For too long, Islamic finance has operated within its own confines, often measured against its own peers rather than the broader financial market.
This insular approach, while perhaps fostering internal growth, has inadvertently created the perception of Islamic finance as a less competitive or less sophisticated alternative to conventional finance.
A paradigm shift is a must now, with Islamic finance being benchmarked against the titans of conventional finance – the Black Rocks, Vanguards and State Streets of the world.
This bold stance reflects a growing maturity within the Islamic finance industry and a recognition of the evolving demands of the Muslim consumer.
The underlying premise for this shift is simple yet profound: the vast majority of Muslims globally, even those deeply adherent to their faith, currently operate within conventional financial systems.
When seeking Shariah compliant alternatives, their natural inclination is to compare them against what they already know and use. This means Islamic finance providers can no longer afford to be ‘good enough’ within their own segment; they must be genuinely competitive in terms of performance, accessibility and pricing against their conventional counterparts.
The awareness of Islamic financial obligations such as avoiding Riba, is widespread among Muslims. The challenge is not a lack of demand or understanding of religious prohibitions, but rather a dearth of ‘genuinely viable solutions’ that are both Shariah compliant and financially attractive.
In many markets, Shariah compliant products have historically been more expensive or more difficult to obtain than conventional options. This disparity places the Muslim community at a ‘significant disadvantage’ for simply choosing to follow their faith, which fundamentally contradicts the ethical principles of Islamic finance that advocate for fairness and equity.
The new generation of Muslims, particularly those in the third or fourth generations in Western countries like the UK, are financially literate and unwilling to compromise. They demand ‘the best of both worlds’ – adherence to their principles without sacrificing financial benefits.
Hejaz Group directly addresses this by providing a ‘viable alternative’ that allows Muslims to switch from conventional funds without ‘suffering’ or ‘losing anything’; in fact, they often gain due to better performance or competitive pricing.
This approach aligns with Maqasid Shariah, the higher objectives of Islamic law, which include the preservation of wealth and the promotion of justice and well-being. A financial system that disadvantages its adherents fails to uphold these objectives.
Hejaz’s competitive advantages stem from its institutional size, global asset management portfolio of over US$3 billion, and its holistic offering. Unlike many smaller players or fintech platforms that merely facilitate access to products owned by others (which may even be conventional funds with a Shariah window), Hejaz owns and controls its own ‘bona fide, authentic Shariah compliant solution’ from end-to-end.
This integrated approach ensures true Shariah adherence and allows for greater cost control, making products competitively priced and accessible to a broad spectrum of the Muslim community, not just the ‘uber rich’.
The challenge for the broader Islamic finance industry is to embrace this competitive mindset. While Islamic finance is founded on unique ethical principles – such as Musharakah, Mudarabah and asset-backed transactions – these principles must be delivered efficiently and competitively in the modern financial landscape.
The success of institutions like Hejaz Group, which measure themselves against global benchmarks and prioritize competitive performance, will ultimately drive the mainstream adoption of Islamic finance, transforming it from a niche offering into a powerful, ethical alternative for a global clientele.
Muzzammil Dhedhy is co-founder and executive director of Hejaz Group, Australia
