Booming Islamic banking will need 30,000 jobs in the Gulf in 10 years: A.T. Kearney study

"Although Islamic financial institutions still represent a minority in the Gulf countries, Sharia compliant banks are poised to pose a serious threat to conventional financial institutions in the chase for market share," said Dr. Dirk Buchta, Vice President and Managing Director of A.T. Kearney (UAE) Limited at the release of the study.

In the Gulf States alone, the number of Islamic financial institutions has increased sharply in recent years. Market observers forecast that Islamic banking will continue to grow at rates of between 15 and 20 percent.

In the competitive world of Islamic finance, Sharia compliance alone is no longer a differentiating factor. The adoption of strategic management practices holds the key to success, according to the study that covered all major Islamic financial institutions in the Gulf region.

"Leaders distinguish themselves along the lines of strategy, organization, processes, and resource endowments, and not only in one specific area," said Dr. Helmut Schulte-Croonenberg, Vice President at A.T. Kearney and head of the study.

Leading financial institutions in Islamic banking are shifting away from traditional product focus to a more customer oriented approach, reflected in the emphasis that is placed on marketing, service quality and customer service. This reorientation is part of a concerted effort to alter the existing perception of Islamic banking as providers of mediocre service quality.

"Acting in a customer-focused way means more than just adapting existing selling techniques to focus more on the customer. It's a new approach for all parts of a company," said Alexander von Pock, Manager at A.T. Kearney and author of the study.

The study says that in order to support the customer-focused strategy, leaders are fostering an agile and responsive business culture, backed by efficient processes and resources. This also means that Islamic financial institutions have to find the right balance between two seemingly contradictory requirements, an accelerated Sharia approval process in tune with customer requirements and the diligence required for this task. Further standardization of rules and regulations as well as products and services is therefore desirable.

The study suggests several development areas for Islamic banks, particularly the need to better understand their (potential) customers. Besides religious aspects, competitive returns and services are also major bank selection criteria, according to von Pock.

Conventional banks entering Islamic finance need to adopt a specific and focused approach. First, they should target segments they already serve, in order to fully leverage the existing expertise. Secondly, existing processes and resources should be utilized to the utmost extent possible.

"In IT, for example, processing and databases should be shared, while products should be modularized," explained Schulte-Croonenberg. "Moreover, the banks have to carefully select their branding strategy, and an independent brand is often advisable for achieving this goal."