The first session, facilitated by Carel Oosthuizen (former IMF) and Dr. Hatim El Tahir (Deloitte), was on the heterogeneity in Islamic finance development, Shari’ah and regulatory frameworks across different jurisdictions. The internationalization process need to comprehend an overview of the current landscape challenges across different jurisdiction, with some of the key indicators in relation to the structural economy such as economic growth, population, health, education, technology, employment, RD spending, depth of financial market and financial intermediaries development, access to finance, human development, and governance framework. The statistics of Muslim countries reveal huge potential for the level of improvement of each indicator, and hence it depends on how IFIs will incorporate and leverage from each of the factors gradually into several internationalization stages.

Specific to the context of Islamic finance, the issues remain on the legal and regulatory frameworks, supervisory frameworks, safety net, Shari’ah governance, and tax laws, which vary across countries. Some of the sound multinational strategies include ensuring a base (domestic) business, and not underestimating the complexity of economic fundamental, strong governance and risk infrastructure, robust technology, high capital buffers and flexibility. In addition, IFIs needs to account for emerging compliance trends due to cross-border regulations on compliance management framework and stricter governmental oversight, which may result in costs of compliance-related activities.

This requires integrated risk compliance framework which accommodates changing risk drivers and regulatory consistency. The key implementation is on integrating governance, process, people and technology, as well as strengthening GRC (governance, risk, compliance) capabilities through integrated control framework, IT risk management roadmap, and information process and compliance. 

The second session, facilitated by Dr. Philipp Wackerbeck (Strategy), discussed key requirements for internationalization, modes of entry, and strategies to achieve competitive positioning of foreign Islamic financial institutions. The domestic markets in some particular countries are nearing saturation and partially overbank, leading to internationalization initiatives. Nonetheless, the previous internationalization activities of some IFIs were very opportunistic and somewhat limited, with several executed transactions despite unclear business case, which imply the lack of structured approach for target market selection and decision on best strategy. As an overview, while there are limited number of banks with meaningful in-country operations and limited presence, most of the banks are having “flag planting” or pre-emptive strategies through establishing first base in new markets and avoid late entry cost, with some opportunistic ways in getting license in mature markets. Even a few banks with meaningful in-country operation and broad presence lack of international growth attributable to complex management models, as well as problems in capturing market shares and group synergies. To tackle the challenges, market characteristics and management models need to be synchronized, with particular country mapping including embedded-, core-, network-, hubs-, and on hold markets. Some of the identified macro challenges have been imperfect regulatory conditions, dominance of national incumbents, and rare attractive internationalization opportunities. Therefore, key internationalization strategies are the best combination of market selection (with criteria of market size, growth potential, competition, market access and compatibility) and market penetration, including greenfield, MA or partnership.

The third session, facilitated by Vaquas Alvi (Ogilvynoor) and Ayman Mohammed (Al Baraka Banking Group), was on rebranding as an expansion strategy for Islamic Financial Institutions to go mainstream.  The evidence has showed that the faith of most of Muslim consumers has affected their consumption behaviour. This cover a holistic lifestyle including banking and finance, fashion, travel, food and beverage, personal care, etc. While the young Muslim generation has been considered as untapped opportunity, Muslim consumers nowadays have been commonly misunderstood due to stereotyping, insensitivity, and localism, which further cause the failure to expand across border and to resonate. The concept is that there is no such thing as a Muslim brands, as Muslim consumers’ concern is on how the brand is able to understand and reach them, driven by emotional connection, as well as certain values. Hence, Islamic branding emphasizes on values that appeal to both non-Muslim and Muslim consumers, ranging from “Shari’ah-compliant friendliness to full Shari’ah-compliant in all aspects”, which can be classified into different tiers, as well as focuses on the segment of futurist.

Some of the key points for Islamic finance are of understanding its customers and their needs, overcoming the stereotype image, not losing values at any cost, connecting and resonating with the community, customization, thinking like a brand, etc. To be just Shari’ah compliant is not sufficient, and the strategies need to incorporate the emotional connections with consumers, and especially to raise awareness among Muslim consumers with respect to how Islamic finance differs from conventional ones.