What is in a name? Apparently quite a lot if you are in the business of being an Islamic/sharia-compliant bank. In fact, in early January, Noor Islamic Bank of Dubai made the costly strategic decision to adopt the simplified moniker, Noor Bank. Most startling of all was the reasoning behind the shift.
Said Noor Bank Chief Executive Hussain Al Qemzi: “The oldest Islamic banks started by adding the Islamic term into their names because the idea at that time was new. But over time, the majority of Islamic banks – including the biggest ones such as Al Rajhi, Baraka and Kuwait Finance House – don’t have it in their names because it doesn’t add value.”
If ‘Islamic’ doesn’t add value, this raises the question: just what is Islamic banking?
Uncertain terms
To a certain degree, it has to be recognised that the whole is greater than the sum of the parts when it comes to defining the difference between Islamic and ‘sharia-compliant’ banking. In truth, anyone can be sharia-compliant. For instance, no one would ever argue that HSBC is an Islamic bank, yet with its Amanah brand, HSBC met all the requirements for sharia-compliance.
And therein lies the rub: sharia-compliant banking is mechanistic while Islamic banking is holistic. The problem is, how do you apply regulations, rules, standards and practices to something that is as nebulous and undefined as the term ‘Islamic’? Most people in the industry and most consumers know ‘Islamic’ when they see it, but they would be hard pressed to provide an accurate description and definition.
Is it sufficient to be a purveyor of products and services that have been certified as being halal by qualified Islamic scholars? What if a provider of such services doesn’t have a sharia board, opting rather to apply its own research findings in this matter? Is it still Islamic?
Are there requisite business practices that must be followed in order to be ‘Islamic’? For instance, must there be separate branches for men and women? Must the employees follow a dress code? Are there limitations on the use of imagery in advertisements? Or is it sufficient to simply structure products to be in line with Islamic banking standards?
Religious guidelines
One can see how a web of idiosyncratic standards can crop up when trying to define what is Islamic. Sharia-compliance, on the other hand, can be proved by analysis of a bank’s adherence to the well-defined religious guidelines set forth in both the classical and contemporary books of Islamic jurisprudence. You no longer have to guess as to the nature of the banking being done, because the industry landscape has already been shaped by strong legal tradition and precedent.
The problem is, how do you apply regulations, rules, standards and practices to something that is as nebulous and undefined as the term ‘Islamic’?
Thus, arguments can be avoided over just how Islamic one bank is versus another. Such arguments are unseemly, and their accusatory nature would actually threaten the integrity of the industry as a whole. However, by using sharia-compliance as the measuring rod, argumentation is avoided and consumers are given the power to evaluate products and services for their individual adherence to the standards and practices that consumers and their societies deem important. And indeed, in this discussion, the consumer is truly the key.
Dubai, which has not been coy about its designs to take the leadership position in the Islamic banking industry, now has a bank (Noor Bank) that feels confident that it can move forward and secure market share without directly presenting its Islamic bona fides via the name of the bank. This means that, in Noor Bank’s estimation, they can address consumer concerns over the structuring of their products without appealing directly to Islam in an in-your-face manner. Saudi Arabia is prime example of this approach in practice.
A bank is a bank
Of the 12 commercial banks licensed to operate in Saudi Arabia, four function as fully sharia-compliant entities: Alinma Bank, Bank AlBilad, Al Rajhi Bank and Bank AlJazira.
The word ‘Islam’ or ‘Islamic’ is clearly not present in their names, and you will furthermore not find mention of those words on their websites or in their marketing materials. In fact, the Saudi Arabian Monetary Agency (SAMA) does not differentiate between Islamic and conventional banks. For SAMA a bank is simply a bank, and all banks must adhere to requisite SAMA policies related capital adequacy, transparency, accounting, etc.
Alinma pushed the envelope even further by using a colour palette consisting of dark browns combined with fresh pastels. Not exactly what one might expect from an Islamic bank
It is up to the banks themselves to determine how to position themselves in the market and establish their aforementioned Islamic bona fides. And in a country where Islam is part and parcel of nearly every aspect of daily life, banks have found that it better suits their needs as institutions, and better addresses consumer concerns, to lead with the notion of sharia-compliance rather than the notion of being Islamic.
Even if one looks to the brands of these Islamic banks themselves, you find them eschewing some of the more traditional imagery that one might associate with an Islamic brand. The colour palettes of these banks, for instance, show an attempt to stand out in an environment flooded with Islamic imagery such as ornate Arabic calligraphy and the ubiquitous use of various shades of dark green.
Alinma Bank, which launched most recently in the Kingdom, had every opportunity to invoke Islam more directly, and might have been justified in doing so given that its competitors were utilising unique colour schemes and non-traditional imagery. Yet Alinma pushed the envelope even further by using a colour palette consisting of dark browns combined with fresh pastels. Not exactly what one might expect from an Islamic bank.
However, in an atmosphere where Islam is so ubiquitous, there is no need to force the Islamic concept upon the public. That would make a bank passé. Alinma and others have continued to explore the limits of creativity and have, most importantly, chosen to push a values-based approach when communicating the extent of their sharia-compliance.
Local trends: sharia-compliant banking in Saudi Arabia
It has been said that all real estate is local. That is to say that despite national trends, local realities still hold sway in the determination of real estate valuations. Something similar can be said of Islamic banking. What applies to Saudi Arabia may not, and often does not, apply in other markets such as the broader GCC area, Malaysia, London, etc.
Saudi Arabia has a population of 25 million and an economy that is rapidly diversifying. For banks, opportunity abounds, and there is not as much incentive to look beyond the Kingdom’s borders. Therefore, banks’ decisions to position themselves as being sharia-compliant really only makes sense in the Saudi context. The same rationale doesn’t apply to Dubai, where banks might need to think about what best serves a regional or broader international strategy.
It must also be noted that it is the unfortunate reality that the geopolitical climate over the past decade has led to a tarnishing of the Islamic moniker. And in some markets, even invoking sharia can be detrimental to the image of an institution. In a market such as London, there may be a need to refer directly to Islam and sharia-compliance in order to secure a core segment, but in terms of dealings beyond that niche, the word ‘sharia’ could be problematic.
There is also a difference between retail and corporate banking markets. At a corporate level, business is just business, and there is arguably less of a concern over the name of an institution. It is really at the retail level where the brand becomes paramount as a bank goes about pleading is case to the masses. And one would be remiss not to mention that there might also be third option, that of dropping Islamic references altogether.
At the end of the day, Islamic/sharia-compliant banking is essentially asset-backed banking that has an ethical angle to both how it operates and deals with customers. As such, the creative minds in branding might look to create a moniker that captures those two aspects and packages banking in a way that appeals entirely to the values of institutions and the mechanisms used to develop and sell products and services.
Perhaps, in a Western context, calling it something as simple as ‘classical’ banking would be more fitting. Either way, it seems that Islamic banking is here to stay and will continue to develop creatively to fit the markets in which it operates.
