Proven Strategies To Improve Your Islamic Banking Profitability

The rapid growth of the Islamic banking sector is good news for this branch of financial services. But some suggest that profitability remains a struggle.

Consulting firm A.T. Kearney offers two recommendations to fix the problem: improve strategic positioning and maximize operational efficiency. Strategic positioning will differ depending on each bank’s individual business goals. But operational efficiency is where this post comes in.

One major way Islamic banks can improve operational efficiency is by implementing specialized collections and recovery software. Unlike a collections module that comes with a core banking system, a specialized solution is built from the ground up to improve collections rates.

This post describes why specialized software is important—and how it enables proven, cost-effective strategies that boost Islamic bank profitability.

Why Specialized Software Is Important

How you recover obligations from customers has changed, whether you’re aware of it or not. Think about it: every aspect of consumer behaviour has transformed in response to online resources, options and purchase methods. There are more channels than ever on which to work, live, play, purchase and communicate. And service expectations across online channels are higher than ever.

Consumers simply expect all transactions to happen with the speed, convenience and service of Amazon, whether or not those services are offered by a tech-savvy online giant. This is a new standard that affects even established industries like retail banking.

As we speak, a clutch of fintech disruptors is unbundling the services offered by retail banks and eating away at traditional lines of business.

As a result, collections and recovery have changed, too. Placing a phone call, interrupting a consumer’s day and forcing a settlement isn’t just ineffective. It also damages critical relationships with customers who have more banking options than ever. 

Put simply, no bank—Islamic or otherwise—has the time or luxury to sit still while internal or external collections staff waste time and energy cold calling with nothing to show for it. 

Instead, you need to meet customers where they actually are, whether that’s online or on a smartphone, and deliver phased settlements that respect each customer’s unique situation. That’s where specialized software comes in. The best systems help you execute strategies that improve profitability, reduce inefficiencies and, ultimately, generate more revenue. 

Gain Insights To Better Manage Risk

Specialized collections software provides robust tools that give you unprecedented insights into the risks in your books. Using advanced mathematical modelling, you can see exactly which obligations are outstanding, and how your entire portfolio is affected by new assumed risks. 

The result? Real-time risk management that you can easily understand and present to decision-makers.

Automate Costly and Time-Consuming Processes 

From pre-recovery to (if necessary) legal recoveries, there are legions of tasks that sap time, money and resources from your organization. Specialized collections software automates many of these tasks—from report generation to automated notifications.

That cuts down one of your major costs (personnel) and creates efficiencies elsewhere, all while freeing up talent to work on what matters: producing collections results.

Reduce Documents Through Every Stage of the Cycle

Going mostly paperless isn’t just an environmental win. It’s a real business benefit. Tons of documents are gathered and processed during each stage of the collections cycle. Often, delays and inefficiencies occur when documents are lost, disorganized or require sign-off from other departments. Specialized software eliminates these delays and inefficiencies by managing documents digitally in a centralized location.

How Do You Find And Research A Specialized Collections Solution?

Our free resource, The Collections and Recovery Software Purchasing Guide provide a step-by-step process to find, evaluate, purchase and implement a collections and recovery software system.