This commentary is written by Blake Goud, CEO of the Responsible Finance & Investment (RFI) Foundation, and Jessica Robinson, Founder and Managing Director of Moxie Future, who is also an Emissary with the RFI Foundation. Their article is part of Salaam Gateway’s International Women's Day 2020 series that is co-designed and curated by Nyra Mahmood, MD of UK-based Simply Sharia Human Capital (SSHC LTD), the publishers of the 2016 report "Women in Islamic Finance & Islamic Economy”.
Women around the world own more wealth than ever. Yet the financial industry has done very little to understand women’s needs when it comes to money, nor build services and products that truly reflect these needs. In the Middle East we see the same phenomenon, but with unique characteristics.
Women’s wealth in the Middle East is on par with many developed markets, something which has been widely acknowledged over the past decade. Yet relatively little has been done to serve the growing female customer base, including by Islamic financial institutions.
HOW MUCH ARE WE TALKING?
We know that women’s wealth in the Middle East measures in the hundreds of billions of dollars, but precise data are few and far between. This lack of understanding of the size of the female market is telling in itself – reflecting perhaps the lack of interest in the potential market. Take a few estimates that we do have:
- A widely circulated estimate from MEED dating to 2008 calculated that women-controlled wealth within the Gulf Cooperation Council (GCC) could be $385 billion by the end of 2011;
- In 2010, Boston Consulting Group estimated women across the entire Middle East held $500 billion; and
- Most recently, Al Masah Capital estimated that women-controlled wealth across the Middle East had reached $690 billion by 2012 which implied an annual increase in wealth of 11% albeit from the depths of the Great Financial Crisis.
If this positive trend continues, even at significantly lower growth rates, women in the Middle East will control over $1 trillion within the next five years. Financial institutions that do not adapt their services to meet the expectations of women in the region will miss out on a significant opportunity.
ARE WOMEN IN THE MIDDLE EAST UNDERSERVED?
Yes, it certainly seems so. Despite the size of the wealth controlled by women, there are relatively few types of services offered to women specifically.
Of course, the most common ‘service’ we see are all-women bank branches or female-focused banks, meeting the needs of some women who prefer to use all-female branches. However, this addresses only one aspect of a woman’s interaction with the financial industry. More and more women are seeking financial and investment products that are catered to their circumstances, needs and ambitions.
This is not just a MENA-specific problem and we see little appreciation of women as a specific and important customer base by the financial industry more broadly. Looking across the globe, there are some systemic problems, with the majority of financial institutions either not understanding their female customers or simply excluding them.
Let’s look at some evidence of this. BCG found that women are often offered ‘dumbed down’ products, based on stereotypes of women not being as performance-focused as men. In terms of their wealth management experience, the research found that women are not offered services in a way that takes women seriously or building a relationship based on understanding and knowledge of their client. This is reflected in findings from EY that said 75% of women feel misunderstood by wealth managers.
CONFIDENCE, OR LACK OF, COMPOUNDS THE PROBLEM
Research indicates that women lack confidence when it comes to money, and investing in particular, pushing them towards lower risk options such as cash savings accounts. Take a read of “The Financial Power of Women”, a report published by Fidelity International, which found women’s confidence is often hit because they don’t feel they understand financial products well enough. A recent JPMorgan survey also found that the main factors hindering women are a lack of confidence, but also the lack of time and limited investment knowledge.
The way we communicate with women about money is also important. Recent research by UK-based Starling Bank undertook a linguistic study assessing 300 articles from a mix of outlets aimed at men and women. This is what they found - women were defined as ‘excessive spenders’ across 65% of the articles targeting them. They were given guidance to “limit, restrict and take better control of shopping splurges”, with 71% of articles encouraging them to seek discounts and bargains to save money. Articles aimed at men used language such as “dare” to encourage men to “invest”, which reflects more positively about their financial choices.
TIME FOR A CHANGE?
Against this challenging backdrop, it is time to think about how the financial industry can serve women better, particularly in the Middle East. There is much more that can be done.
