Do Islamic banks need to "reorient themselves" in order to grow in the future?
Islamic banks have to not just take on and resolve the challenges they face but also reorient themselves in the way they do business to enter into the next cycle of growth and become mature.
That was the view of a group of banking chief executives during a debate on Islamic Finance: Banking on emotions or merit at the first Global Islamic Economy Summit 2013 in Dubai on Wednesday.
In a Brunswick Insight Survey 2013 conducted on behalf of Abu Dhabi Islamic Bank’s 1,000 customers to gauge their attitudes towards Islamic banking, it was found that only 12 per cent to 20 per cent want to do business with Islamic banking, 60 per cent to 80 per cent are indifferent between Islamic banking and conventional banking and between 10 per cent and 20 per cent do not want to do business with Islamic banking.
The customers in that survey were asking for ethical banking and a bank that is simple and accessible. “Islamic banks have an opportunity to leverage ethics...and you have to do things in the best interest of the customer,” said Tirad Mahmoud, chief executive of Abu Dhabi Islamic Bank. If you do this properly, you will be able to attract that indifferent customer group [in the survey], which is quite substantial.”
Hussain Al Qamzi, chief executive of Noor Islamic Bank, echoed similar thoughts when he said that there is a need to be clear and transparent about the money we take from the customers, the money we invest.”
But he also added the challenges of differentiation, cost and size faced by the Islamic banks when compared to their conventional counterparts: He said that differentiation would help to set apart our products from conventional banks and there is a need to cut the costs and be of a reasonable size to achieve economies of scale. And technology can help us to do all of these, he said.
“If we need to make a key effect or impact on the market it is going to be differentiating in nature rather than relying on beliefs,” said Adnan Chilwan, chief executive of Dubai Islamic Bank. The products need to be customer need-based rather than bank need-based, Chilwan added.
In this regard, there is need to promote innovation and speed of innovation, said Mahmoud.
As for reorienting Islamic banking and finance, Mahmoud laid down a vision of the future. Substance rather than form should be brought into the market; creation of straightforward financing that are Sharia-compliant rather than relying on synthetic structures like Tawaroq and, lastly and more importantly, focusing on all communities. “As Islamic banks, our objective is to make the world a better place to live in. The world is expanding and we have something to offer to the rest of the world, not just the Islamic community,” said Mahmoud.
By Gaurav Ghose
- Deflation shocks in emerging markets and the GCC currency peg
- Crashing oil: has the time come for GCC countries to tax their citizens?
- Moody indeed: how did Moody's rate the ME's banks for 2015?
- The Middle East's Switzerland? Lebanon's banking secrecy is here to stay
- Precious retirement: why UAE expats are moving their pensions out of the UK
- 8-year-old Yemeni child dies at hands of 40-year-old husband on wedding night
- Saudi's burgeoning trade: Islamic economics thriving
- Attempting to go mainstream? how Islamic banks are ditching the 'Islam' label in order to go global
- Wrong for so many moral and amoral reasons: why state spending on illegal settlements is even bothering Israelis themselves