free islamic banking
TRANSCRIPT
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Is Islamic Banking Satisfying the Customer?Marketing Model: E-N-T- G-A-M-I-K-R
By:
Nadeem M. Firoz
B.Com (Hons), M.Com (Univof Peshawar); MBA, Ph.D(USA)
School of Bus (AACSB)
Montclair State University, New Jersey
AL-HUDA CENTRE OF ISLAMIC BANKING & ECONOMICS
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Introduction
Experts in Islamic Financing
Easiest way to understand the Islamic financing conce pt
Easiest way to understand the non Islamic financing conce pt
Is Interest free is free?
Im portance of Marketing
Marketing for non Marketing Executives
Easy lay man model of Marketing: E NTGAMIKR
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So What?
Customer satisfaction requires total Marketing
Integration Satisfying customer at what cost?
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Sellers Market of Islamic
Financing
Lack of competition
Lack of knowhow
Analogy to MNC¶s Sweat Shop & Child Labor
Abusing of Orthodox Islamic Believers
Exploitation of interest free idea and loansharking
Charging more than conventional interest
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A case of House Building FinanceCorporation (HBFC)- WAPDA Town.
Nov 1, 2010Islamic Finance
House value at the time of loan Rs: 60,00,000
Loan of Rs. 3,10,000 Life of the loan 17 years
Paid in last six years Rs. 5,000 a month
5X12X6= Rs 3,60,000
Principal reduced only Rs. 34,000 Principal remaining: Rs. 2,76,000
If paid today loan remaining with interest
Rs.4,73,000
If paid in 17 years may be equal to 10,00,000
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A Case of IMF. Conventional Finance
Interest only loans
IMF/World Bank on December 21, 2005 ± 19 countries loans down to zero
± for countries with per capita income of less than $380/year
± [This was due to the historic Multilateral Debt Relief Initiative (MDRI)]
Rich nations (G-8) write off $40 BN in debt - Heavily Indebted Poor Countries(HIPC)
62 countries were paying $10 BN each year in debt servicing
Example:Time 30 years
Loan $40 BN
Paid Interest $120 BN
Principal remaining $40 BN ± Finally to Zero after making 80 BN
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So What?
Making a case for a case
All the same Nothing is F R E E
No money no Honey
Lets try to Satisfy the customer (KING)anyway
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Environment
SWOT ------ Analysis
strength weaknesses internal micro
opportunity threats external macro
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Marketing Internal & External
C-king
4P¶s-contl
8uncontl
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Needs & Wants
Maslow's hierarchy of needs:
Needs cannot be created
Satisfaction of the needs and wants of the customer
5. Self-actualization
4. Self-esteem3. Social
2. Safety
1. Physiological
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So What?
PHYSIOLOGICAL
House, Education, Car, Etc.
Through Equity loan: Safest loan in
the world
Case of HBFC/WAPDA 3 Lakhs loan on
60 Lakhs property
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Targeting
Bases of Segmentations
Multiple segments
Demographic- age income, sex, education
Behavioristic- Product use- consumer or B2B markets
Geographic- north east, southwest, east, west, Midwest,
Psychographic- life style- social class, personality
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Strategies
1. Mass marketing 4. Undifferentiated
Marketing
3. Productdifferentiated
marketing-
5. Marketdifferentiated
Marketing
5. Target marketing
One defined markt
6. Target marketing -
Concentrated
markt
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So What?
1. Mass
Marketing
4.
Undifferentiated
Marketing
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Goods - Products
Goods
Services - intangible
Products ± tangible
4 -- Problems/Nature/Issues/Concerns of Services
1. Intangibility
2.V
ariability 3. Perishability
4. Inseparability
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So What? Intangibles
Converting Intangibility to
Tangibility
Build on a relationship
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So What? Tangibles
Tangibles: No problemhere
oGetting into a house
oGetting a car oGetting education
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Customer & Financing fit
Seeking Customer Satisfaction
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So what?
Conduct Market Research
± Study consumer behavior to identify consumer¶s wants and needs
± Target and segment the Muslim market by demographics and geography. Findcommunities with devout Muslims who are most likely to purchase Islamic financingproducts
± Align consumers¶ wants and needs with the organizations objectives
± Materialize wants and needs into differentiated Islamic financing products
Create Consumer Oriented Marketing Program
± Engage in a grassroots marketing program where banks reach out directly to localMuslim residents in the surrounding community.
± Develop a comprehensive website which details all aspects of your bank¶s Islamicfinancing products, BUT focus on direct sales, as a Majority of mortgage products arepurchased face-to-face
Offer Promotional Discounts
± To encourage Word-of-Mouth advertising offer ³refer a friend´ discounts on your nextmortgage payments
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?
Integrating Islamic financing into your business
± product design, training, processing, business structure, human resources policy and
employee relations management, and FDIC compliance - County specific
Obtaining approval from Shariah boards
± body must have oversight of all significant business decisions
± interpretations of Islamic law are constantly being debated among Islamic scholars,
not all Shariah boards are created equal
Cost of launching Islamic products
± extensive MIS required to develop a product with little precedent in the United States
± design and printing of new financial documents to support the new products, counselfrom Muslim and regulatory experts, and the training and hiring of staff members to
support the new products
Stereotypes
± United States - felt to be hostile towards the concept after the 9/11 terrorist attacks
± Muslim - wary of western institutions as the recent ³War on Terror´ policies
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?
Regional banks are in best position
-focus on local Muslim community, conduct MIS, build up trust, focus on word
of mouth advertising
Control start-up costs
-dedicate only a few staff members to develop business
-service Muslim¶s on an ³as-needed´ basis until business grows
-use simple proven Islamic financing products (quick approval by Shariah
boards)
Continue MIS
± to determine consumer¶s evolving wants and needs
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?
Market to non believers to expand the
marketing pool:Market Share
to
Market Size
Micro lending
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Amount - Price
Profit & Loss
Cost of Capital
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So What?
Partnership
Keep profit down to less than conventional
interest rates to attract customers form all
markets (believers and non believers)
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Information - Promotion
Strategy
Media Tactics
Print: Magazines - Newspapers
Out of home: Billboards - Transit - Flyers
Broadcast: Radio - TV
Word of Mouth:
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So What?
Maximum information
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Knowhow
Marketing Consultant
IntegrationMatrix structure
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So What? Matrix
CEO
banker banker banker
Mktg
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So What?
Existing Products New products
Existing markets 1.Marketi
penetration
2. Product
development
Existing Markets 3. Market
development
4. Diversification
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So What?
H Star ?
L Cash Cow Dog
MGR H L
RMS
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Recommendations
1. Research your area
2. Advertise
3. Follow examples4. Hire Consultants
5. Offer Alternatives to Mainstream Banking
6. Similar but Different
7. Major Markets
8. Market Potential
9. Multiple Designs
10. Medium of Exchange
11. Sharing the Risk
12. Based on Honesty
13. Belief that God is Watching out for you
14. Investing in Ethical Products or Markets
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So What?
M-A-R-K-E-T-I-N-G
E- N-T- G-A-M-I-K -R ©2010 Firoz
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Questions/ Comments