Social Media and Islamic Finance: Practical Partners?

What does Social Media and  Islamic finance have in common?. Are there synergies between retail Islamic finance and Social Media?. Should Islamic finance take advantage of a wide breadth of knowledge that already exists in the industry, in order to develop business strategies that are consumer centric in order to achieve organic growth?. There is no disputing the fact that there has been a definite shift in the way consumers interact with brands and organisations. One of the key drivers for this change is social media, the arrival of whom has blurred the geographical borders of communication.

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One of social media’s greatest benefits to brands is the ability to scale up customer engagement for value creation. The most intimate and valuable type of interaction was until recently facilitated mostly by one on one engagements that demanded extensive human resources and expenditures. Now, powered by digital platforms, engagement reaches scale. Engagement via social media has more to offer than recruiting customers and driving sales.

It can help extend the customer life-time by creating loyalty, as well as optimise it by turning customers into advocates and enjoy additional leads and sales. And –finally, but potentially most importantly, engagement through social media can generate insights from customers, which can lead to better products and services.

Social media has the power to bring consumers close to organisations like never before, especially Islamic ones, up to the point where they can be embedded in the business model.  So how exactly does social media propel growth for  Islamic finance. Or put another way, how can Islamic finance, especially at consumer retail level, take advantage of the social networking phenomenon for awareness, education, and greater market penetration?.

Historically, the Islamic finance industry has neglected retail banking. This has occurred despite the fact that retail banking could have provided it with funding that is arguably more stable than the current main wholesale and investment business. Potentially retail customers would in fact switch from conventional banks to Islamic banks for religious reasons, but savvy consumers would definitely move if in fact it was understood that Islamic retail financial products provided better earnings. Most Islamic banks however have chosen to ignore this segment in the marketplace. Clearly there is a need for increased levels of education, awareness and change of perception or to put it another way-education, perception and liquidity. All of the key drivers in Islamic finance revolve around these important Keynote themes. It is evident that Islamic financial institutions who are commercially driven have not done enough to educate and communicate Islamic finance’s social and economic value propositions.

Many players in the Islamic finance industry can benefit if social media is used more widely, although there are limitations to the role that social media can play in developing the industry. There are many areas where Islamic financial institutions can use social media to reach out to potential consumers, critics and other industry participants all of whom can begin to widen the debate on the industy, as well as provide responses to the challenges in and critiques of Islamic finance.

Blake Goud principal of Sharing Risk dot Org defined the problem as : “With critics writing and speaking about Islamic finance being too permissive, or too concerned with creating solutions for problems which don’t exist, or being too focused on developing products that serve the bank’s interests over the investors, it can almost seem that there are no supporters of the industry except for the bankers, layers and asset managers who are profiting from its creation. However, this would be a mistake. There are many Muslims who do view interest as riba and who do find Islamic financial products valuable because otherwise they would not be able to buy a house or a car or finance their businesses or invest for retirement. For this subset of Muslims, the conventional alternative is not an alternative at all. That being said, most have questions about whether the industry as it exists today is truly serving up a Shari’ah-compliant alternative to conventional finance, but use still use it because there exists no other alternative.

Weaving through these contradictory views towards Islamic finance is challenging enough and with a severe recession underway in many parts of the world, it is even more challenging for Islamic financial institutions to market themselves to potential consumers[1] and attract the skeptics into even a discussion about what is necessary to make the products offered into a realistic alternative to cost-conscious consumers. In this area, the canned press releases and articles that ‘cut and paste’ from these press releases do the industry a disservice and push away more people than they attract. The opposite approach from the canned news–“persuading” consumers to switch to Islamic finance by questioning the religiosity of Muslims who use conventional finance–is equally ineffective and (fortunately) is rarely employed by mainstream Islamic financial institutions”. 

He then pondered the solution by refining the groups that Islamic financial institutions and think tanks need to appeal to if they are to continue the rapid growth of the last decade:

  1. Muslims who think Islamic finance is too close to conventional finance;
  2. Muslims who think Islamic finance is unnecessary and enriches no one but the bankers who offer it;
  3. Muslims who find conventional banks totally off limits and who use Islamic banks, but would like them to shift their focus away from replications of conventional products;
  4. Muslims who use Islamic banks and are happy with them;
  5. Muslims and non-Muslims who have heard, but don’t understand the terms “Islamic” and “finance” used together; and,
  6. Non-Muslims who wonder whether Islamic finance is just applicable to Muslims or could be an alternative to the conventional banks in the wake of the financial crisis.

Blake says “These groups can overlap somehow, but in general they all require different approaches for Islamic finance institutions to reach. A one-page ad in a newspaper or magazine may reach the Muslims who already use Islamic finance and are looking for reassurance about the banks’ commitment to Shari’ah-compliance or it may reach Muslims who are outside the financial system looking for a Shari’ah-compliant alternative. However, they are unlikely to reach those Muslims and non-Muslims who are unaware of Islamic finance or are skeptical of industry for one reason or another. Social media can provide a way to reach out in a more detailed, engaging way. It can start a two way discussion, whether through a blog where people can comment and the blogger can respond; it can be shorter, as in a Twitter page where the Islamic financial institution can announce new initatives, link to articles that address a particular area of interest to the bank’s audience, or it can make people aware of press releases from the bank.”

Another blogger/marketer Joy Abdullah suggested the use of Shari’ah compliant stockpicking and stock trading games, the rationale being that interest could be ignited at the college/university level. He also suggested pushing information on specific products such as mortgages educational loans contract structures, for example  is there ‘Takaful’ built into the product?.

Clearly the scope is there for Islamic finance to be “accelerated” thru social media, but it requires the Islamic financial institutions to develop a knowledge of social media, and produce their own social media thought leaders, and develop a presence in these various mediums. In addition If the Islamic Finance industry ‘de-jargonises’ its communication language, focusses on being consumer-centric, and clearly communicates a one single key benefit as the core message, it’s acceptance and thus growth would shoot through the roof and certainly trend on the various social networks where consumers reside. In order for Islamic financial institutions to be successful in broadcasting their message digitally, it’s going to be down to how well, they can execute these plans.