Faith and finance

Although Pakistan is the world’s second most populous Muslim country, it has a ranking of only 9/50 on the Islamic Finance Country Index (IFCI) – which ranks countries according to their efforts in developing, promoting and advocating Islamic banking and finance.

Keeping these factors in mind and in a bid to capture this untapped market potential, in 2013 the National Bank of Pakistan (NBP) re-launched its Islamic banking (IB) operations by creating the brand Aitemaad. This is now being followed through with a major media campaign.

According to the State Bank of Pakistan (SBP), the total assets of the IB segment are valued at approximately Rs 1016 billion (March 2014), an increase of 20% from December 2013. The segment comprises 20 Islamic banking institutions, of which six are full-fledged Islamic banks – Meezan Bank is the category leader with a 62% market share – and 14 Islamic banking divisions (IBDs) within conventional banks, where Bank Alfalah occupies the top rung with a 52% market share.

It was the recognition of the fact that IB has been growing at over 30% (2009-13) compared to 10% in the conventional banking sector (during the same period), coupled with the added incentive of bringing in a large proportion of the 56% of the population living in semi-urban and rural areas into the banking system with riba-free financial products and services – that led NBP to make a strategic shift in the operational and marketing thrust of its IB services last year.

According to Sarfaraz Ahmed, Senior VP, Islamic Banking Group, NBP, “When NBP first started its IB services in 2006, there were no standalone IB branches; all such operations were conducted via separate windows at some of our conventional branches. This was a major shortcoming because our target audience did not have a brand they could associate with. There was no marketing and the products and services we offered lacked focus and our IB products failed to create an impact.”

As a result, between 2006 and 2012, the bank’s IB Group made the case that in order to fully capitalise on the growth opportunities in the IB sector, a separate brand had to be established offering a dedicated, nationwide branch network with the dual benefits of banking with a long-standing institution such as NBP and using Shari’ah-compliant financial products and services.

With IB accounting for approximately over nine percent of the overall banking system assets by the start of 2013 (SBP’s Quarterly Unaudited Accounts), NBP’s management realised that future growth would come from IB. Add to this a supportive, pro-IB government in power, the first time appointment of a separate Deputy Governor for IB at SBP and the exemption for the IB sector from the SBP minimum deposit rate requirement, and it was evident that 2013 was the best possible time to launch Aitemaad.

According to Ahmed, “We wanted to leverage NBP’s presence across Pakistan and use it to create a brand that customers would trust to cater to their financial, economic and religious needs. This is how Aitemaad was coined and the tagline, ‘Sood se pak, Aitemaad ke saath’ was devised.”

However, unless the re-launch came with policy changes, the objectives of creating market awareness, developing customer loyalty and increasing market share would not be achieved. Consequently, the most important difference between the launch in 2006 and the re-launch seven years later was, says Ahmed, “the establishment of standalone, designated IB branches across the country.”

Given that financial institutions have to rely on the quality of their service to differentiate themselves (product and service portfolios are relatively the same with minimal cost differentials), employees at Aitemaad branches were schooled in IB principles through knowledge-based, customer-focused training sessions to counter the market perception of NBP’s below average service quality.

Sakina Nazir, Marketing Manager, IB Group, NBP, points out that “customers today, even those who are not highly literate are aware of the options available. They will not bank with an institution that fails to effectively cater to their customised needs and demands.”

While the creation of a new entity for its IB operations was a given, it was also deemed essential that the link with the parent brand be maintained, which is why the brief to Mass Advertising and the Brand Partnership (the advertising agencies which conceived, designed and executed the visual identity of Aitemaad) was to retain the green, white and yellow colours in the design elements – elements that have defined NBP since its establishment.

The media plan for Aitemaad (conceived and executed by Mass Advertising) included print advertising (accounting for over half the promotional budget) and brand activation.

Ahmed says that “the media plan is aligned with our expansion plans and the focus is not only on informing people that a NBP Aitemaad branch has opened in their neighbourhood, it also answers their queries regarding the legitimacy of Shari’ah-compliant financial transactions, thereby persuading them that IB is suited not only to meet their religious requirements, but is also essential to the financial prosperity and security of their families.”

Since the re-launch, Aitemaad’s focus has shifted from targeting the metros (where 56% of IB options are concentrated) to second-tier cities and rural areas (industry analysts estimate this is where 55% of the untapped customer base exists), therefore the media plan consisted of insertions nationwide in the Urdu and English language press to announce the opening of every new branch and the publication of supplements detailing the products and services offered, followed up by interactive road shows to coincide with branch openings.

Looking to the future, Ahmed confirms that “radio spots in regional languages are in the pipeline in order to effectively reach our audiences in remote locations where radio is the main source of news and entertainment.”

A TVC however, will not be part of the marketing plan anytime soon, because according to Nazir, “A TVC would convey the impression that an Aitemaad branch is around the corner from every house. Once our network has expanded so that every major location has an Aitemaad branch, then we will consider a TVC.”

Despite the progress, if the SBP target of 20/20 for Islamic banking is to be achieved – i.e. acquiring a 20% market share of the overall banking industry by 2020, Ahmed is of the opinion that several obstacles will have to be overcome.

“The greatest challenge is the lack of investment options available within the IB sector as well as the misconception that IB is merely conventional banking under the guise of religion.”

To this end, awareness workshops in colleges and universities to educate young people about Islamic financing principles and image building seminars and conferences – where the Bank’s Shari’ah advisors and Islamic finance scholars provide consultation and guidance – are in the pipeline to ensure that IB realises optimal potential in Pakistan.