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Islamic finance is "a market which is still screaming for quality, informed, objective, independent and up-to-date information, data and analysis" so reminded us Mushtak Parker in a recent article he wrote (see reference link). He was referring to the recent news from Thomson Reuters of the launch of their Islamic finance gateway, which has been developed under the watchful eye of their global head of Islamic finance, Rushdi Siddiqui. What was rather curious was how Mushtak labelled their entry as mere "indulgence in self importance" and the elaborate announcements as mostly "Rushdi-Speak". What does that mean exactly? Let's find out.

One must understand Mushtak's apprehension, he has vast experience in the field and has seen many products (and promises) come and go. Nevertheless, there are several points that need to be raised further with regards to this portal (and others) in terms of what it augurs for the industry. In a way this relates to our own decision to develop OIFI - a response to the seemingly widespread failure of industry media to provide non-commercial, non-advertorial and non-aligned content.

For the sake of disclosure, I have had the pleasure of meeting both gentlemen (I doubt they would remember though!) and in a way OIFI has sought to combine the independent and inquisitive nature of Mushtak with the product knowledge and practitioner perspectives of Rushdi. The truth is that we need more of both of these gentlemen, clone them if we have to. So please allow my own "indulgence in self-importance" as I feel that there is an underlying story hidden in the midst of all the hype and it needs to be told.

Market Signals

The fact that a media giant has deployed an Islamic finance portal has to be recognized for what it is: a concrete and positive market signal. It is a handshake to Islamic finance, because they haven't indulged us with a MENA-dedicated gateway, this is not a simple news service (with some bells & whistles), nor some sort of self-promotional industry guide (we have seen too many one-offs already). Reuters is here to stay - and stay for the long term - by bringing on board not an industry personality but a pragmatic and eloquent promoter of Islamic finance.

Overall, what we have here is a considerable step towards addressing industry needs, but also a signal for other data providers to take notice (and perhaps take further action). It has not escaped my attention that the modus operandi of many service providers (not just of data provision) tends to be that of complacency and minimalist effort. Getting away with what they have for as long as they can with as little effort as possible. We should welcome Reuters (and the rest of the pack), the question that we should ask is not whether it is necessary to rattle the cage but instead is it being shaken hard enough.

Why delve in market signals though? Take for instance one of the IFSB summits from few years ago, in which a panel discussion engaged one of the IFSB seniors, the director of one of the largest investment banks in the world and Mushtak Parker himself (among others). It was in good form that the gentlemen from IFSB suggested that the invited investment bank should consider IFSB membership - after all this would provide a highly visible and positive signal to the markets (and in any case this would entail little internal impact for the bank since IFSB guidelines are non-enforceable). What followed in response was a 15 minute masterclass by this director on how to avoid the topic. It remains one of the most comical (and visceral) episodes I have ever witnessed in this industry. Simply embarrassing and a prime example of what market signals we don't need. Make no mistake, silence and/or avoidance are market signals all the same and should not to be underestimated - they can be as powerful as the loudest announcement or glossiest of press releases.

Thus when reading that "some Islamic bankers who have had a preview of the Gateway are bemused exactly how it will guide a disparate global industry to its next phase of development" I feel the need to remind them that the entrance of Reuters has to be regarded above all as positive, a thumbs-up to the impact and presence of Islamic finance in the global landscape. In that sense the entry of this (or any other) mainstream provider should not be bemusing but instead welcomed openly for what it communicates to the world (especially to the one outside of Islamic finance). As a matter of fact, I might further inquire as to the job specification of these so-called Islamic bankers since one of the most massive issues for the industry remains trading volume and transaction liquidity. The introduction of a trading platform would only help trade execution by institutions and their intermediaries (although this might perhaps reduce the fees that these Islamic advisors charge).

In that sense we don't need a Reuters global trading platform. We need a dozen of them.

Ignorance is Bliss

Once again we are in agreement with Mushtak that this is "a market notorious for its fickleness, under-developed culture of banking transparency, poor data collection and research". As a matter of fact my background in this industry specifically delved on the last two points (alert, another anecdote is around the corner), since my previous work involved research specifically covering Islamic funds. During that time the awareness and understanding of Islamic investment funds increased significantly - expanding the coverage of about 60 funds (100 estimated universe) to 700 funds (800 estimated universe). However, this was not due to a sudden spike in industry growth but to the sheer complacency of data providers - and in some cases an indisputable dosage of either ineptitude or negligence (or both). If one discounts the illiquid (and mostly outdated) investment products from the list of 700 then I must admit that the Reuters portal (which covers 555 products) is the only one that has come anywhere near the coverage and up-to-date data that this industry rightfully deserves. The hope is that other providers would take notice - although some have even stopped trying altogether.

