INTRODUCTION.
Five years ago, since Islamic banking products started to be offered in the country. Reflecting from that time till now the key question to ask is what is the strength, weakness, opportunities and threats facing Islamic banking in Tanzania? I acknowledge that a scientific research is required to answer and fairly treat this question. However, from practitioner point of view, we can try to answer this question which can provoke interested researcher in his/her pursuit for an answer. Let us answer the question by first trying to understand SWOT analysis in simple language.
SWOT ANALYSIS.
To any student of management or business administration, SWOT analysis is a well-known strategic tool or technique taught in all business schools of the world. Originated by Albert S Humphrey in the 1960s, SWOT Analysis is as useful now as it was then.
SWOT Analysis is a useful technique for understanding your Strengths and Weaknesses, and for identifying both the Opportunities open to you and the Threats you face. Used in a business context, a SWOT Analysis helps you carve a sustainable niche in your market. Used in a personal context, it helps you develop your career in a way that takes best advantage of your talents, abilities and opportunities. What makes SWOT particularly powerful is that, with a little thought, it can help you uncover opportunities that you are well placed to exploit. And by understanding the weaknesses of your business model or otherwise, you can manage and eliminate threats that would otherwise catch you unawares.
According to Wikipedia, SWOT analysis (alternately SLOT analysis) is a strategic planning method used to evaluate the Strengths, Weaknesses/Limitations, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective. It is recommended before setting business objectives or pursuing an idea or course of life, you should first perform SWOT Analysis.
Strengths: characteristics of the business, or project team that give it an advantage over others.
Weaknesses (or Limitations): are characteristics that place the team at a disadvantage relative to others.
Opportunities: external chances to improve performance (e.g. make greater profits) in the environment.
Threats: external elements in the environment that could cause trouble for the business or project.
Hope this few paragraphs shed light on what SWOT analysis is all about, let us now answer the question: what is the strength, weakness, opportunities and threats facing Islamic banking in Tanzania?
STRENGTH (of Islamic Banking itself as well for it being in Tanzania).
1. Advantages of religious proposition in a country. Muslims are the majority.
2. Competitive advantage: In the long run, less marketing is required than conventional banking and better cost control as a result.
3. Morale and commitment to serve is higher among Muslim bankers and staff due to religious value.
4. Huge amount of savings can be mobilized (Muslims dominate in business sector) and thus boosting the deposit base of banks through retail and corporate banking products.
5. Less use of money for speculative purposes thus chances of investment failure and much volatility in investment is reduced.
6. Innovative aspect is also found in it, using phone banking, e- banking, etc. a blend of tradition and modern life can be easily served to customers.
7. Location wise & geographically, it is feasible and operational all across the country. There is significant population of Muslims across the regions.
8. Quality of services will not less be than conventional banking services. This fosters competition to established banking (interest based) in same market.
9. Ethics in mind. Even members of other faith can choose it for ethical reasons.
10. Possibility of flexibility exists in case the legal and regulatory framework innately non supportive.
WEAKNESSES.
1. Lack of standardization across the Muftis/scholars of the country and among the scholars and bankers.
2. Disadvantage of proposition is that there would be a hesitant and new thing to Muslims themselves and not fully accepted by all members of the community i.e. Christians, Hindus, e.t.c
3. A lot of capital is needed to boost it in front of conventional banking, and also huge reserves have to be maintained, to meet any loss sharing situation in Islamic finance modes of investment.
4. Time/season factor becomes a major problem in case of Islamic banks, as people would like to shift their money from Hajj or Zakat deductible accounts or they wish to pay their zakat from “Halal” funds during Ramadan or on Eid festivals or go for hajj during the hajj season, etc. creating short term liquidity problems for the Islamic banks.
5. Management and staff need further training to provide Islamic financial services as well to do their job efficiently.
6. Value chain management will become a major hurdle to Islamic Halal funds of Tanzania Islamic banks, as it will need Islamic money and call money markets, investment opportunities with pure halal businesses, Islamic equity market (instead of stock market), etc.
7. In case there is vast differences in Sharia interpretations among Sharia scholars and in theory and practice of Islamic banking therein arise inherent weakness.
OPPORTUNITIES.
1. More opportunities now lie in Islamic banking as it has been accepted by BASEL, WB, international agencies, multinational corporations, non-Muslim governments CENTRAL BANKS. E.g. creation of Islamic Bonds in Kenya.
2. Reaching the unbanked segment; all Muslims sects and ethical investors (locally and internationally) can equally be reached and participate in the banking system.
3. Traditional interest based banking will have to defend through heavy marketing and advertising which will reduce their profitability and hence adopt Islamic banking in their operations.
4. Islamic banking is a complete solution to economic and to some extent social needs of everyone from House building to education in addition to conventional help in commerce, business and industry.
5. Modern Islamic banking emerged in late 20th century with more or less advent of internet and information age, thus it is naturally blended with tools of internet, and computer based banking, and will witness a sharper growth than traditional banking growth of last 500 years.
6. New markets shall emerge with growth of Islamic banking, i.e Islamic mortgage, Islamic insurance, new investment projects etc.
7. In regions were Muslims are minority, like Kilimanjaro (around 10% of population?) Islamic banking will enjoy the benefit of niche marketing and if properly targeted will obtain better results.
THREATS.
1. IT developments and Research in latest Banking are in non-Muslim countries where conventional interest based banking have a very strong position thus Islamic banking will enjoy latest tools of IT, but lesser than conventional banking.
2. Religious prejudice is likely to hinder Islamic banking growth in the country.
3. Market demand is good and promising but very less as compared to conventional interest based banking in the country even worldwide.
4. Lack of research and clear information of the financial and economic strength of the Muslim society in the country is likely to hinder attraction of international investors and forecasting growth.
5. Sustainable financial backing by large multinational firms, investment banks, and world major economic powers is lacking.
6. The existence of anti-terrorism legislation is worrisome to majority of Muslims as pictured by the govt officials to be the supreme suspects. They fear their accounts to be frozen without justice as it happened in the West and in the country E.g. Al Haramain Foundation.
CONCLUSION.
In deed some of this points are relevant to many jurisdictions, what is important is to develop strategies that can capitalize on the opportunity and mitigate the risks posed by the threats.