Study shows nearly four in 10 Australian Muslims are stashing cash at home due to the lack of Islamic financial products in the market.
A survey has highlighted that 36% of Australian Muslims are choosing to retain “significant” cash savings at home because of the lack of Sharia-compliant finance products available in the market.
The study, which was commissioned by Hejaz Financial Services, a Melbourne-based, non-bank financial institution that offers Sharia-compliant services, consisted of digital questionnaires of 400 Muslim Australian in October 2021 surveying their financial habits and attitudes. The findings highlight the growing demand for Islamic financial products in Australia.
“This study highlights that whilst Muslim Australians are becoming more aware about the principles of Islamic finance, they still lack access to products and information,” said Muzzammil Dhedhy, chief operating officer at Hejaz.
“Traditionally, Australian Muslims were migrants, however the second or third generation are highly educated, speak English and have good jobs and income,” he explained. “They are demanding products like wealth management and property financing that are aligned with their faith and values.”
Filling the gap
To fill this growing demand, Dhedhy said that Hejaz is working on new products.
“We working on various instruments including three new Islamic exchange traded funds (ETFs).” Hejaz plans to launch the Hejaz Managed Funds which are presently unlisted and are in discussions with trustees and fund administrators to establish the new listed ETFs.
These ETFs will consist of a global equities fund that will track the MSCI Islamic Index. The second ETF will be a property/REIT (real estate investment trust) and the third ETF will consist of an income/credit/mortgage fund.
“These ETFs will be listed on the Australian stock exchange and be available to both domestic and international investors,” said Dhedy. Hejaz plans to launch these new ETFs by the end of the first quarter of 2022 or in early in the second quarter.
Beyond ETFs, Hejaz is also working on other ancillary services including a robo-advisory.
Robo advisors are digital platforms that provide automated and algorithm based financial investments with little to no human supervision. They do this by collecting information from users about their financial circumstances and investment goals.
Takaful (Islamic insurance) is also on the cards, but that will require its own legal process. “Takaful services require an insurance licence, this is a medium-to-longer term goal for us,” he said.
Hejaz continues to focus on getting its banking licence application. In June, Salaam Gateway reported that Hejaz initiated discussions with the regulator, the Australian Prudential Regulation Authority, as well as the Australian Securities & Investments Commission.
Dhedhy said that talks are progressing and hopes that Hejaz will receive its restricted licence within the next 12 months. After a two-year period, they hope to obtain a full banking licence and become a fully-fledged Islamic bank within three years.
“We have an excellent relationship with Australian financial regulators, who are willing to support us in developing more customer-centric products,” he said.
Others in the race
Muslims make around 2.6% of Australia’s 26 million population, according to the 2016 census. This is expected to increase to nearly 3% during the next census which took place this year.
Despite the growing Muslim population, and demand for Sharia compliant products, there are no fully-fledged Islamic banks in Australia. However, that is set to change. Islamic Bank Australia (IBA), is hoping to become the country’s first Shariah-compliant retail lender and is in the process of obtaining its own banking licence.
Among the other more established Islamic players are Crescent Wealth and MCCA as well as non-bank financial institutions like Amanah and Islamic Co-operative Finance Australia.
Adding to this, conventional banks like National Australia Bank (NAB) offer some Sharia compliant services. Most recently, NAB launched the country’s first Sharia structure for construction financing earlier this year.
One Australian banking practitioner said that the current Islamic product offerings are adequate given the poor uptake. “If a major Aussie bank offered a product with the same service offering then that would improve uptake dramatically, '' he said. “Most Islamic players are tiny.”
Dhedhy said that Muslims are frustrated with current limited offerings.
“A lot of educated and wealthier Muslims are looking for good quality products,” he said. “Among products we want to create are specific savings products for things like home deposits, weddings, college funds, and hajj.”
He also added that Islamic products don't have to be expensive when compared to the conventional.
“Muslim customers should only expect to pay a few basis points more than conventional products, otherwise they’re not competitive enough,” he said. “Moreover, 5% of our customer base are non-Muslim, because we are offering competitive products that align with the moral values of modern Australians.”
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