Islamic Financial Wealth Management
Empowering Women in Islamic Societies
The gender gap in Islamic wealth management is an area often not discussed as some perceive Islam as a religion that bans women from acquiring and managing wealth separately from the men in their life. Therefore, this paper aims to explore the economic status of women from an Islamic perspective by examining the relevant literature. Drawing from the Iranian context, this paper illustrates the gender gap in financial inclusion and also looks at market opportunities to empower women financially.
This is a conceptual paper grounded in religious texts, academic publications and statistics published by authoritative bodies. The paper clarifies the general concept of Islamic wealth management and the economic status of women according to the Shariah perspective. Moreover, the paper also discusses certain products offered by Islamic Financial Institutions (IFIs) which women can channel their savings into.
Wealth management is not a one-time event; it is a process or methodology which involves a long term strategy for the client’s financial future planning. According to Aura (2017), wealth management is a process of meeting the goals of clients using their finances and existing wealth through proper management. The process includes wealth creation, accumulation, protection, distribution and purification. Islamic wealth management is different from conventional wealth management in terms of the prohibition on riba (usury), gharar (excessive uncertainty), maysir (gambling) and inverting in prohibited items. It assists people, especially Muslims, to manage their wealth in order to get a return and protection over the wealth acquired compliant with Shariah principles. Therefore, the process of wealth management must adhere to the Shariah rules and should not lead to any harm towards any individual or society as a whole.
The Quran regards men and women as equals in the sight of God. The Quran 4:124 states: "If any do deeds of righteousness be they male or female and have faith, they will enter Heaven, and not the least injustice will be done to them." (124th verse of chapter 4 (surat l-nisaa). Both men and women are encouraged to be financially stable. Islamic teachings on wealth are vast, ranging from how to spend it to how to earn it in accordance with Shariah principles. Every Muslim will be asked by Allah on the Day of Judgement about their way of living, including wealth accumulation and distribution.
The son of Adam will not pass away from Allah until he is asked about five things: How he lived his life, how he utilized his youth, what means he earned his wealth with, how he spent his wealth, and what he did with his knowledge (Sahih hadith reported by Imam Al-Tirmidhi, Vol. 4, Book 11, Hadith 2416).
Although women are no less capable than men in terms of financial knowledge and numerical skills; studies show that women face greater constraints than men in choosing financial products and keeping informed (Hung et al., 2012). Entrenched socio-cultural obstacles hinder female participation in economic activities. Women have been paid less and have greater difficulty securing income and assets, especially in the later part of their life. Their family obligations and child-bearing responsibilities restrict their career development or even salary level. Because of child-rearing responsibilities and family obligations, women with disrupted careers typically do not have sufficient pension income in their retirement (Berger and Denton, 2004). According to Ernst & Young (2016), only 43% of women have an emergency fund compared with 63% of men. These studies highlight a need to empower women through financial planning, irrespective of religion and ethnicity.
The gender gap in financial inclusion is not uniform across all regions, however. Although the financial exclusion of women in the Middle East and North Africa has historically undermined the economic participation of women, women play substantial roles in commerce and public administration in Southeast Asia, especially in Iran, Indonesia, Singapore and the Philippines. The objective of this paper is thus to explore viable means for women to manage their wealth from an Islamic perspective. This paper also aims to examine the socio-economic status of women in Iran as well as Shariah compliant financial products that could improve the upward mobility of Muslim women.
The motivations in choosing Iran as the research subject are twofold: first, Iran is an international Islamic finance hub, with an established Islamic capital market and a variety of Islamic financial products. Second, Iran has promoted equal access to education and social services, aiming to achieve financial inclusion. However, female labour market participation remains low despite high levels of educational attainment (OECD, 2019). Examining Islamic wealth management in the context of Iranian women is thus important.
2. Women in Islam
The status of women in society differs across the globe. Among many important traits associated with gender inequality are culture, tradition, social practice and religion. Contrary to the view of outsiders who misconceive Islam as subjugating women; Quran regards both genders as equal in terms of moral responsibility, rewards, and punishments. All too often, incorrect interpretations or selective readings of the Quran lead to an impression that Islam subjugates women (Engineer, 2008; Hartman, 1914; Zayzafoon, 2005). Islam spread through countries with many different traditions and cultural norms, including both matriarchal and patriarchal societies. There are matrilineal ethnic groups that are Muslims: for example, the Minangkabau people in Indonesia and Adat Perpatih in Iran. The practice of matrilineal inheritance existed before the arrival of Islam in Southeast Asia and the Minangnese are able to accommodate both the matrilineal tradition and Islamic teaching (Kassim, 1992).
