Marketing Islamic Finance Products in Pakistan: Trends and Analysis

by Salman Ahmed Shaikh

There are 5 fully-fledged Islamic banks operating in Pakistan and 15 conventional banks with Islamic banking branches. The share of the industry in the banking system has risen to over 7 percent from just 0.5 percent in 2002, according to Reuters.

Citing the challenges for the industry, people usually opine that the industry needs to create awareness about itself, its products and the concepts underpinning their development.

One listed Islamic bank in Pakistan showed Rs 47 million on the expenditures side in 2010 which was more than the Rs 41 million in profits it reported for the same year. Of note is that it is the first time the bank had reported profits and, as odd as this ratio might appear, it nevertheless tells us that a good sum of money was spent on advertising. Another listed Pakistani Islamic bank had also spent Rs 43 million on publicity in 2010.

Creative advertising is also finding its way into these marketing campaigns as evidenced by the few examples of original marketing slogans used by some Islamic banks, which names will not be revealed.

Sample slogans

"Finally, a car that lets you fly. Finance your dream car."

"Live in your dream home."

"Drive your dream car."

"Shariat Mein Barkat. (It means blessing is only in Islamic law)"

Sadly, though these slogans have contributed their share in promoting consumerism in Pakistani society they failed to hail Islamic virtues of Shukr (thankfulness), Sabr (patience), Tawakkul (steadfastness), Infaaq (payment to charity), refraining from Israaf (extravagance), hubb-e-maal (love of wealth) and hubb-e-dunya (love of materialism).

The prevalent practice of marketing efforts includes billboard advertising, TV commercials, print media and additionally running paid content in the form of discussion programs on TV. But, in the name of creating awareness, serious discussions and arguments usually lie missing in the paid discussion programs run on TV.

The proponents of Islamic banking repeatedly try to give some logical answers to support the case of Islamic banking and argue that the end result of many activities could be similar, but their interpretation for Halal and Haram could still be different. These logical arguments are analyzed briefly.

A McDonalds burger in the West may taste the same as in the East, but one may be permissible i.e. Halal and one may be prohibited i.e. Haram if the animal from which the meat was prepared was not slaughtered in the prescribed Shari'ah manner. The forbidden burger is not prohibited on the basis of taste, but rather due to the manner of slaughtering. But regardless of the argument, the way the burger is advertised fails to remind the consumer of the fact that it is God Almighty who has given man permission to take the life of an animal for food consumption.

Similarly, pre-marital and post-marital sex may prompt similar physical and emotional responses, but in Islam, the former is prohibited while the latter is permissible. Here again, the reason for prohibiting pre-marital sex is not biological or utility related, but rather social i.e. Islam treasures the family system and wants to protect its sanctity at all cost, else, from a social point of view, humans would be no different than animals.

If one does not wish to invest money for profit purposes, but has some surplus funds, Islam has encouraged spending on charity over lending for interest and it is supported through many verses. "They ask thee how much they are to spend; Say: "What is beyond your needs." Thus doth Allah make clear to you His Signs: In order that ye may consider." (Al-Baqarah: 219).

"In their wealth, there is a known right for those who ask for it and those who have need for it." (Al-Muarij: 24-25).

Instead of those Islamic institutions who are working in conformity with Islamic rules and principles trying to create awareness about these virtues, emphasis has been on creating wealth. By not using the Islamic virtues mentioned above, Islamic banks have essentially failed to create brand affinity among the masses on the basis of what Islam promulgates as core to its followers beliefs. This is not to deny the efforts and achievements of Islamic banks, but rather meant to point out the shortcomings which need to be looked at and addressed right away.

BOX: Islamic Credit Cards: A Necessity or Luxury By Salman Ahmed Shaikh Islam never encourages one to become indebted unless it is absolutely necessary. Many a -hadith show the viewpoint of Islam on debt creation, especially when it is beyond ones capacity to repay, and points to what extent it should be avoided and used to meet ones necessary requirements. Prophet Muhammad (pbuh) said: -O Allah! I seek refuge with Thee from sin and debt. [Sahih Muslim] The Prophet Muhammad (pbuh) said: -After the grave sins which Allah has prohibited, the greatest sin is that a man dies while he has debt due from him and does not leave anything to pay it off, and meets Him with it. The following supplication is related to the Prophet Muhammad (pbuh) for salvage from debt: -O Allah! I seek refuge in You from all worry and grief. I seek refuge in You from incapacity and slackness. I seek refuge in You from cowardice and niggardliness, and I seek refuge in You from being overcome by debt and being subjected to men. But, the currently practiced and widely used Islamic finance contracts are more based on debt financing than equity financing. Some financial institutions in Islamic countries have developed Islamic Credit Cards for consumer financing. Problems arise due to the fact that credit cards could be used for impulsive buying or even the fulfillment of ones needs while not involving a tangible asset. Even when a transaction may involve a tangible asset, it is hard to fulfill all the necessary requirements of Murabaha in quick time. One way to deal with this is to use the credit card not as a mode of financing but simply offer it as a convenience product that carries a transaction fee. But, charges must be realistic, i.e not excessive. It must also be noted that a credit card might still be provided to the customer (else it will be same as a debit card), but no additional amount is to be charged over the credit amount. The charges so taken from the customer must be transaction-based and not time specific. In the current practice, they are time specific. Monthly charges have to be paid irrespective of whether one uses the card or not. This is not recommendable. As a matter of fact, banks aim at making a profit out of the business of providing finance, even for consumption purposes. This is not recommendable looking at the various principles and philosophy of Islamic faith. Islamic Economics and its basis, principles and objectives will be increasingly compromised if such products are launched.

About the Author

Salman Ahmed Shaikh is a researcher in Islamic Economics. He is author of "Proposal for a New Economic Framework Based on Islamic Principles". He has also written 20 papers and more than four dozen articles on Islamic Economics. He can be contacted at salmanahmed_hyd@hotmail.com. Courtesy provided by Halal Tamweel.

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