Islamic finance must evolve for deeper inclusion
Islamic banks now attract customers not only from the traditional Muslim customer base but also from non-Muslims seeking ethical financial alternatives.
When asked to name the top three reasons they stay with their current bank, most young people cite factors related to customer service and ease of use.
The most popular responses involve a combination of convenience offered by mobile banking, access to digital credit, and trust in the bank’s stability and reputation. Only a handful of young people choose their bank based on adherence to Islamic finance principles.
For banks, whether fully-fledged Islamic banks or conventional banks offering Islamic banking products through Islamic windows, this insight presents an opportunity to steer product and service development and the growth of sharia-compliant finance to align with modern banking expectations and evolving customers’ needs.
In recent years, Islamic finance has emerged as a transformative force in the global financial landscape, demonstrating its potential to drive sustainable economic growth.
After more than 15 years since it was pioneered in Kenya, Islamic finance has come of age. It continues to demonstrate its potential, driven by the growing demand for ethical and Sharia-compliant financial solutions.
Kenya currently has three fully-fledged Islamic banks and conventional banks, including KCB Sahl and NBK Amana, offering Islamic banking products through dedicated Islamic windows. Beyond institutional growth, customer adoption has expanded significantly over the years.
Islamic banks now attract customers not only from the traditional Muslim customer base but also from non-Muslims seeking ethical financial alternatives. However, to truly thrive in the modern, fragmented and highly competitive financial landscape, Islamic banking must evolve beyond tradition.
Our experience with both conventional and Islamic banking youth customers indicates a shift in priorities. While the older generations (baby boomers and Gen X) bank decisions were focused on securing a safe place to keep their money, today’s youth prioritise convenience, digital innovation, and personalised experiences.
Essentially, for Islamic banking to appeal to many a population, there is a pressing need to bridge the digital gap. This translates to and requires investing in user-friendly mobile applications, integrated digital payment platforms, and innovative financial products.
Secondly, deliberate efforts must be made to sensitise the youth about Islamic finance. This can be achieved through established modern marketing strategies, including leveraging social media, influencers, and digital content.
Thirdly, financial institutions must anticipate the needs of their younger customers by offering solutions like halal digital micro-credit options that cater to young entrepreneurs and students who may need quick access to funds without engaging in interest-based borrowing. Progressive adaption will enable Islamic banks to reinforce its role as a viable and ethical alternative in the banking sector.
The writer is the Head of Islamic Banking at KCB SAHL Bank.