A leader in Islamic banking and finance (IBF) was recently asked how his competitors perceived him. He answered, “My real competitors respect me, and those who consider me their competitor and still use negative tactics to harm me are not my competitors.” Such negative people badmouthing their competitors are simply losers. There is a Persian couplet:
You ought not be concerned about the noise of competitors
As barking dogs can never decrease beggars’ earnings
Competition by default recognises the abilities and strengths of one’s competitors. Hence, a competitor must respect their rivals. If they don’t respect them, and use negative and unethical tactics in their absence to harm their interests, such people are cowardly, and must not be respected in return.
Competition is central to modern Western economic theory, as it is perceived to lead to the most efficient economic output. Thus, competitors must be taken seriously, and they must be respected. There is a tendency in some markets, including in IBF, where market players tend to malign their competitors by using cheap and unethical means. These tactics normally include spreading rumours about their competitors or using subtle ways like dropping a sentence or so, hence putting a question mark on the credibility of their competitors.
For example, I know a man in London, who would go around talking against some of his competitors behind their back on numerous occasions. Such people must be exposed. Similarly, a Shari’a scholar based in London was also found to have spread bad news about other Shari’a scholars and advisors. The most recent event took place at Durham Islamic Finance Summer School when someone based in Birmingham was caught badmouthing a competitor. Such people are simply crazy, as they don’t know that what they say about others in their absence reaches them through other sources. Eventually, such negative characters lose their own respect, if they have any. Backbiting one’s competitors is moronically absurd, to say the least.
Islamic banks and other regulated financial institutions (e.g., Islamic asset management companies) play fair games when trying to capture business. Such unethical tactics are actually employed by the providers of ancillary services. For example, some years back a service provider based in the USA approached an asset management company in London to poach its Islamic advisory business, by informing it of its existing service provider’s “expected” bankruptcy. Obviously,
this was untrue, and the American firm did not get the business. In the process, however, the existing service provider faced some undue problems. One must ask if such tactics are really Islamic. This is apparently consistent with the behaviour that is characterised in economics as maximising of self-interest with guile.
This diary is not about any individual, I must clarify though. The above examples are used as a preamble to discuss something fundamentally important to IBF. This diary is actually about positive competition, and to analyse if there is any scope for practicing cooperative competition. Competition isn’t the end-game, it is a means to achieve something else. Many short-sighted players would say that the objective is to win. No. Winning is not the end-game. Every game is part of a bigger game, and the objective should be to be part of all the games within a spectrum.
For example, Islamic financial advisory is a game within IBF, which itself is part of a bigger game within the global financial services industry. Financial sector is part of an economic system, which in itself is a segment of the overall system. The argument can be extended to include metaphysical domain and beyond.
Coopetition is in fact a neologism coined to describe cooperative competition. It is no more just an ethical consideration but a number of large industrial groups are benefitting from competition. At this stage of development of IBF, the industry needs competition more than the competition. This will allow the industry to benefit from an increase in the size of the pie (size of the industry), which should allow the individual players to have a bigger slice in the market, even if it doesn’t increase individual players’ share in the total market.
As the size of the pie is small, some short-sighted players in the ancillary market exhibit unethical behavior when it comes to dealing with their competitors. Apart from the above examples of bad behaviour, there is another glaring example. Institute of Islamic Banking & Insurance (IIBI) in London has on numerous occasions received help from the publishers of ISFIRE but denied them of distributing the magazine in their seminars and lectures. This is obviously not an example of cooperation in a market that otherwise demand mutual help and cooperation. Consequently, IIBI is fast going into oblivion.
The coopetition should be both inter-industrial (i.e., cooperation between Islamic and conventional finance) and intra-industrial (whereby Islamic financial institutions and other related players must cooperate to increase the size of the pie). Inter-industrial coopetition will allow to reduce financial exclusion and, hence, increase the size of the global financial services industry, Islamic financial services included therein. Intra- industrial coopetition will allow the global Islamic financial services to increase its size.
According to Barry Nalebuff, “Creating value is an inherently cooperative process, capturing value is inherently competitive.” Those players in the Islamic financial services industry, which are fighting for capturing value tend to forget that they will benefit from the real value of IBF only after sufficient value has already been created.
Coopetition should be a basic ingredient of a global strategy for further growth of IBF. A comprehensive coopetitive strategy for IBF must delineate a framework to encourage and orchestrate non-hostile/cooperative mergers and acquisitions in the global Islamic financial services industry.
Just imagine a scenario in which all subsidiary Islamic banks in Malaysia (e.g., CIMB Islamic, Maybank Islamic and RHB Islamic, etc.) are lumped into one entity called as Islamic Bank of Malaysia (IBM), to which businesses of all the subsidiary Islamic banks must be transferred. This large bank will allow Malaysia to pursue its dream of having its first mega Islamic bank, with the domestic capital.
Furthermore, it will also be a cost-effective way of promoting Islamic banking in the country.
This suggestion sounds like a crazy idea. But then madness is what the Diary of a Mad Philosopher starts with, and it is befitting the context to end it with madness.
