By Rushdi Siddiqui, co-founder and managing director of Azka Capital

Social marketing eliminates the middlemen, providing brands the unique opportunity to have a direct relationship with their customers. — Bryan Weiner.

Today, it seems Islamic finance is still stuck at a hard-copy of stage communication (faxes) when the financial world has moved on to Facebook, Twitter, blogging, etc.

Many Islamic financial institutions have Web sites, but how often is it updated beyond awards won? How many Islamic banks, takaful operators, Shariah consulting firms, industry bodies, etc, are on Facebook? Yet, the youth — its future clients — in many Muslim countries with Islamic finance are on Facebook.

What about the cross-sell of Islamic finance to non-Muslims as an ethical alternative? These potential customers are an important cluster of social media and they are continuously looking for offerings aligned with their values.

Several Islamic financial institutions have Twitter accounts, unsure how many of their (retail) clients are on Twitter. Do these institutions believe SMS, Internet and mobile banking is the “social media” connection to their clients?

Maybe the culture of social media is lacking in, say, the GCC. But we saw how effectively social media was utilised during the Arab Spring.

Fear

Is there a fear of technology among Islamic financial institutions? The fear of hackers stealing from customer accounts and identity theft? They have heard about horror stories on hacking from US- and EU-based banks with allegedly better (read, more expensive) firewalls.

Is there fear that social media connectivity will raise the level of transparency to conventional benchmarks standards and with accountability to follow? Put differently, will social media result in enhanced governance? It is not a bad thing in this post-credit crisis environment where companies are rewarded via a stable stock price and rave reviews for transparency and governance.

Is there fear that “bad news” concerning Islamic financial institutions will spread like wildfire if (deeply) connected to social media? It will spread anyway as news organisation coverage is supplemented by bloggers and tweeters in real time.

Resources

Is it a lack of resource issue in having, say, a “chief social media officer”? It would appear that Islamic financial institutions have not looked at public relations and outreach as an investment in their brand, but, rather, a cost of doing business.

Brand-building goes towards commitment to not only clients and staff, but long-term growth of the institution, including eventual cross-border expansion and future clients. Furthermore, during challenging market cycles, the message to the community, whose attention has become shorter, is the confidence inspiring “business as usual”.

Guidance

The Thomson Reuters Islamic Finance Gateway, or IFG, may just provide a guidance for Islamic financial institutions on understanding about the benefits of social media connectivity. It comes down to market intelligence, and the market place is the best source of “knowledge that powers” market movements. The community connectivity function of the IFG comes down to insights by industry experts making sense of the information overload, communicating about important sign posts on the road ahead and allowing community to interface with experts on a secure platform.

LinkedIn, Twitter

At the behest of colleagues, I joined LinkedIn about a year ago to connect with like-minded colleagues globally to share ideas and articles. Outside of unsolicited endorsement of people I have connected with, but, not worked with, it has been a pleasant experience, especially reading leadership articles.

Furthermore, I started tweeting a few months ago, initially on Islamic finance and the halal industry, but have expanded to issues related to Muslims, Islam, Muslim countries, etc. It has been a fulfilling experience and I should have joined much earlier. Why?

1. Tweeting forces one to convey their message in 140 characters, becomes very important in today’s world of short-attention span and information overload. Islamic financial institutions should be able to convey thought leadership within these constraints.

2. Twitter brings news in real time from multiple eyes, hence, it’s a multiple “op-ed” of the market place on the subject matter. The raw news provides more colour than polished sound-bites.

3. Twitter has allowed me to follow the likes of global leaders like His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, and his comments in real time. He first tweeted about Dubai being a hub for an Islamic economy a few months ago.

Conclusion

Shaikh Mohammed’s tweets, at the time of writing this, on the performance of UAE government standards should encourage Islamic financial institutions to engage and embrace the social media to not only connect, but also to report developments.

Rushdi Siddiqui is co-founder and managing director of Azka Capital, a private equity advisory firm focused on halal industry initiatives, and an advisor to Thomson Reuters on Islamic finance and the halal industry.

