In a recent interview with Islamic Banker, Siddiqui shared his view about the world of Muslim Lifestyle e-commerce and what Islamic finance can learn from it.
IslamicBanker (IB) : So, from your experiences with Zilzar, what are some lessons for Islamic Finance?
Rushdi Siddiqui (RS) : There are many lessons, but three important lessons … First, does as an Islamic bank or Takaful operator understand and appreciate the digital challenges of the customer journey? Do they understand their depositors, existing or potential, are also exposed to efficiency of B2C e-commerce journey via their smart-phones? As depositors, they are expecting their user journey to be comparable (effortless and seamless) to, say, a B2C website or content based website like Zilzar Life (www.zilzarlife.com). For example, the customer services of, say, some of the B2C sites is far superior than the average Islamic bank’s customer service, as the former ‘get it,’ meaning what the customer wants. As the customer increasingly has more options, and
he/she will walk if not happy! Second, do they know where the customers are migrating? They need to go to where the (Muslim) Millennials are congregating. Thus, digital-first strategy, via mobile, as (fast and secure) internet penetration is increasing every day in the Muslim world. It’s about reach combined with depth, and Islamic banks need to think beyond footpath customers. Furthermore, mobile banking cannot be just about
a van driving through neighborhoods collecting deposits or disbursing.Thus, mass emails, while still relevant (assuming not caught in customer spam filers) cannot be the ‘go to’ digital strategy. Digital market and social media marketing, bringing traffic to content with higher
conversion ratios, needs to be seen as an investment in the brand building. Third, focus on your front yard, and not the compettion, as only you have control your own manifest destiny! Invest in your people, technology, and digital marketing.
IB : What are the major threats to Islamic finance?
RS : The inertia is their biggest enemy. They need to move from the ‘law of necessity and bias on form mindset,’ to efficient market based, substance-oriented solutions. Islamic banks are slowly being disrupted and have not yet figured it out! Now, we have Islamic crowd funding, like www.shekra.com, and Islamic offering of conventional Peer-to-Peer lending, like Beehive in Dubai. In Malaysia, the Secuities Commission has given six licenses to crowd funding, and one is an Islamic platform (yet to be launched). These non-bank financial institutions are offering access to
capital to today’s change-agents of tomorrow: youth, women, SMEs, etc. These are excluded stakeholders from both Islamic and conventional finance in the Muslim world. Furthermore, Islamic banks need to move beyond bias towards real estate, with it boom-bust cycles and links to the price of oil, to other real economy sectors. The Muslim lifestyle marketplace, looking for compliant liquidity, includes halal food and beverage, ingredients, cosmetics, pharma, travel, fashion, media/recreation, and logistics. These areas are all linked to Muslim demographics-cum-consumerism: the next big market with BRICS (Brazil, Russia, China, India, South Africa) characteristic.
IB : What can be done for convergence to occur between Islamic finance and the Muslim lifestyle space?
RS : Let’s take an example of a publicly listed company with halal food products in, say, Malaysia, and examine the opportunity for Islamic finance:
Does the company’s financial structure only have conventional (interest based) debt? If so, a Muslim may consume its end products, as halal (certified by, say, JAKIM), but cannot invest, as it violates the debt ratio (of one-third) of the Dow Jones Islamic Market Index. How ironic! For example, the company has capital equipment to make its halal products, but is it conventionally leased or through Ijara structure? The company’s factory/warehouse is insured, but is it through conventional insurance or Takaful? The company has a bank account where it parks its cash – is
it in a conventional banking account accruing interest or in an Islamic bank accruing profit rate? Some may argue the interest and profit rate is same, as both off LIBOR. In the above examples, Islamic finance has an opportunity to provide Islamic debt (Sukuk) and working capital (Murabaha)
to refinance conventional debt, assuming the cost is economically attractive, tax benefits notwithstanding. ‘Refinancing’ with Ijara leasing, Takaful, and compliant corporate accounts allow for an end-to-end halal offering. What should make it more appealing is these are established
companies with cash flows and customers/suppliers! Thus, Shariah compliant liquidity is applied to the real economy sectors. Here it’s a (halal food) manufacturing company, a consumer non-cyclical based upon demand with increasing demographics. We need more sukuk from the manufacturing sector, which is asset backed, which can spark yield curves, secondary market trading, etc. E-commerce platforms, like Zilzar, may be just me the
missing piece of the puzzle for convergence.
WE WILL LAUNCHING THE ZILZAR FOUNDATION SHORTLY, FOR HUMANITARIAN CAUSES, WHERE A SMALL PERCENTAGE OF OUR REVENUE WILL GO TO THE FOUNDATION TO DISBURSE TO THE COMMUNITY. OUR RESEARCH HAS SHOWN THAT, ALL THINGS BEING EQUAL, MUSLIMS/PEOPLE OF CONSCIOUS WILL MAKE PURCHASES WHEN THEY KNOW PIECE OF THE PROFITS IS GOING TO A NOBLE CAUSE.
IB : How do you intelligently link Zilzar and Zilzar life?