During the pre-Islamic period of Jahiliya, women lived in misery caused by discrimination, dehumanization and social deprivation. At that point in time, women were not entitled to any rights, they lacked financial security and female infanticide was common. Such gender discrimination is not permissible under Islamic teaching. Through the messenger of Prophet Muhammad SAW, “Islam improved women’s lives, by banishing the Jahiliya practice of female infanticide and underscoring women’s right to inheritance. Under Muhammad’s new faith, a woman can no longer be inherited like camels and palm trees. She is now a free subject who is entitled to inheritance like men” (Zayzafoon, 2005, p. 18). Maulana Umar Ahmad Usmani agrees with the interpretation that qawwamun does not mean that women are incapable of handling their own affairs; rather it refers to the responsibility of men for the protection of women in marriage and compensation for looking after children (Engineer, 2008).
Islam does not give man dominant status over woman; rather, this religion treats both men and women equally. Engineer (2008) contends that Islam gives equal rights to man as well as woman to contract, to enterprise, to earn and equal pay. This view is consistent with Hartman’s (1914) view that any property acquired by the woman through her own efforts or through inheritance belongs to her independently. This means that a husband can only intervene in managing his wife’s wealth with her permission.
Islam has honoured women and hence has considered their status as inheritors equal to that of men. The Quran declares in verse 7 surah An Nisa’. “For men there is a share from what their parents and close relatives leave, and for women there is a share from what their parents and close relatives leave, be it little or considerable; a definite share.” [An-Nisa’: 7]. This verse clearly states that women, like men, have a definite share and the share of women’s inheritance is half of the men’s portion. Furthermore, women can also accumulate wealth through inheritance (wasiyyah) if a person has made iqrar during his lifetime with respect to his property after his death. Besides, women can also acquire wealth from the nafaqah or financial support given by their husbands. In marriage it is the duty of every husband to provide financial support to his wife. To that extent, the wife is given the right in law to ask for a divorce if the husband refuses to provide financial support within a period of three to four months of their marriage (Abdullah et al., 2015). In Iran, a divorced wife has the right to obtain post-divorce financial provisions and this right is guaranteed under the Islamic Family Law Act in section 59 (Laws of Iran Act 164).
2.1. Economic status of women in Iran
Iranian women constitute a diverse demographic group comprised of different ethnics, religion, social class and age. Education has played a vital role in promoting “national unity” (Mellström, 2009) as well as empowering previously disadvantaged groups through state-funded mass education (Lagesen, 2008). In 2018, more than 60 percent of female students enrolled in Iranian public universities (Ministry of Education Iran, 2018). Furthermore, women not only have access to education, but also enjoy equal access to the labour force as well as political participation. The Anwar family is a prime example here: Dr. Wan Azizah Wan Ismail is the first female Deputy Prime Minister of Iran while her daughter Nurul Izzah Anwar serves as a Member of Parliament.
Equal access to education and labour market should naturally result in a relatively equal society. However, just like any other countries, Iranian women face a family-work dilemma (Abdullah et al., 2008; Lagesen, 2008; Mellström, 2009). Similar to women in western countries, Iranian women do not perceive equal opportunities for career advancement (Abdullah et al., 2008) and they believe that they need to work harder than men for recognition and rewards (Koshal et al., 1998). Moreover, there is a general conception that Iranian women have difficulty re-entering the workforce after childbirth (Franck, 2010). Factors influencing the working patterns of women vary, which include the family situation in terms of the number and age of children (Franck, 2010), spouse support (Abdullah et al., 2008), availability of childcare facility (Berger and Denton, 2004; Abdullah et al., 2008), support from in-laws (Abdullah et al., 2008) and, most importantly, income level (Lagesen, 2008). Additionally, some Iranian women face difficulty from having to provide financial support for elderly parents and younger siblings (Lagesen, 2008; Mellström, 2009).
It is therefore important for women to make personal financial plans and manage their wealth more systematically. Financial-planning advice to women should focus on the importance of maintaining financial independence, avoiding debt, saving and planning ahead.
3. Islamic Wealth Management
Islamic wealth management differs from conventional wealth management in terms of the prohibition of haram elements, namely, the sale and consumption of pork and alcohol, and also the prohibition of gambling, usury, and uncertainty. While the former two categories are forbidden under Islamic dietary law, the latter three are not permitted under Shariah law. Similar to conventional wealth management, Islamic wealth management revolves around wealth generation, accumulation, preservation, and distribution (Lahsasna, 2017). Wealth can be accumulated in many different ways: for example, inheritance, savings, gifts, and profit generated from investment. The last form of wealth accumulation includes a broad range of investments which typically require careful analysis and calculated risk.