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

Dear Dr. Ahmad Mohamed Ali, President, Islamic Development Bank (IDB) Group:

Asalaam Alaikum:

The Islamic finance world welcomes your comments on the ‘Mega’ Islamic Bank to effectively compete against well capitalized conventional financial institutions.

“…The ‘Mega Islamic Bank’ comes as an initiative of the Islamic Development Bank in its efforts to address the dearth of senior financiers, the absence of the Islamic tools of stock exchange and the absence of market liquidity between Islamic banks.”

However, $1 billion, with $500 million in paid capital by the three founders (IDB, Dallah Albaraka and Qatar Government), is smaller than three existing Islamic banks, which have never addressed themselves as ‘mega.’ The three include Saudi Arabia’s Al Rajhi, Qatar’s Mashraf Al Rayan and Kuwait’s Kuwait Finance House (KFH). Furthermore, it seems the ‘mega’ story may be incomplete without Malaysia’s participation.

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March 14, 2012

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

Provocative statements are commonplace in the world of politics, academia, business and finance. They serve a ‘perception of purpose’, from distraction to direction and denial to dissatisfaction.

Put differently, such comments are viewed as ‘info-tainment’ to stand out in a competitive market environment.
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January 17, 2012

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

“The proper man understands equity, the small man profits.” Confucius.

The year 2011 was the year for [Malaysia] Shariah compliant index out-performance against all conventional developed and emerging market country indicies and almost all frontier countries.

The Islamic finance industry has not talked up the Islamic equity capital market story, as the Islamic debt capital market poster child, ‘Sukuk,’ has become the alter-ego of Islamic finance. But, does that amount to concentration brand and business risk for a $1 trillion, where Sukuk are, at best, 20% of Islamic finance?
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Will 2012 be the year of “come together” consolidation for Islamic banks?

Size is often the justification for achieving economies of scale, used to access deals for league table prominence, used as a buffer in a challenging environment, used as defensive measure to ward off unwanted suitors, and so on.

Islamic banks are very much like Islamic (equity) funds. There are hundreds of Islamic banks and funds, but the paid-up capital and assets under management, respectively, is too small to be meaningful. Yet, both, more so Islamic banks, present a unique situation (of an industry risk) of “too small to fail”.

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By Rushdi Siddiqui, Global Head of Islamic Finance at Thomson Reuters

The time has arrived to take a deeper dive on better understanding of Shariah compliant companies in an Islamic (or Shariah compliant) equity indexes. To many informed and uninformed observers of Islamic equity investing, it seems to imply investing in publicly listed companies in Muslim countries.

The end results contradict the assumptions. This also rebuts the often heard allegations by many from the anti-Shariah movement that Islamic investing is about investing in companies linked to terrorism or financing terrorism. The largest companies in the S&P Global BMI Shariah include ExxonMobil, IBM, Chevron, Nestle, Microsoft, etc.
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By Rushdi Siddiqui, Global Head of Islamic Finance, Thomson Reuters

‘Don’t cheat the world of your contribution. Give it what you’ve got.’ - Steven Pressfield

On November 22, 2011, the world’s first Islamic interbank benchmark rate (IIBR) was launched. It is the result of a collaborative approach taken by many Islamic financial institution, industry associations, and Shariah scholars, over the course of 24 months, to a decades-old industry challenge: how to decouple Islamic finance from a conventional Western pricing benchmark (LIBOR) and the law of necessity when an ‘Islamic’ alternative was not available. The objective was to support and preserve Islamic finance authenticity.
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By Rushdi Siddiqui, Global Head of Islamic Finance, Thomson Reuters

Failure is a mark of success in venture capital, hence, it is an option with beneficial learning consequences.

Today, Islamic venture capital is a feel-good theory presented at (not many) conferences about the lofty goals of this niche market with the focus on the formalism of structuring and screening. Its impact investing, yet we seem to see it as a cost (at best) and a write-off (at worst).
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