions? These I think are two big questions that require some moments of reflection.

Author: Sadia Karim, Founder & CEO, Yurizk

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