It’s Time Islamic Finance Delivered

Joy Abdullah

Today’s global business scenario is popularly referred to as VUCA (volatile, uncertain, complex and ambiguous). In this landscape the financial services industry has been rocked by the advent of FinTech. Coming on the heels of the trust issue, FinTech has had a disruptive effect resulting in forcing the sector out of its comfort zone and to re-look at their business models.

The speed of technological innovations and its adoption has significantly impacted on the industry. A decade ago things would change on an annualised basis with key variables being constant. Today it’s literally changing on a daily basis. The financial services sector has not escaped the march of technology and has been forced to look at significant changes in process, product offerings and most importantly strategy.

Given the size of the Islamic finance industry it has, so far, been unaffected. Yet, the winds of change are rapidly sweeping in. Whilst the industry organizations might, as yet, not show any external signs of disruption the indicators, that threaten the sustainability and viability of the organizations, are clearly there to see for the observant. Illustrating the point here are a couple of news headlines:

“Digital or Die: Why banks are in last chance saloon on ROE” by The Banker1
“Tech’s Role In Reaching Indonesia’s Rising Middle Class”2

News such as these highlight the rising questions on the role of the financial institutions. Today is the role of a financial institution stakeholders’ profit or is it social value?

Across jurisdictions we hear of efforts that show that the global Islamic finance industry is attempting to grapple with various aspects of the changed and changing business landscape but a clear strategic perspective, that shows sustainability for the industry organizations, is still not quite clear as yet.

For the brave few organizations that are in a growth mindset, a new set of skills, tools and capabilities are being brought on board to develop a new strategic journey in ensuring sustainability.

A new strategic Journey

Given the environmental volatility and the rapidly increasing impact of technology, the Islamic finance industry needs to take on board the importance of earning trust to generate social capital and provide tangible social impact value for all stakeholders.

The increasing preference of green sukuks and ESG oriented investments clearly indicates a trend that has created the necessity of having such a differentiated strategic approach to business. The usual practice of prioritizing organizational structure, functional roles, processes and realigning decision points and undertaking tactical activities that simply have the profitability return as the key metric no longer works.  Continuing this will not provide the agility, which is required, in creating tangible value and impact on sustainability.

Developing social capital takes into account the key area of the human element, of an organization, in strategy. Humans, by nature, are social creatures with a high need for social companionship, acceptance, recognition and respect. Employees of an organization either make or break the strategy and in today’s business environment employees are critical in generating trust and ensuring successful execution of strategy.

 

The three areas to create the new strategic framework are:

1- Understanding how Purpose and Experience creates a Story

Instead of the usual top-down communication practices, look at creating meaningful conversations with employees using the necessity of why the organization needs a new strategy as the starting point. Continue with what strategic options can be created and conclude with how to set about making it happen — together.

By just bringing the employees together and sharing why a new strategic direction is required three benefits occur:

    o

  1. It re-assures employees about their jobs as, in an uncertain and volatile environment, employees all have this as a top-of-mind question.
  2. o

  3. It has a direct impact on the work culture as more inclusion occurs and people feel they can contribute.
  4. o

  5. It throws up practical ideas that provide opportunities for innovation and change.

This process of conversations enables the organization to visit and evaluate their purpose and the type of experience the organization wants their stakeholders to have thereby developing a unique value which would over time become its comparative advantage.

2- Creating Conversations

As a second stage to the conversations, set-up innovation groups that obtain business intelligence on cross-industry development. Develop mini project groups tasked with generating ideas which tangibly provide value and enable the organization to evaluate alternative investment avenues for growth. These project groups can work with start-ups and other innovation centres to bring on board developments that can help the organization. Help by creating space for genuine interaction that is characterized by curiosity, expression of ideas, inquiry, and experimentation3.

An example from the FMCG sector is what Unilever has undertaken. It has a set-up called ‘Unilever’s Foundry’4, which asks start-ups to join. Unilever provides mentorship, process training and network access which help the start-ups scale up but at the same time it provides the Unilever teams to know what are the innovations and developments occurring across their portfolio which could impact them in the long run thereby allowing them an inside track to industry changes and growth opportunities to capitalise on.

3- Education 

The third and last benefit is to set-up continuous learning facilities for employees. This is not to be confused with the current trainings and skill development that is undertaken. Continuous learning comes from having a clear talent management plan with regards to organizational capability requirements, in the long run, and has a focus on the humanization aspect of the brand experience provided. It aims to upskill existing employees in order for them to operate in different functions.  

Coupled with conversations such a facility aids tremendously in increasing employee engagement.

In summary accepting the impact of change, that technology and increased consumer awareness has brought about, and seeking to create a truly value-based competitive advantage which clearly connects the purpose of the organization and the customer experience will enable Islamic finance organizations to create preference, profitability and in turn sustainability.

1) http://www.thebanker.com/Editor-s-Blog/Digital-or-die-why-banks-are-in-last-chance-saloon-on-ROE

2) http://www.brinknews.com/asia/techs-role-in-reaching-indonesias-rising-middle-class/?

3) Closing the Strategy-Execution Gap Means Focusing on What Employees Think, Not What They Do

4) These are the 30 startups joining Unilever Foundry https://www.techinasia.com/unilever-foundry-30-seaa-2017

Disclaimer

Leave a comment

Your email address will not be published. Required fields are marked *

Interested in investing with Wahed?

Open your account in minutes

Get Started