Mimicking the mainstream is not the way forward for Islamic finance, says Ryan Harrison.
Of the financial models to emerge from the 2008 global crisis and the recent political turmoil in the Middle East, Islamic banking has perhaps been the best placed.
Shari'a finance saw a renewed optimism, and in recent years was hailed as a safe bet amid the uncertainty given that it doesn't dabble in what some call the speculative, casino-like exploits of western banking institutions.
The sector, however, has failed to create the traction that many predicted.
Islamic banks, by definition, must conform to shari'a law, and in general take a very conservative line on anything to do with financial innovation. Marketers continue to grapple with the taxing problem of how to sell shari'acompliant products in the Middle East.
They are often bogged down with practical concerns from demanding scholars, who can be risk-averse in the extreme, and will veto ideas based on austere religious beliefs.
Making banking sexy is hard enough, but it's proven a herculean task for Islamic banks.
Rather ironically then, the approach by most Islamic institutions has been to mimic conventional finance industry.
So, at the retail end we find Islamic home loans, car loans, credit cards and insurance (or takaful). Meanwhile, brand specialists are left to emphasise the practical, day-to-day benefits of the products.
For instance, a spokesperson at Emirates Islamic Bank (EIB), one the biggest in the UAE, told GMR it will be rolling out an Islamic version of the successful "Go for it" credit card, which allows users to access Dubai's public transport with just one branded card.
It follows the successful launch last November of the conventional precursor by Emirates NBD, the parent of EIB.
It allows customers to use their Visa debit and credit cards to pay for fares on Dubai's Metro, buses, water taxis and parking fees.
"We're aiming primarily at the young Muslim consumers with this Islamic "Go for it" card, which will be on the market sometime in Q1 this year," the spokesperson said.
But he admitted there was a long way to go to educate this critical segment of society about the nuances of Islamic products.
Consider this: Muslim countries, especially in the Middle East, are some of the youngest in the world.
The global Muslim population is estimated at 1.8 billion. Of these, more than 780 million Muslims are under the age of 25 years, representing 43 per cent of the global Muslim population, and more than 11 per cent of the entire world population.
If the aim is to sow the seeds of brand loyalty at a young age, it's a marketer's dream. But it might be said that when Islamic products are so similar in nature to their conventional counterparts, there is a challenge for banks to explain the benefits of becoming shari'a-compliant. Apart from Ogilvy Noor, which launched in 2010, few consultancies exist that cater specifically for Islamic branding.
Yet, with the 2011 upheaval in the Arab world, the rise of dedicated media servicing could be on the cards.
"There is more to the Muslim world than veils and violence. Here were people with aspirations, drive, sophistication, creativity and savvy," said Ogilvy Noor's Shelina Janmohamed in a recent report on the Arab Spring.
"Brands that wish to engage such consumers at an emotional level have to understand these trends and traits and credit people for their bravery and courage," she added. So what can marketers of Islamic products do in practice?
Sameer Hasan, business director at the influential Ethica Institute of Islamic Finance, said they need to connect with this new-found aspirational spirit by bringing more innovative Dragons' Dentype approaches to the market.
"What would really make a difference is putting together ventures where they provide equity-based investments and nurture up-coming ventures and fund these products. So they're working with young people that have business ideas. This would change the fabric of the economy and inspire innovation in Islamic finance rather than just extending cash loans.
"Today, the industry hasn't even scratched the surface as far as bringing products to market. They never seem to hit the market because banks are content with things like Islamic home loans, car finance and takaful products.
There's a complete lack of appetite for new innovations."
Hasan also said that Islamic banks have yet to exploit fully the potential of events like the Hajj pilgrimage in Saudi Arabia.
Shari'a-compliant packages could be offered that leverage resources in the travel industry, such as hotels and airlines, instead of just credit cards.
"It would make more sense to facilitate the thousands of people that want to go," he added.
The Middle East is ripe for such entrepreneurial support, especially given that in the debt-riddled West small businesses are having a tough time as big banks starve them of start-up cash.
It's true that, until now, progress has stalled at the retail Islamic banking level partly because there is a growing education gap that needs to be bridged, especially among younger customers. As a result, banks spend much of their marketing efforts informing potential consumers about Islamic finance rather than testing the water for new and exciting products.
So, having had a call-to-arms from the Arab Spring, the Islamic finance industry has little excuse not to take its great jump forward.
Apart from creating awareness about itself, the biggest challenge will be to convince an increasingly young and inquisitive Muslim population that it's safer and more exciting than what is now a western-based conventional look-a-like.
© Gulf Marketing Review 2012