For a start, the availability of banking services for women is just one place where Islamic finance engage with female clients, because women are not sitting with their savings entirely in a bank account.
In fact, a survey of women in the GCC found that about half of women in the Middle East and North Africa invest their wealth in individual stocks. As of 2018, over 220,000 female investors held shares in Abu Dhabi Stock Exchange-listed companies worth 20 billion dirhams ($5.44 billion).
MOMENTUM IS BUILDING, LET’S USE THIS
For women in the region, momentum is rapidly building.
Interestingly the lack of dedicated financial services for women contrasts with the advancement women have seen in education and business across the GCC. Women control 22% of the region’s private wealth in large part through their ownership of family businesses. Although they play a significant role in the region’s economy, they have been underrepresented in the board room of many of the region’s companies, including its financial institutions.
As a result, these financial institutions, and particularly the Islamic financial institutions, have not been well suited to developing differentiated services for women as customers, who represent a significant untapped market. Many male peers join women in acknowledging that the imbalance in representation in senior management and on boards of the region’s public companies.
One survey conducted in 2017 by Emirates Investment Bank found that high net worth individuals in the GCC, when asked about boardroom gender diversity were widely supportive of a greater role for women. 77% expressed an interest in more women in senior management in public companies. 73% supported more women on boards of public companies, while 59% (three-quarters of those who wanted to see more women on boards) supported introducing quotas to require more female board members.
WOMEN, MONEY, IMPACT AND SUSTAINABLE INVESTING
We hope that this growing recognition of the lack of inclusion of women in senior ranks and the lack of financial products designed and offered in a way that meets women’s needs will help to elevate attention paid to women by Islamic financial institutions.
Change should not be limited solely to longer-term shift towards greater gender balance at the senior level. In fact, Islamic financial institutions have many steps they can take to improve the services they deliver to women. A critical first step is conducting more outreach to better understand women as clients.
One exciting trend we are seeing is the rapid rise of interest in sustainable and impact investing, presenting a unique opportunity for institutions to connect with female customers.
We have seen overwhelming evidence that an increasing number of women across the world are thinking about the impact or difference their money can make, not just in terms of financial returns but in terms of driving positive societal and environmental change. For example, global research by Moxie Future found that 83% of women surveyed care about where their money is invested, 79% of women felt that we urgently need to act in order to build a better world for the future. And a whopping 69% felt it important that their investment and savings decisions reflect their personal values and philosophies.
These findings confirm what has been uncovered in other research. For example, a U.S. study by Morgan Stanley Institute for Sustainable Investing found that women (84%) were more receptive to sustainable investing than men (67%). Female investors are nearly twice as likely as male investors to consider both the rate of return and the positive impact made by a company when making an investment. In another example, Calvert Investments found, in its study of affluent women, that 95% ranked "helping others" and 90% ranked "environmental responsibility" as important.
To date, we do not have comprehensive data on how widely women in the Middle East share these viewpoints, but it is likely that these trends are representative.
For example, a global survey by UBS in 2018 found that 53% of investors in the UAE had at least some sustainable investments compared to 39% globally. Since In our opinion, knowing that women are underserved and are more likely to seek out sustainable investments, this presents an exciting opportunity for Islamic financial institutions to reach out to female investors and access an untapped market.
Listening to women does not simply mean developing women-only products. Instead, the differences begin and largely end with the way financial institutions interact with their customers, such as focusing on building more personal trusting relationships with clients, improving digital services, and driving client growth from existing client referrals.
Combining the available data points supports a strong conclusion about the opportunity for Islamic financial institutions to benefit from viewing women with wealth as a substantial and growing market. As Islamic financial institutions incorporate sustainability into their core pitch to customers, they will find more support for these initiatives from women who could hold the key for their responsible finance transformation. All of these approaches need investment by financial institutions, but if done wholeheartedly, will help to strengthen customer relationships, benefit from broader trends in responsible and sustainable finance and ultimately improve their business outlook.
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