Sharia’, Finance
and Strategy
Abdel-Maoula Chaar
Strategic Management for IFIs
Porter five forces
New
Entrants
TH
Suppliers
NG
I
N
AI R
G
E
R
BA POW
AT
E
R
Field of
Finance
Rivalry among
firms
TH
G
N
I
AIN R
G
E
R
BA POW
Clients
AT
E
R
Substitute
Products
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Strategic Management for IFIs
Porter five forces
New
Entrants
AT
E
R
Suppliers
NG
I
N
AI R
G
E
R
BA POW
TH
Field
of
Field of
Finance
Finance
Rivalry among
firms
G
N
I
AIN R
G
E
R
BA POW
Clients
Rivalry among
AT
firms
E
HR
T
Substitute
Products
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Strategic Management for IFIs
Rivalry Among firms
Islamic
Finance
Western Finance
Islamic
Market
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Strategic Management for IFIs
Rivalry
firms
Porteramong
five forces
New
Entrants
Suppliers
T
GH ing
I
H ain
rg er
ba pow
- Sharia’ scholars with
business knowledge
- Banking specialists
with Sharia’ knowlege
Islamic banks. New entrants
contribute to the expansion
of the market
Field
NO at of
e
thr
Finance
Field of
Finance
W g
LO inin
a
rg wer
a
b po
Sharia’
compliancy
NO t
Sharia’
compliancy
ea
thr
Clients
- Potential market of
1.6 billion people
- Concentration of
wealth
Substitute Clients looking exclusively
for Sharia’ compliant
Products products
AM Chaar– Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Islamic finance facts
The distribution of IFIs
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Islamic finance facts
Islamic markets characteristics
 951 billions Sharia compliant assets
 799 billions banking assets
 152 billions under management
 1 trillion target expected in 2010
 20-30% annual growth rate
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Islamic finance facts
The distribution of Islamic assets
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Islamic finance facts
Islamic markets characteristics
 951 billions Sharia compliant assets
 799 billions banking assets
 152 billions under management
 1 trillion target expected in 2010
 20-30% annual growth rate
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Islamic finance facts
Islamic markets characteristics
 951 billions Sharia compliant assets
 799 billions banking assets
 152 billions under management
 1 trillion target expected in 2010
 20-30% annual growth rate
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Islamic finance facts
Growth of Islamic banking assets
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Strategic Management for IFIs
Porter five forces
New
Entrants
Islamic banks. New entrants
contribute to the expansion
of the market
NO at
e
thr
Suppliers
T
GH ing
I
H ain
rg er
ba pow
- Sharia’ scholars with
business knowledge
- Banking specialists
with Sharia’ knowlege
Field of
Finance
Sharia’
compliancy
NO at
e
thr
W g
LO inin
a
rg wer
a
b po
Clients
- Potential market of
1.6 billion people
- Concentration of
wealth
Substitute Clients looking exclusively
for Sharia’ compliant
Products products
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Islamic finance facts
Islamic markets characteristics
 HNWI and UHNWI on the rise
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Islamic finance facts
Islamic markets characteristics
HNWI expected annual growth (2006-2011)
Middle - East
9,50%
Asia Pacific
8,50%
7,20%
Latin America
7,00%
North America
6,10%
Africa
Europe
4,30%
1% 2% 3% 4%
5%
6% 7% 8%
9% 10%
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Islamic finance facts
Islamic markets characteristics
 HNWI and UHNWI on the rise
 Affluent Segment:
 Young, active, optimistic
 Financial markets and financial services
underdeveloped
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Islamic finance facts
Conventional banks’ Islamic vehicles
2003
4
3
2
20 00
19 95
1
5
20 05
2002
1996 1998
2004
1. Citi-Islamic - 2. HSBC Amanah - 3. Noriba (UBS)
4. BNP Paribas Najmah - 5. Calyon Islamic Window
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Islamic finance facts
Conventional banks’ Islamic vehicles
 Window Models
 Used by banks to carry out altogether Islamic
and conventional financial operations
 Branches
 Dedicated delivery channels for Islamic finance
products
 Subsidiaries
 Separate legal entities used to offer Islamic
finance products
Strategic Management for IFIs
The dynamic of Islamic and western
financial fields
Islamic
Finance
Western Finance
Western Finance
Islamic
Finance
Islamic
Market
Islamic
Market
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Strategic Management for IFIs
The dynamic of Islamic and western
financial fields
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Strategic Management for IFIs
Porter five forces
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Strategic Management for IFIs
Difference in Islamic sensitivity
 Only Islamic – 20%
Sacrifice returns/service for full Sharia’
compliance
Looks for pure Islamic players
 Islamic if equal performance – 40%
Will not sacrifice returns/service for Sharia’
compliance
Sharia’ compliance is a bonus
 Value-Seekers – 30%
Looks for the best performance regardless the
bank identity
Only conventional – 10%
Ernst & Young (2008).
The Islamic funds and investments
report.
Strategic Management for IFIs
The dynamic of Islamic and western
financial fields
Western
Finance
Western Finance
Islamic
Finance Finance Islamic
Islamique
Market
Islamic
Market
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
The Islamic Finance Paradigm
Sources
The specificities of the Sharia’
TAWHID
Quran
(Quran / Sunna)
Sunna
Interpretation
STEWARDSHIP
Sharia
(Sharia)
Fiqh al
MASLAHA
Mouamalat
(Fiqh et Ijtihad)
Operations
(Techniques)
Ijtihad
Organization
(Sharia Boards)
Applications
Mindset
The Islamic Finance Paradigm
The Paradigm
Islamic Finance
Quran / Sunna
Tawhid
Sharia’
Stewardship
(Stakeholders primacy)
Maslaha
Optimizing
stakeholders benefits
The Islamic Finance Paradigm
The specificities of the Sharia’
Letter of
the Sharia’
Spirit of
the Sharia’
The Islamic Finance Paradigm
The specificities of the Sharia’
Strategic Management for IFIs
The dynamic of Islamic and western
financial fields
Islamic
Finance
Ethics
Research
& Social
and
Responsability
Development
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Strategic Management for IFIs
Porter five forces
New
Entrants
Ethical banks
w
Lo eat
r
Th
Suppliers
No play
er
w
po
- Sharia’ scholars with
business knowledge
- Banking specialists with
Sharia’ knowledge
- Universities and
business schools
Islamic
Finance
Ethics & Social
Responsability
No play
er
w
po
Clients
w
Lo eat
r
Th
Substitute
Products
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Strategic Management for IFIs
Western
Finance
Ethics
CSR
The dynamic of Islamic and western
financial fields
Islamic
Finance
Modern Finance
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Strategic Management for IFIs
Porter five forces
New
Entrants
Ethical banks
w
Lo eat
r
Th
Suppliers
- Sharia’ scholars with
business knowledge
- Support institutions
- Universities and
business schools
No play
er
w
po
Islamic
Finance
Ethics & Social
Responsability
No play
er
w
po
Clients
w
Lo eat
r
Th
Substitute
Products
AM Chaar – Introduction – 5th Islamic banks and financial institutions conference – Damascus 2010.
Strategic Management for IFIs
Education in Islamic Finance
Strategic Management for IFIs
Education in Islamic Finance
Thank you
Abdel-Maoula Chaar