MARKETING FOR ISLAMIC FINANCE PRODUCTS: AN ANALYSIS FROM MAQASID POINT OF VIEW

بسم هللا الرحمن الرحيم

29-Nov-14

5th International Conference on Islamic Jurisprudence in the 21st Century

Organized by

Department of Fiqh and Usul al-Fiqh

International Islamic University

Malaysia (IIUM)

É

Paper Title

Venue

Room 2

23th -24th September 2014

Md. Habibur Rahman

Abu Talib Mohammad Monawer

Abstract

• RP:

– Different Marketing Mix/Tools in Conventional Practices

– Adopting, Alternatives, Integration in Islamic Practice

– Maqasid point of view is absent

• RQ: what are the marketing principles and tools that assist in

achieving the noble objectives of SharÊÑah?

• RO: To study the marketing principles and tools for Islamic

finance products that lead to achieve the maqÉÎid al-SharÊÑah.

• Keywords: Islamic Marketing, MaqÉÎid al-SharÊÑah, Islamic

Finance.

Outline

Introduction

Islamic Marketing: Tools/ Mix

MaqÉÎid al-SharÊÑah

End & Means in Islamic Finance

MaqÉÎid & Marketing

Conclusion

What is Islamic Marketing?

An approach to marketing from the perspective of both marketers and consumers which draws from the traits associated with principles of Islam.

Islamic Marketing Mix

Integrated 7 Ps (Nurhazirah H., Muhammad I. H., 2014)

7 Ps Islamic (Wilson, 2012)

7 Ps of Conventional Marketing (Lovelock, 2011)

5 Ps of Islamic Marketing (Qader V. D., 2010)

4 Ps of Customer Centric Way (Qader V. D., 2010)

4 Ps of Seller-Centric Way

Customer-centric way Seller-centric way

4 Ps

Product

Price

Place

Promotion

7 Ps of Conventional Marketing

7 Ps

Product elements

Price

Place & time

Promotion & education

Process

Physical environment

People

7 Ps of Islamic Marketing

7 Ps

Pragmatism

Pertinence

Palliation

Peer support

Pedagogy

Persistent

Patience

7 Ps of Integrated Marketing Mix

7 Ps

Pragmatism & Product

Pertinence & Promotion

Palliation & Price

Peer support & people

Pedagogy & physical

environment

Persistent & process

Patience & Place

Maqasid al-Shari’ah

• MaqÉÎid al-sharÊÑah in Islamic Finance:

• 3 levels of Maqasid: Necessities, Needs, and Luxuries

• 5 Necessities: Deen, Life, Progeny, Intellect, and

Wealth

• General Objectives of Islamic Finance:

– Circulation, Transparency, Justice, and Protection &

Preservation

• Elements must be avoided to achieve Maqasid:

– ÍarÉm (prohibited) subject matter, RibÉ (Interest), gharar

(Uncertainty), maysir/ QimÉr (gambling), khaÏar (risk), etc.

Ends & Means in Islamic Finance

• Four general maqÉÎid (Uzaimah & Safinar, 2006; FarÊd ZËzË, 2012; Laldin and Furqani, 2013; Ahcene Lahsasna, 2013):

• End1: Circulation of wealth for consumption or investment.

• Means

– legislation of financial contracts,

– Prohibition of ribÉ, Hoarding, Monopoly, gambling, etc.

– Constitution of Various types of transactions

– Encouragement to undertake and participate in necessary types of financial activities.

• End2: Fairness & Transparency

• Means:

– Witnesses

– write the agreement

– pledge certain property to be a security for debt.

– bail/ waranty

– earning money in a legal way, protection of public interest,

and proper spending of wealth

– Certain values, measures and standards to be upheld in

transactions

– Certain negative elements to be avoided

• End3: Justice and Equality

• Means: – fields of zakat, war wealth,

– waqf, etc.

– Social duties and responsibilities towards others

– The concept of farÌ al-kifÉyah (social obligation) places responsibility on those who are capable or better off to assist those who are not capable or who are worse off (Rahman, 1969)

– Finacial dealings with non-muslims,

– Stadardization of Islamic financial institution,

– Enactment of rules and procedures

• End4: Protection of wealth and property from transgression or wrongful appropriation.

• Means:

– Enforcing law against illegal appropriation

– Allowing to request for a guarantee by contracting

– Impose a compensation for any non-performance

– punishment for financial crime and spoils,

– Breach of contract

– pure ownership,

– rules of validity of contracts

– Stability of finance and business,

– Documentation, development and investment of wealth,

MAQASID OF MARKETING

• Fulfillment of needs and goals: to fulfil consumers' needs, besides achieving company goals.

• Balance between company and customers goals: so that company gets profits; and consumers are provided safe and quality products; and towards ensuring the welfare of society.

• Hanafy and Salam (1988) outlined six categories of ethical principles that can be applied to marketing activities. These are the principles of truthfulness, trust, sincerity, brotherhood, science, and technology and justice. All these ensure the well-being of the mankind.

5 Ps of Islamic Marketing (Qader V. D., 2010)

5 Ps

Product

Price

Place Promotion

People

5 Ps: 1. Principles of Product

Lawful (Tayyibat) and not to cause dullness of mind in any form.

Asset backed

Deliverable

Identification of extra cost-added features (Ibn al-Ukhuwwah, 1938)

2. Principles of Price

Islamic market should be free to respond to the market forces operating within it.

No corner market,

No hoarding,

No unjustified price manipulation, and

No restriction on trade

3. Principles of Place

Not manipulating the availability of a product for the purpose of exploitation;

Not using coercion in the marketing channel;

Not exerting undue influence over the re-sellers choice to handle a product

4. Principles of Promotion

Avoidance of false and misleading advertising;

Rejection of high pressure manipulations, or misleading sales tactics;

Avoidance of sales promotions that use deception or manipulation.

5. Principles Concerning People

Free and independent judgment, no coercion

• Sexual appeal,

• Emotional appeal,

• Fear appeal, subliminal advertising and

• Pseudo scientific claims

• Because all have elements

of coercion which cause

them to be

categorized as unethical as

a means of marketing.

Islamic Marketing & Maqasid

Tahsinat

Means of hifzul mal

Beneficing din, life, intellect, progeny,

Benefiting Honor through promotion-advertising

GM Circulation

Fairness & Transparency

Justice & Equality

Protection & preservation

SM

Conclusion

If the principles and tools of Islamic marketing are applied, Marketing will achieve the maqasid in finance and it will further be a means of the general objectives of shariah.

Marketing of Islamic finance products shall be marketed and promoted in such a way that ensures and actualizes the noble objectives of the SharÊÑah.

Islamic finance products must be pure and Íalal, that must carry the religious, social and ethical values. The market place should be driven by typical demand and supply and it should be free from any kind of artificial pressure. Promotion and advertising tools and means shall conform to the rules and principles of the SharÊÑah. The interaction between sellers and customers should be at a level of brotherhood.

Future Research Implications

Further research could be extended to develop a framework of Islamic marketing from Maqasid Point of view.

A study on Islamic Marketing mix from the Maqasid point of view is needed.