Product development refers to an activity of creating new products or enhancing exitsing products or services. Developing new products in an Islamic bank might be tougher depending on the compliance to not only the regulatory bodies but also the principles in islamic banking.

1. Dr. Okan Acar
Group Manager.
Dijital Transformation
@DrOkanAcar
PRODUCT DEVELOPMENT
IN
ISLAMIC BANKING

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3. WHAT IS PRODUCT?
• The output of the production process
• A good or service that most closely meets the requirements of a
particular market and yields enough profit to justify its continued
existence.
• The product is perceived as the service which the people use for
their financial need in banking
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4. PRODUCTS IN BANKING
DIGITAL CHANNELS
DEPOSITS
INVESTMENT PTODUCTSLOANS OR FINANCES
DEBIT CARDS
CREDIT CARDS
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5. PRODUCTS IN BANK BALANCE SHEET
• Loans
• Car, consumer,
mortgage, corporate,
sme etc.
• Leasing
• Machinery, car etc.
• Cards
• Credit cards
• Deposits
• Current deposit, Time
deposit
• Bonds
• Sukuk, bonds, Bills
ASSETS LIABILITIES
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6. WHAT IS PRODUCT DEVELOPMENT?
Develop new products Enhance existing products
Product development may involve modification of an
existing product that satisfies a newly defined customer
want or market niche.
The creation of products with new or different
characteristics that offer new or additional benefits to the
customer. 6

7. PRODUCT DEVELOPMENT ORGANIZATIONS
•PD and marketing is in the same place
•Under customer oriented sales sectors such as retail, sme
or corporate
•Budgeting and sales targets
•Market analysis
•Decisions are easy and orientation is perfect
Marketing
Oriented
•PD is in a seperate place
•PD is under independent organization such as strategy
•No sales targets or budgeting
•Market analysis
•Cost efficient (only one PD to serve all organization)
Product Oriented
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8. PRODUCT DEVELOPMENT ORGANIZATION
Strategy
PD Process PMO
To serve all bank
Retail
Marketing
PDMarketing
CRM
To serve only
related marketing
SME
Marketing
PDMarketing
CRM
Corporate
Marketing
PDMarketing
CRM
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9. PRODUCT DEVELOPMENT STEPS
Idea Generation
Assessment of the
alternatives
CancelPrototype
Development
Concept
Development
Pre-Launch
Launch
Assessment
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10. IDEA GENERATION
 Ideas can be gathered from all members
in the organization.
 Focus group meetings with the customers
 Customer surveys, market analyses,
benchmark studies, competitor studies
 Product development teams are given
new product ideas as targets
 Brainstorming platforms which consist of
members across different departments
such as process development, marketing
teams etc.
 Idea suggestion platforms enable people
Open-minded team
Creative Idea
Nice working
enviroment
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11. PRODUCT IDEA SOURCES
Customers
Technology
Competitors
Managers
Product
Development
Sales
Representatives
Idea
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12. ASSESSMENT OF THE ALTERNATIVES
Alternative #1 Weight Score (1-10) Weighted score
Criteria-1 0.30 10 3
Criteria-2 0.15 8 1.2
Criteria-3 0.25 7 1.75
Criteria-4 0.30 6 1.8
Total 1.0 7.75
Alternative #2 Weight Score (1-10) Weighted score
Criteria-1 0.30 8 2.4
Criteria-2 0.15 8 1.2
Criteria-3 0.25 3 0.75
Criteria-4 0.30 10 3
Total 1.0 7.35
The resources are limited
One or few alternatives can be choosen
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13. CONCEPT ANALYSIS
 Concept is the detailed study of the product whereby we define the framework
 Concept of the new product idea includes target customers, market research and financial projection.
 The possible returns of the product under different economic conditions (high-medium-low) are also
studied.
 The technologic requirements are defined
 The product’s alignment with Islamic principles is consulted to the scholars
 The pricing strategy is determined
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14. Cost-based pricing
Demand-based
pricing
Competition-based
pricing
PRICING METHODS
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15. WHAT IS INSIDE CONCEPT ANALYSIS?
• Scope of the product
• Target customers
• Their min max ages
• Their salary ranges
• Their occupation etc.
• The security structure
• Pricing (profit rate) based on
• Tenure
• Occupation
• Downpayment etc…
• Commissions
• Advance commission
• Penalties for early settlement
• Profitability analysis
• Projections about the product (sales and
revenue based)
• The provisions against bad debts.
• The need for IT development and
process improvement
• The swot analysis of the bank
• Mathematical models and simulations
• Conclusion
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A sample concept analysis

