Author: Faisal Mahfooz
Advertisers in the Western world are realising to the fact that the Muslim consumer segment of about 1.8bn people is undeniably the next important market that needs a bit of understanding. Also, it remains largely untapped.
According to Standard and Poor Ratings Services, the Islamic Banking products hit a target of about $400 billion the world over in the year 2009. For bankers itâ€™s like a phenomenon and itâ€™s catching up among Muslims.
During the last ten years a number of Muslim countries as well as Islamic organisations have shown tremendous interest in following the banking that prescribes to their Islamic law, Shariâ€™ah. The summary of Islamic banking lies in the fact that all forms of interest are forbidden. Therefore, the financial products such as a house mortgage has to be different from the Western model according to the Islamic financial model must work on the basis of risk sharing.
This means that the customer and the bank share the risk of any investment on agreed terms, and divide any profits or losses between them. In addition, investments should only support practices that are not forbidden â€“ trades in alcohol, betting and pornography are not allowed. The Financial Services Authority (FSA) in Britain admits that â€œAn Islamic banking institution is not permitted to lend to other banks at interest.â€
According to the world giant banking group HSBC, the Islamic banking industry today stands at several hundred billion dollars (estimates vary), and consists of more than 300 financial institutions in and outside the Muslim world. It is the product of the collective effort of bankers, economists, and Islamic legal scholars over the past several decades to develop financial solutions that meet the religious requirements of Muslims, says HSBC.
Saad Saraf, CEO of the UK-based advertising agency, Media Reach sees tremendous opportunities for a company such as the Media Reach which specialises in multi-cultural communications. He says â€œEven the British regulatory authority FSA admits that the Islamic financial products are easily available in the UK from a number of High Street banks which offer current accounts and mortgages customised for the British Muslims. Now we see a lot of activity in the market. FSA allowed the first wholly Shariâ€™ah compliant retail bank in the West, Islamic Bank of Britain about six years ago.â€
The FSA has also authorised the European Islamic Investment Bank which is the first such investment bank. In addition, London has become an important financial centre with major international firms and the Middle Eastâ€™s biggest traditional banks offering Islamic products, says FSA. The main centres for Islamic banking still tend to be concentrated in the Middle East and Gulf region. Assets controlled by Islamic banks at the global level are estimated to be $200-500bn and are growing at a pace of 10-15% per year.