- <strong>Primer on the evolution of Islamic banking in Pakistan</strong>
- In most cases, bankers working in Islamic banks have spent part of their career in conventional banks and as a result their approach and strategy is unlikely to differ much from those practiced by conventional banks.
- <strong>Getting the message, or not?</strong>
- <strong>Promoting Islamic banking</strong>
- <strong>The way forward</strong>
Islamic banks operate differently (read halal) as their mechanisms are rooted in Islamic teachings. Thus, Islamic banking is halal and transactions and capital channelled through this relatively new form of banking adds barkat to our lives and businesses. These are the inferences that consumers are supposed to construe from the promotional activities of Islamic banks in Pakistan. The point is whether consumers are assimilating and accepting these inferences. From different research studies, it can be cautiously deduced that a sizeable proportion of customers do not accept Islamic banks as purely Islamic.
In this context, promoting Islamic banking in Pakistan remains a marketing communication challenge. Creating customer acceptance that this form of banking is Islamic requires going beyond conventional communication strategies both in terms of media and creative.
Primer on the evolution of Islamic banking in Pakistan
Islamic banking has seen a surge in the last few decades in both Islamic and non-Islamic countries. Its development stems from a confluence of conventional banking and Islamic teachings with Quranic and Hadith injunctions being the primary sources. In Pakistan, the development of Islamic banking services has seen the involvement of Islamic scholars, banking professionals and economic experts. Efforts in this area have included years of scholarly work as well as interaction amongst experts from different countries. All these efforts have helped develop Islamic banking as a distinct field in Pakistan. Customers accepted the concept, particularly in the initial years, and there was an undeniable growth in this arena. This resulted in establishing new Islamic banks as well as Islamic banking services within conventional banks. Today, along with several Islamic banks, almost every conventional bank has a separate Islamic division. Thus it can be said that this evolutionary process was largely propelled by customer demand for halal and Islamic banking; one that respects Islamic injunctions, the foremost being the absence of interest.
In most cases, bankers working in Islamic banks have spent part of their career in conventional banks and as a result their approach and strategy is unlikely to differ much from those practiced by conventional banks.
Getting the message, or not?
Different research studies on customer perception and behaviour have highlighted the fact that they are rather dissatisfied and question whether the ‘Islamic’ side of these banks is truly Islamic and actually different. Their concerns are exacerbated when they don’t see much differentiation between Islamic and conventional banking services. Speak to a consumer finance representative from a conventional and an Islamic bank about any consumer financing product and you will realise that interest seems to be present in both options and that both have almost similar sets of terms and conditions when it comes to treating different scenarios. Another example would be the promotional campaigns for a savings product by conventional and Islamic banks. Although the earning figure may differ, both will quote an earnings figure, although Islamic banks are cautious to tag these earnings figures as ‘expected’, as Islamic banking does not allow for guaranteed income over financial investments. However, the difference may not be perceived by customers.
So, if the services are delivered the way customers want them to be, but some of them are not getting the message, where is the problem? The problem lies in the promotional strategies of Islamic banks which are not communicating the right perception.
Promoting Islamic banking
In most cases, bankers working in Islamic banks have spent part of their career in conventional banks and as a result their approach and strategy is unlikely to differ much from those practiced by conventional banks. The same applies to the marketing professionals within Islamic banks. Furthermore, these marketing professionals have much to address when it comes to engaging consumers. They are in competition with all the other banks and they need to offer products that can compete with conventional banking products. This challenge is further amplified by the fact that they cannot ignore those customers who are relatively insensitive to whether a bank is Islamic or not. The dilemma is therefore that if they position themselves as too Islamic, they cannot commit to returns and if they do commit returns (even with the legendary ‘asterisk’ for expected returns), they risk being accused of mere window-dressing.
The truth of the matter is that an Islamic product may not need to be hugely different all the time, and this fact needs to be conveyed to customers in innovative ways. Recently I was reviewing a booklet by a religious scholar who had deliberated at length on how conventional banking products can become Islamic by inculcating seemingly minor modifications (and minor though they may be, they do meet an Islamic requirement). His explanation was supported by different analogies. For instance, in Islam a condition for meat to be halal requires that Allah’s name be taken at the time of slaughter. This act, which although may not have any material implication, is of crucial importance from a religious standpoint and cannot be ignored. Thus, at times, otherwise seemingly minor modifications in banking products can make them halal and Islamic. Personally, I find the concept to be logically appealing although what I find a bit strange is that this and other arguments by scholars are sparingly found in the communication of Islamic banks.
The way forward
There is no doubt that there are differences between Islamic and conventional banking approaches and these have been substantiated by extensive scholarly research and further work in this area continues to respond to the objections raised by different circles. What seems to be missing is a marketing strategy that takes a sound positioning on these differences and then effectively communicates this positioning to customers.
Many options and opportunities need to be explored and here are a few points which I would like to recommend for further thinking.
1 A few years ago, all packaged milk brands received a boost thanks to a carefully planned promotional effort by Tetra Pak, the leading supplier of milk packaging. A campaign aimed at positioning packaged milk as a superior product yielded dividends for all brands which were otherwise competitors.
2 Innovative ideas are largely untapped and need to go beyond the conventional. Depicting ‘Islamic’ by using the obvious (maybe a bit too obvious) elements such as mosques minarets, calligraphy or other elements of Islamic architecture needs to evolve into more creative ways.
3 Social media presents a wonderful opportunity for brands to engage customers and convey to them what makes Islamic banking different.
Marketers involved in Islamic banking need to develop innovative creative and media strategies, and effectively communicate to customers the efforts made by religious scholars; this will go a long way in strengthening Islamic banking in Pakistan.
Talha Salam is a faculty member in marketing at the FAST School of Business, Lahore.