RS : Muslim content (not news based) websites are about the user’s journey. A good website has daily fresh content, but that’s only a starting point. For example, if a reader gets excited about or is moved by an article on hijabs, foods, travel, etc., but, unfortunately, his/her journey ends when
the article ends. We want them to continue their journey to commerce. Thus, if a user is excited about, say, a hijab story (by one of our 40 bloggers), and they have a hijab business, we want them to open up a digital store on www.zilzar.com Or, if they want to buy a hijab, they can proceed to Tijani, a B2C site, which will be launched in the near future. Thus, content and commerce have to come together – that’s when the user has a great journey in one eco-system. Furthermore, we will launching the Zilzar Foundation shortly, for humanitarian causes, where a small percentage of our revenue will go to the foundation to disburse to the community. Our research has shown that, all things being equal, Muslims/people of conscious will make purchases when they know piece of the profits is going to a noble cause. Thus, aligned to our tag line: One Community: One Platform.
OF THE 57 MUSLIM MAJORITY COUNTRIES, 22 ARE THE LEAST DEVELOPED IN THE WORLD. MANY MUSLIMS LIVE ON LESS THAN A DOLLAR A DAY, HENCE, NOT BANKABLE. I DON’T BELIEVE THESE MUSLIMS ARE INTERESTED IN SUKUK (WHOLESALE PRODUCT) OR ISLAMIC EQUITY FUNDS! YOU’RE NOT GOING TO SELL AN ISLAMIC HEDGE FUND TO A GUY LIVING IN A THATCHED HUT, LET’S JUST KEEP IT REAL
IB : What to you estimate to the true number of Muslim consumerism, in the context of existing developments?
RS : It’s definitely not the 2 billion that speakers number-drop so carelessly at Islamic finance and halal industry events! Furthermore, the media cannot be seen as an accommodating stakeholder, it needs to ask tough questions on these assumptions. Of the 57 Muslim majority countries, 22 are the least developed in the world. Many Muslims live on less than a dollar a day, hence, not bankable. I don’t believe these Muslims are interested in sukuk (wholesale product) or Islamic equity funds! You’re not going to sell an Islamic hedge fund to a guy living in a thatched hut, let’s just keep it real. I estimate the target is about 500 million, which is a very respectable number. These Muslims are the Milllennials and Gens X and Y. They are socially media savvy, grid (internet) connected, faith-inspired, with rising per capita income, and they want products and services aligned to their values. They will be your best ambassadors or your worst enemies, as things go viral fast. Furthermore, what’s even more interesting is (because of positive demographic factors) there are large, respectable, and growing numbers of consumers (in the tens of millions) in the pipeline. They are the middle-class in the making, connected to the grid, hence, the new BRICS opportunity! The Muslim lifestyle opportunity is bigger tailwinds than China in 2000, when Alibaba started to take-off
THE WORD ZILZAR IS A COMBINATION OF TWO WORDS: ‘ZIL’ IS FROM ZILLION (LARGE NUMBER) AND ‘ZAR’ IS FROM BAZAAR. ZILZAR IS, THUS, A MARKETPLACE OF A LARGE NUMBER OF PEOPLE, PRODUCTS, PRICES, TRANSACTIONS, ETC. WE HOPE TO EVENTUALLY BECOME THE BLOOMBERG OR THOMSON REUTERS TERMINAL FOR THE MUSLIM LIFESTYLE MARKETPLACE, WITH SPECIAL EMPHASIS ON HALAL INDUSTRY PRODUCTS AND PLAYERS.
IB : Where did name Zilzar come from? And your motto, ‘One community: One platform’ – what does it mean?
RS : Muslims have always talked (romantically) about the ‘one’ Ummah, but this could not be done as they are scattered globally. The beauty of the internet is how it ‘connects the dots’, hence, what was ‘actually’ impossible is now ‘virtually’ possible. This is what our motto refers to, ‘One Community: One Platform.’ As for the Zilzar name, we wanted to take the Google approach on branding: recall, remember and retention. We did not want to call it a ‘Halal’ platform, as that would not be exclusionary and many non-Muslim owned companies supply halal products. In our short life in
the public domain (14 months), the brand recognition is very respectable. For example, type ‘Muslim Lifestyle Marketplace’ in Google and Zilzar takes up the whole of the first page. The word Zilzar is a combination of two words: ‘Zil’ is from zillion (large number) and ‘zar’ is from bazaar. Zilzar is, thus, a marketplace of a large number of people, products, prices, transactions, etc. We hope to eventually become the Bloomberg or Thomson Reuters terminal for the Muslim lifestyle marketplace, with special emphasis on halal industry products and players. Today, we have nearly 24,000
merchants, from 130 countries, covering 15 categories. We wanted to stand out from Alibaba and other B2B platforms, hence, we have categories for service providers (caterers, education, consultants, legal, etc.); our users can translate content to 16 languages; there is access to and you can be listed as Muslim Owned businesses; there is information about halal abattoirs (presently in Malaysia); there is the SAMI Halal Food Index, and so on.
IB : How are staff different at a Muslim lifestyle marketplace platform compared to an Islamic bank?
RS : The mindset and approach is different. The staff at Zilzar is working hard to emulate culture of silicon valley. This means management encouraging calculated risk taking, i.e., thinking outside the box, and then bringing it inside the box. The focus is on ‘think work’ rather than execution. With staff at banks, it’s mostly execution. So we’re talking about creativity. Where ideas are turned into invoices. But the creativity culture does not exist in most Muslim countries, including Malaysia, a byproduct of a schooling system focused on memorization than creative thinking. Thus, it will take time for young people to directly challenge the question” ‘What if I fail? Is it the end of my career?’
I’ve told them of my own stories of numerous failures. The failure does not define me, its basically saying, ‘I’ve figured out a way of what doesn’t work.’ When they see someone in management who has failed, yet got up and tried again, it shows resiliency. In not trying, you are actually failing!