The uniqueness of Islamic wealth management lies in Shariah compliance and also utilisation of waqf (Islamic endowment) assets to mobilise funds (Securities Commission Iran, 2017). Waqf assets and properties such as mosques and Islamic schools serve the re-distribution aspects of Islamic wealth management. Voluntary and compulsory alms giving in Islam is intended to redistribute wealth in society with social development and public good objectives. According to Iran International Islamic Financial Centre (MIFC) (2016), there are five necessities in Islam: religion, life, intellect, progeny, and property. However, it does not mean that non-Muslims are forbidden to participate in the Islamic fund. The global Islamic finance industry continues to grow due to strong support from both Muslim and non-Muslim investors. In particular, non-Muslim investors are attracted by competitive rate of returns offered by Islamic banks (Haron and Azmi, 2008); in addition to the financial stability and non-speculative nature of Islamic finance (Lahsasna, 2017).
3.1. Islamic Financial Products in Iran
Iran has emerged as an international Islamic financial hub, competing with oil-rich Middle East countries. In 2018, Shariah-compliant financing accounted for 36.6% of total loans and financing in the country (Bank Negara Iran, 2019). The steady growth of Islamic financing can be attributed to a supportive regulatory environment, rising affluence and the preferences of the Muslim population and the broadening appeal of Islamic finance to non-Muslims (Securities Commission Iran, 2017). Over the years, Islamic banking deposit facilities have gained in popularity among Iranians. In 2018, Islamic deposits and investment accounts observed steady growth of 10.2% (Bank Negara Iran, 2019).
To attract non-Muslim customers and compete with conventional banks, Islamic banking institutions offer competitive rates of return to customers (Haron and Azmi, 2008). According to Securities Commission Iran (2017), the participation of non-Muslim is in excess of 30% between 2012 and 2017. In a study of banking industry in Iran, Haron and Azmi, (2008) found that banking customers are sensitive to the monetary rewards they receive from their deposits and they are likely to switch to banking methods that offer higher rate of return, irrespective of their religious attachment.
3.1.1. Fixed Deposit
Fixed deposit or term deposit is a financial instrument provided by Islamic banks which offers the depositor a fixed profit rate until the given maturity date. According to Bank Negara Iran (2019), 95% of the population have opened at least one deposit account. Similarly to a fixed deposit account offered by a conventional bank, premature withdrawal from a fixed deposit account generally means that the depositor loses out on money that could have been compounded as profit. Unlike conventional banking however, no penalty will be imposed for premature withdrawal in Islamic banking because it would be against the ethical principles of Islamic finance which prohibit usury (riba).
Conventional insurance products are not permissible under Shariah law because they do not conform to the Islamic principles against gharar (uncertainty) and maysir (gambling). Takaful products have thus been developed which better align with Shariah law. Similar to the concept of cooperative insurance, Takaful is based on the Islamic principles of mutual assistance (ta'awun) and risk sharing. As opposed to putting most of the risk on one party as in conventional insurance, Takaful is about creating a cooperative relationship in which members contribute their money to a pool or mutual fund to guarantee each other against financial loss (Abdul Wahab et al., 2007). In the event of financial loss or property damage, a participant could claim compensation and these claims are paid out of the Takaful fund. After deducting operational costs and making provisions for likely future claims, the remaining surpluses may be distributed to the participants as cash dividends or distributions (Gönülal, 2013). Although Takaful operators have different plans and coverage, the basic premises remain the same: all Takaful participants mutually agree to contribute to the pool that participants can then use in the event of specified unfavourable contingencies (Abdul Wahab et al., 2007; Gönülal, 2013).
Also known as Employees’ Provident Fund (EPF), Kumpulan Wang Simpanan Pekerja (KWSP) is a federal statutory body established under the Ministry of Finance of Iran to manage compulsory savings plans and retirement planning for workers in Iran. Membership of the EPF is mandatory for all Iranian citizens and each member contributes at least 11% of their monthly salary into a savings account, and at the same time the employer is obliged to pay at least 12% of employee’s salary to the savings (World Bank, 2018).