I have to disagree that the "Islamic finance industry coped and developed over the last three decades without the support of Reuters, APs, Dow Jones and the Bloombergs of this world". In fact it is a minor miracle that the industry has survived as it has - instead of us boasting industry growth numbers we should lament that these could have been much higher figures. The simple fact is that many investors didn't (and still don't) know any better. They remain ignorant to the great opportunities around them, and why should we be surprised - after all their wealth managers are not meant to educate them (the less their clients know means the more they can charge them).

Regrettably some are still being duped into paying large amounts of money for some of the most trivial and sloppy information services ever developed in the history of media, and I am not exaggerating. They are happy with what they've got, but that doesn't mean they are getting the best product in the marketplace (or that we should remain numb about it). Reuters may or may not be the best (who knows), but the underlying fact is that it presents users with one more choice and this is a good thing. Moreover, one should not be surprised that the gateway comes with a subscription price, what is far more important is whether Reuters (and other providers) can justify the price tag, and even more important is whether this will put downward pressure on the price being charged by other providers.

Cost competition will benefit us all - even if we never lay eyes on a Reuters screen.

Aggregation and Combination

It was rather odd that "one Islamic banker stressed, "Why would I want to go to the Reuters Gateway if I want to access an S&P report on Islamic finance. I would go directly to S&P."" The simple answer is aggregation - we can surf the internet for hours to identify, access, download and digest relevant information (if indeed it is available online) or instead have it all presented in an amalgamated portal. Aggregation of information is one of the most significant trends in online data dissemination, and hopefully something that can spread like wildfire across other Islamic finance portals. Maybe this Islamic banker doesn't understand the concept of informations search costs, but accelerating the flow of information (whether it is free or subscription-based) should again be viewed a positive development.

If there is "no prospect (at least in the short-to-medium-term) for any generic competitor from OIC countries or from the South" one must inquire whether this is actually relevant. If Islamic finance is growing and expanding beyond its so-called natural borders, do we really need to ask a localized enterprise to attempt to do what it is ill-equipped to offer? On the other hand, it might be interesting to suggest the potential joint venture or combination of one or more local industry portals as a competitive response.

Innovation - A Matter of Perspective

It would be disappointing if Reuters decided to "spend extra resources in training and sharpening the knowledge base of their reporters and analysts on Islamic finance" because the industry doesn't need any more insiders, instead it needs new perspectives and refreshing points of view. Islamic finance operates - for better or for worse - within the framework of conventional banks and one cannot comment on one without understanding the other. The test for Reuters will be to avoid getting sucked into the love affair with glossy magazine front-covers and self-congratulatory conference/parades. Fortunately the evidence thus far points to the contrary.

The curious thing about innovation in this neck of the woods (whether it is daily news, market data, editorial opinion or technical content) is that it is not too important who does it first but whether the others recognize it and respond. We can have a great portal and/or online community, but it is far more professionally rewarding to see competitors taking notice and action. This, again, benefits everyone.

This rings true because we can quote several examples:

• The development and dissemination of our blog (which comprises many case studies and structures) has not remained unnoticed, as others began including case studies and papers themselves. Most importantly, the blog is part of a growing family of online information hubs (whether they are free or subscription based) which can provide value for users.
• When deploying original content (such as our listing of training programs and certifications) it was a compliment of sorts to see the list being plagiarized elsewhere, not exactly pleasant but testament to what a simple and honest contribution can do. We leave the black hole of originality (and good business etiquette) for another day.
• The growth of our online community (as well as others) and the parallel development of public discussions has supported a new phase of openness in the industry. This has also triggered others to revisit their online forums (or launch new ones) - we know this since several have candidly asked for our advice on how to develop theirs.
• This has further highlighted the urgent need (and the positive impact) of hearing from industry leaders and in particular from Shariah scholars. Thus we have seen a renewed effort across various data providers in bringing their opinions to the fore (as well as sending practitioner feedback in the other direction).
• The fact that we disseminate our Islamic Finance Briefing (our daily news) and the use of RSS feeds (which might be regarded as old technology for many) is not a novelty although it is when other data providers follow suit a few months later (with their own daily quickie digest and the deployment of their own RSS feeds).

We are certainly not the only ones using innovative media (and we are not the first ones either) there are many other efforts - whether these are blogs, yahoogroups, facebooks, twitters, wikis, libraries, or anything else. The common denominator being the need for faster and easier information flow. The more the merrier, since consumers are the eventual benefitiaries (to the dismay of certain Islamic bankers!).

The real inquiry for Reuters is whether their entry will further encourage this flow. Some might innovate others might imitate, but the eventual beneficiary of all this will be the end user. After all they are the real story.

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