Women and Islamic Finance
The rise of Islamic Finance is significant. In 2019, the total assets of global Islamic banking amounted to about 1.99 trillion U.S. dollars and, since then, this value has only increased.
In fact, Islamic finance is one of the fastest-growing sectors of the global financial industry. With asset values far exceeding that of media grabbing financial products such as bitcoin, Islamic finance is quietly growing to become one of the major financial sectors.
While Muslims today have greater access to halal investing through platforms like Fardows, there still exist large opportunities to provide for the unmet financial needs of Muslims. One such opportunity is the role of women within Islamic finance and banking.
Islamic finance has positioned itself as a great catalyst for the advancement of women’s positions, within their respective economies and societies, by offering an ethical alternative to conventional finance.
Below we’ll explore the relationship between Islamic finance and women today.
The Role of Women in Islamic Finance
While women around the world have made significant strides towards improving their financial and societal standings, they still face obstacles such as wage gaps and glass ceilings.
Glass ceilings occur when females experience difficulty getting promoted in the workplace, even if they are more qualified than their male counterparts. This phenomenon is prevalent in both Muslim and non-Muslim majority countries. In many Muslim-majority countries, women have higher levels of education compared to men. For example, a study by Al Masah Capital highlighted that, in Saudi Arabia, 93 percent of employed women hold a secondary school certificate or university degree, compared to only 60 percent of employed men. Women are therefore underrepresented in leadership roles in most corporations, including in Islamic financial institutions.
According to a study from Pew Research, women 25 and older now make up 50.2 percent of the college-educated workforce. However, despite being ahead educationally, women still fall behind. For example, a study conducted by Payscale highlighted how women only earn 82 cents for every dollar earned by men.
One factor that contributes to this is cultural beliefs. Some women in richer Gulf countries may be uninterested in working because of generous government welfare benefits. On the other hand, cultural attitudes that endorse men’s education over women’s may also discourage women from pursuing higher education or working outside of the home, making it difficult for them to lead fulfilling professional lives.
Islamic finance has, however, provided women with an opportunity to excel and overcome such barriers. Women in Muslim-majority counries are beginning to have a more active role in the workplace and are performing a broader range of jobs. For example, the number of Saudi women working in the banking sector more than tripled in the last 10 years. Many of them at Islamic banks.
It’s worth noting that Islamic finance has not only seen an increase in female participation in the past years, but also an increase in female participation in more advanced areas of Islamic finance. Historically, women were more frequently hired in less senior roles such as tellers or loan officers. However, large Islamic investment funds have begun scouting for women with incredible educational and professional backgrounds for advanced roles. In fact, some of these Islamic funds have crafted programs to train and connect women from various backgrounds with Islamic finance roles.
Therefore, women are becoming increasingly represented in Islamic finance at all levels.
The Growth of Female Leaders in Islamic Finance
In addition to working in Islamic finance, women have started to enter into leadership roles and shape the industry . This can be attributed to the significant increase in the number of female scholars, entrepreneurs, and executives in the Islamic financial sector.
One of the best examples of this is in Malaysia, where two female Shariah scholars are sitting on Malaysia’s Shari’ah Advisory Council (SAC) Board, alongside eight other male Shariah scholars. This is a big development since only a few years ago; there were no women on such boards. Similarly, there has been an increase in the number of female Shariah advisors in Islamic banks board rooms. This is partly as a result of new regulation from governments dictating that Islamic advisors can only sit on one board at a time, to safeguard private information. However, it also signals an increasing number of professional opportunities for qualified applicants who happen to be women.
In Malaysia, these female leaders have been instrumental in advocating and advancing for Islamic finance. This is a positive development, and it will help promote the industry as one that can be inclusive to all genders. This is especially important given the increase in wealth held by women over the past years. By having female Islamic advisors and executives, Islamic banks will be able to create products that are tailored and relevant to females. This should allow Islamic financial institutions significant opportunities for revenue and asset growth. While in the past, Islamic finance had a reputation of being male-dominated, today women are actively working in the sector and are making Islamic finance more accessible to women.
Islamic Finance and the Inclusion of Women
Women have a significant role in today’s world economy. They make most of the financial decisions for their households and, with the increase in women’s wealth, they’re spearheading financial institutions’ growth. Therefore, Islamic financial products need to position themselves favourably towards the growing female market.
One area of significant potential for female inclusion in Islamic finance is microfinance. Microfinance involves providing small loans and other lending-based financial services to help individuals increase personal and business wealth. Today, more than 40 percent of microfinance customers are women.
Historically, many Muslims had largely been excluded from microfinance schemes, as the lending structures microfinance institutions used were not compliant with the Islamic faith. Traditional microfinance makes use of loan products with fixed interest rates which involve Riba. This meant that many Muslims had to choose between their faith or finances. Islamic financial providers have now started to offer halal loans/micro financial products, and hence uptake by Muslims has increased.
Women have a vast range of financial obligations and typically spend a large part of their income on including educational expenses for children and household expenses. Islamic microfinance is designed to fill income gaps by providing easy access to halal loan.
