Islamic Finance: Engagement, Inclusion & Expansion

By Rushdi Siddiqui, Global Head Of Islamic Finance, Thomson Reuters

On the long plane ride back from Malaysia to New York, I was thinking about ‘out-side-the box’ areas that would interest me to develop in Islamic finance. There were two areas that would not exit my thoughts.

Is Islamic finance capturing the imagination of the Generation Y and Z (the youth) as employees and customers? What has Islamic finance financed to build?

Islamic finance needs to stop talking only about prohibition against ‘pork, interest and speculation.’ The technical rules of engagement are an important foundation, but positive success stories are the recipe for success in the Muslim world and cross-sell in non-Islamic world.

The industry needs ‘shout loud and far’ that its open for business for funding and financing all permissible activities linked to the real economy.

Youth, Sports & Asset Management

I’ve made presentations on Islamic finance at undergraduate/college levels in US, GCC and Malaysia, and, folks, more work needs to be done. There is not much interest or belief in the authenticity of Islamic finance as its practiced today. At the graduate level is a different story, but their concern is jobs/careers upon graduation.

One of the best ways to connect with the youth, beyond social media offerings, is through sports and role model athletes or even ‘halal’ entertainers.

But how can Islamic finance participate?

No, its not about sponsoring cricket or football matches, endorsing a team, or having a stadium named after an Islamic bank or Takaful company. Its not about buying a premier league football team with an Islamic structure (on behalf of a wealthy family) or by an Islamic private equity firm.

[Why do the GCC Royals only stop in Europe for acquiring trophy sports teams? Will they cross the Pond, Atlantic Oceans, and look into acquiring (parts or all) of hockey teams (Canada), basketball, baseball, football teams, or even soccer teams? May be no appetite? May be not meet IRRs? May be politically sensitive? The US sports teams, like basketball’s Los Angeles Lakers, have become a global phenomenon, hence, great ambassadors to build bridges.]

Here are the ‘known knowns’ include:

-There are many Muslim athletes, from cricket to football to tennis and so on, and from the west we have Kareem Abdul-Jabbar (basketball), Zinedine Zidane (soccer), and others.

-Some/many are conscious of how they invest their moneys, hence, they have or would like to have exposure to Shariah compliant investing

-There are a handful of dedicated Islamic asset management (IAM) firms, however, they have the ‘bankable’ as their clients, and it may include athletes. However, not one IAM has dedicated itself to the Muslim ‘athlete/entertainer.’ Why?

This is not about establishing a management firm that exist for Hollywood or Bollywood stars or baseball, basketball, hockey soccer and football (American) in the west. This is about establishing a world class best of breed IAM firm for Muslim athletes/entertainers, hence, working with, say, agents to access such talents.

We live in a star truck society, and its more pronounced in the emerging markets, which includes all 57 Muslim countries. Its not uncommon to see athletes/entertainers endorsing consumer products in the Muslim world. However, I have yet to see athletes (not male models) appear in marketing materials for Islamic investing products.

Imagine the interesting dynamics for Islamic investing. Imagine the interest in building out Islamic asset classes. Imagine the impact of marketing and PR campaigns and endorsements to the predominantly Muslim depositors and those living in the cash society. Imagine the impact on attracting the attention of the youth to Islamic finance.

There are a number of collateral benefits, from building sports training facilities to having tournaments to financing Muslim lifestyle gear-wear and so on. For example, many Muslim countries, from Pakistan to Bangladesh to Egypt, manufacture for leading brands like Nike, Wilson, Spalding, etc., isn’t it about time the Muslim world builds a international sports brand that becomes a trophy asset? Getting 10% of 1.8 billion Muslims is a respectable market!

This is about Islamic finance financing and funding something real and tangible, something that links and connects to the youth, something that is fun and not just about religion, and something that is sustainable and scalable.

Something like this wins awards for categories like ‘Innovation in Islamic Finance’ or ‘Best Place to Work.’

Thematic City

Dubai successfully put the thematic city concept on the global map, from healthcare city to Internet/media city to festival city and so on. It is a combination of a real estate and tenant play, tourism play, and cluster play.

Unfortunately, due to the credit crisis l, Dubai did not get a chance to expand and apply its experience to building the concept of ‘Halal City or IslamicCity.’ Is there a better name? The Muslim world would have been extremely interested in viewing the concept-cum-finished product through the eyes of Dubai Inc., after successful examples of two co-eighth wonders of the world, Palm Jumeriah and Burg Khalifa.

The essence of faith based tourism include high profile places like Mecca/Medina, Hajj and Ummrah, and Jerusalem, convergence of I.C.J.: Islam, Christianity and Judaism, and not International Court of Justice.

The proposed thematic city, say, ‘Salaam City’ would be financed Islamically (Sukuk and Murabaha Syndicate loans) and built within global ‘green’ standards. It would have mix-use towers, Shariah based hotels/service apartments, convention center (conferences, marriages, etc.), OIC mall (retail, cuisine, etc.), museum of Islamic/Muslim history along the Silk Route, house the $640 billion halal industry (offices, warehouses, factories, and world’s first halal industry body like AAOIFI), etc.

There have been many places built on fast track basis, and the acid test is this:

After the ‘wow’ factor recedes, is there a pull factor (beyond cheap air-fares and hotel discounts) for repeat visits as discover new things? New York, London, Paris, Rome, Cape-Town, Makkah/Medina, Istanbul, Cairo, Casablanca, Petra (Jordan), and other places have it.

An integrated and holistic approach that expands the bandwidth of tourism to touch and embrace history of Islam, while establishing foundation for showing-casing OIC opportunities, providing the focal point for convergence between Halal Industry and Islamic finance, and a natural place for holding Islamic/Muslim conferences, summits, and events.

This may be the ‘repeat’ visitor, Muslim and non-Muslim, offering?!

Media, KBE, MLM

A future piece will address issues on media (it’s the medium that carries the message to the masses), Knowledge Based Economy (tool and product for the 2020/2030 visions), and Muslim Lifestyle Market (consumer and consumerism).

We need to migrate the conversation from avoiding the toxic assets to building cities, from emphasis on screening, structuring and sign-offs to product endorsements of the end result of screening.

The foundation of Islamic finance is business and not religion. What it avoids or what it prohibits is not what it is!

Islamic finance has avoided the bad to do the good. Now, it needs to engage as part of inclusion for further expansion.

The opinions expressed are the writer’s own.