16. APPROVALS
Financial
Control
IT
Risk
Management
Legal
Advisors
Corporate
Communication
Credit
Assessment
Product
Development
PD should coordinate the work flow between these departments.
These departments should also analyse the conceptual analysis
Shariah
Approval
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17. PROTOTYPE DEVELOPMENT
 Product development team should monitor the consistency between the prototype and the
product concept defined in previous product development phases .
 Get feedback from focus group
 Bug fixing and testing the product
 Modification based on feedbacks
 Tests are supposed to find answers for the following questions
 Does prototype work as expected?
 Does it comply with standards?
 Did any problem arise during production process?
 The cost are inline with the expectations?
 Are the marketing plan ready to be implemented?
 Are there any necessary change which should be applied to product to increase sales? 17

18. PRE LAUNCH
• Training programs
• Sales training sessions
• Call center training
• Sales training documents
• Training related departments
• Promotion materials
preparation
• TV / Radio
• Newspaper / magazine
• Poster / flier / insert
• Out door ads (billboards,
megacoms, etc.)
• Internet banner
• Social Media Planning
• Adwords
• Website SEO
• Test on the system
• Reporting tools should be made ready
• Delivery channels organization
• Direct sales
• Branches
• Internet site
• ATM
• Social Media Accounts
• Mobil branch
• Internet branch
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19. LAUNCH
• PD should analyze the customer feedbacks
• Social media
• Appstore – Google play
• Forums
• PD should monitor the performance of the sales of the product
• Sales force should be in touch with PD
• PD should monitor the daily transactions and should question the
low performing channels
• Targets should be given to the sales.
• The sales force should be called for regular meetings.
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20. PRODUCT DEVELOPMENT IN ISLAMIC BANKING
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21. THE HEART: SHARIAH
• The core of Islamic financial products is the Shariah compliance.
• The Shariah scholars are responsible in giving fatwa on the product
with the underlying supporting evidences to the Islamic investors.
• The product must be Islamically acceptable and economically viable
in all aspects. This illustrates the criticality of Shariah analysis which
must be carried out in order to ensure the marketability of the end-
product.
• The Shariah scholars must be involved in the whole process from
beginning and not only at the end of the process
• They must be adequately informed to clear doubts, if any,
surrounding the product
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22. SHARIAH ORGANIZATION
Shariah Board
Scholar Scholar Scholar
Secretary
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23. SHARIAH ORGANIZATION
CEO
Retail Corporate Risk Law Operation IT
Shariah
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24. SHARIAH ORGANIZATION
CEO
Retail Corporate Risk Law Operation IT
Shariah Board
in Banking Authority
Shariah
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25. SHARIAH BOARD
• Approve new product ideas
• Review the existing products
• Audit on existing products
• Document the approvals (fatwa) or rejections
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26. Islamic
Bank
No Interest Ethical
Fair
Solution
Oriented
Customer
Centric
Halal
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27. ISLAMIC BANKING VS CONVENTIONAL BANKING
PRODUCT DEVELOPMENT
Islamic Banking Conventional Banking
Money is not a product, just a mean of trade
Profit on exchange of goods & services is the
basis for earning profit
Only real assets can be financed
Have to comply with International and Local
Banking Laws
Have to comply with Shariah
There are different practices in different
countries
More paperwork
TOUGH
Money is a product
Time value is the basis for charging interest on
capital
All values can be financed
Have to comply with International and Local
Banking Laws
No need to comply with Shariah
No different practices among the countries.
Less paperwork
LESS TOUGH
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