With Islamic microfinance, women can start businesses and create jobs for other people in their communities. This helps women earn money and achieve financial independence. For example, in some Muslim-majority countries, women have used microfinance to start businesses such as food stalls, and convenience stores. These small women owned businesses typically hire other women in their community, giving women stable incomes and a place to sell their goods. This type of economic empowerment has helped many families become better off.
Infact, some Islamic financial institutions and funds have solely focused on investing in women operated businesses. Recently, the Islamic Development Bank (IsDB) was one of the recipients of the Women Entrepreneurs Finance Initiative (We-Fi)’s third funding allocation of $49.3 million. This investment initiative should allow for IsDB to provide financial products to about 15,000 female owned businesses.
Women can succeed in Islamic finance even though the industry has historically been overrepresented by men. This is because Islamic finance is committed to equality and fair representation. Be it through the increase in the female talent in Islamic finance, the increase in the wealth of females, or the increased demand for Islamic financial products by females, females are becoming increasingly important in Islamic finance.
How Islamic finance can become more inclusive
Islamic finance has provided significant economic and social opportunities for women and will continue to do so. However, given that Islamic finance is still in its early stage relative to its potential, there is plenty more room for women in Islamic finance.
Increasing the number of women pursuing a finance based education is a great step towards ensuring women’s continued success within Islamic finance. Currently, women are under-represented in both the conventional and the Islamic financial industry. This is also true when it comes to the financial education space where women are a minority in most universities’ finance classes and student associations.
By providing support and encouragement to women studying finance, it is likely that more women will decide to enter the financial industry. Several local programs in the US have been started to address this, such as Girls Who Invest. However, there has not been a wide adoption of such programs for female inclusion within Islamic financial educational institutions. The Islamic finance ecosystem should come together and devise an end to end platform to address this. For example, universities offering classes on Islamic finance and Islamic financial companies should engage with local highschools to increase interest in Islamic finance as a career option. This would serve as a marketing tool for both the companies and universities and provide them with a future pool of employees to hire from.
Another area where significant progress could be made for the inclusion of women in Islamic finance is by increasing the number of female Islamic scholars. Currently, most Islamic scholars are men, and the religious educational institutions they attend are also heavily male represented at the student and staff level. This can partly be attributed to a lack of interest by women in pursuing Islamic finance, but it can also be partly attributed to cultural views.
Islamic education should be more welcoming to women in order to increase the representation of women within Islamic finance. While it would be hard to increase the amount of female professors in Islamic educational institutions, given their scarcity, different solutions exist.
Providing online courses about Islamic education and Islamic finance should significantly increase women’s representation within Islamic finance. This is because it is a female preferred method of instruction. It would remove location based restrictions (e.g. travel costs and distance), provide a more welcoming environment (increased availability of female scholars) and increase the convenience and the amount of material women can learn from. Online courses would then lead to an increase in the amount of female Muslim scholars and in turn change some cultural views that act as barriers.
Researching Financial Needs
A significant step the Islamic financial industry should take to improve women’s involvement in Islamic finance is researching the financial needs of women. The amount of wealth women hold is growing at a much faster rate than the amount of wealth men hold. This is mainly because women’s participation in the labor force is increasing. There is therefore a significant opportunity to become a prefered provider for women’s financial needs.
To address this untapped market, Islamic financial institutions should research how they can make their product offering more compelling to women. This could be done on both an external and internal level. Women employees could provide feedback internally on the types of changes they would personally like to see as women. Internal employees could also share the questions and requests female customers communicate to them. On the other hand, external research could be done to determine why some financial solution providers are preferred by women and what they do to be in such a position.
One of the most forward looking steps to take would be to increase the amount of women representation within Islamic fintech. Islamic fintech is the next big growth driver for Islamic finance. Today, the majority of Islamic financial assets are held as banking assets. This is, however, quickly changing as new technologies are allowing for greater access to halal financial assets. For example, halal robo advisors, such as Fardows, have allowed Muslims to be able to invest their money in halal stocks and etfs. Similarly. Fardows’ platform allows for easy access to halal loans and halal mortgages in the US.
By involving women in the Islamic fintech scene, the Islamic finance industry can guarantee that the next wave of Islamic financial products will meet the financial needs of women. It would also ensure that women attain the skills and requirements to not only be part of the next development of Islamic finance, but also lead the development.
To increase female participation is Islamic fintech, online courses about finance and technology should be made more readily available. Women should be encouraged to go into more technical and research oriented fields. Women around the world are already on average better educated than men and it is therefore an impetus of the Islamic financial industry to create employment opportunities for qualified women.
At Fardows, we are strong believers in the ability of Islamic finance to positively impact the role and financial standing of women globally. We realize that women’s demands for financial services are growing and will become an increasingly bigger part of global financial services revenue. We are therefore strong advocates for the creation of a more inclusive environment for women to be part of the financial services sector. Similarly, we have taken steps to make our platforms relevant to the financial needs of women.