Islamic financing: rebranding vs fighting ignorance27 january 2014, 12:13
With the Islamic Development Bank financing gaining momentum in Kazakhstan, the public concern is growing over religion seeping into the economy of the secular country. The experts believe that rebranding of Islamic financing could help stimulate development of our economy and dispel the misunderstanding among the people. The chairman of the Association of Islamic Financing Development in Kazakhstan Yerlan Baidaulet told Tengrinews that Islamic financing may cease to be “Islamic”.
Earlier, the Islamic Corporation for the Development of the Private Sector (ICD) talked about financing four new EXPO-2017-oriented projects. Back in 2013, Deputy Prime Minister of Industry and New Technology Asset Issekeshev announced Kazakhstan’s plan to join the Islamic Financial Services Board and possibly enter the International Islamic Financial Market (IIFM).
Yerlan Baidauletov. Photo courtesy of kursiv.kz
Baidauletov said that rebranding of Islamic financing is on its way and the question of removing the word “Islamic” from the term is being considered. He believes that in three years time, the Islamic financing will be known as “stable” and “ethical” financing instead. “We are not satisfied that in recent years, people have not understood what Islamic financing is and stress the one word “Islamic”. In fact, religion has nothing to do with it, it is basically a set of rules, the remaining is pure economics,” Baidaulet explained.
The analyst of the FINAM Investment Holding Anton Soroko supports the idea of rebranding and believes that it will help Islamic financing expand in Kazakhstan. “It (rebranding) will help people start viewing this issue more objectively, without leaning towards already existing preconception,” the analyst said. Soroko believes that two years is enough time to make the rebranding. He agrees with Baidaulet that it will not be a matter of substitution of “one word for another” but rather the word “Islamic” will be omitted in names, description of products and advertisement.
Anton Soroko. Photo courtesy of urbc.ru
Anna Bodrova, Senior Analyst of Alpari said that the problem has nothing to do with the word, but everything to do with lack of financial literacy of the citizens. “The consumers perceive “Islamic financing” as something connected to terrorism or militant groups and do not associate it with interest rates and methods of profit generation,” Bodrova noted. She added that there certainly was an important difference between conventional financing and Islamic financing, and it has little to do with religion. Bodrova explained that Islamic Financing does not use interest rates and futures, but is more like project financing.
“Rebranding is necessary if we intend to continue work with this type of financing. But at the same time it is important to improve financial awareness of the population and explain the ways different schemes work. Along with the newly acquired knowledge and understanding of the work of the financing systems, the population will gain more trust,” she added.
However some analyst have a different opinion concerning rebranding. Senior Analyst of the Return on Investments Research Agency Zhannur Ashigali believes that rebranding is not an optimal solution in this case. She agrees with Bodrova that informing the masses is key to success. “Besides rebranding, informing potential clients about Islamic financing and its benefits, low risks both to the client and the economy as a whole would be more effective,” Ashigali said.
Zhannur Ashigali. Photo courtesy of megapolis.kz
Ashigali added that not only traditional Muslim countries are interested in Islamic financing, but also Australia and countries of Western Europe, North America, and Latin America. “Investors who understand the benefits of the Islamic financing are driving the tremendous development of the sector that is proved by repeated placement of Islamic securities in many regions of the world. The risk is the lowest out of all the possible investments. Notably, for more than 10 years, the Islamic Development Bank has been rated AAA by leading rating agencies in the world, ” concluded Ashigali.