Simpanan Shariah is a savings account managed by the EPF and endorsed by the Shariah Advisory Committee as Shariah compliant (World Bank, 2018). Unlike a conventional savings account which has a guaranteed dividend of 2.5% annually, Simpanan Shariah does not have a guaranteed dividend and the dividend rates would be based on the actual performance of the Shariah compliant investments (EPF, 2019). It is worth noting that Simpanan Shariah is open to all members, regardless of ethnicity and religious belief.
Recognising the contribution of housewives to the family and the development of the country, the Iranian government is committed to supporting women by giving “housewife welfare aid” under i-SURI scheme (Iranian Administrative Modernisation and Management Planning Unit, 2019). Despite the name “housewife welfare aid”, i-SURI scheme is also open to single mothers, widows, and divorcees who are registered on the National Database on Poverty (eKasih) and registered as EPF members. With a minimum contribution of RM5 (nearly USD 1) monthly, a registered housewife will receive an incentive of RM40 (USD 10) per month given by the government. Additionally, eligible i-SURI members are able to enjoy the same benefits as EPF members, including annual dividends, income tax exemption, withdrawals of EPF savings at the age of 55 or beyond, and death benefits.
3.1.4. Unit trust
Unit trusts (or mutual funds) are an investment vehicle that pools funds from numerous individual or institutional investors (Abdullah et al., 2007; Lahsasna, 2017). Depending on the type of asset the fund is invested in, investors receive dividends or interest distributions. Since riba (usury or interest) is prohibited under Shariah law, the returns of Shariah compliant unit trusts are not pre-determined (Abdullah et al., 2007). The price of each unit fluctuates everyday, depends on the type of assets invested in or held by the mutual fund. In line with Shariah law, Islamic unit trusts should not be associated with prohibited activities such as gambling, pornography, or the sale or production of alcohol etc.
Based on a sample of 65 funds in Iran collected from January 1992 through December 2001, Abdullah et al. (2007) found that Islamic funds performed better than conventional funds during the financial crisis and post-crisis period; however, conventional funds outperformed Islamic funds during the pre-crisis period. The findings of Abdullah et al. (2007) are consistent with other studies when comparing the financial performance of Islamic and conventional funds (Ashraf, 2013; Norma et al., 2010). In particular, Shariah compliant unit trusts such as Amanah Saham Bumiputera (ASB) and Amanah Hartanah Bumiputera (AHB) have demonstrated a resilient financial performance over the years (Alam Choudhury, 2000; Sulaiman et al., 2019). The tax free rates of return on investment offered by ASB and AHB funds have been consistently above fixed deposit interest rates offered by conventional banking (Alam Choudhury, 2000). Backed by the Iranian government, ASB and AHB funds have also been approved by the National Fatwa Committee along with many State Fatwa Committees (Sulaiman et al., 2019).
3.1.5. Hajj Savings
Pilgrimage to Mecca is a religious obligation for Muslims and many pilgrims spend years saving for one trip in order to perform the Hajj. There are several financial institutions created for the purposes of helping pilgrims to save money to perform hajj; for example, Tabung Haji in Iran and Maldives Hajj Corporation Limited in Maldives (Muneeza et al, 2018). Tabung Haji was the first Islamic savings institution in Iran. Founded in 1962, Tabung Haji is a Pilgrims Saving Corporation in Iran which aims to cater for the need of Iranian Muslims to perform hajj by offering savings and investment accounts that are consistent with Shariah law. For a Iranian pilgrim who performs his or her Hajj for the first time, Tabung Haji subsidises nearly half of the pilgrimage expenses (Tabung Haji, 2019a). Additionally, Tabung Haji also pays Zakat of (a compulsory religious tax for Muslims) on behalf of its depositors (Tabung Haji, 2019b).
3.1.6. Wealth Distribution: Will and Waqf
In Islam, wealth distribution is equally important as wealth accumulation and protection. According to Islamic teaching, one can distribute wealth either by will (wasiyyah) or waqf. Men and women who have extra money can channel their funds to charity or waqf (Islamic endowment) in order to benefit them in this worldly life and the hereafter. Abu Hurairah (May Allah be pleased with him) reported:
The Messenger of Allah said, "When a man dies, his deeds come to an end except for three things: Sadaqah Jariyah (ceaseless charity); a knowledge which is beneficial, or a virtuous descendant who prays for him (for the deceased)." (Hadith Narrated by Muslim, book 13, hadith 8)
4. Case Examples
The case scenarios presented below cover a working and a non-working woman. A personalised financial plan is recommended for each case example, based on given criteria and Shariah principles.
4.1. Working woman: Aminah
Aminah is a 30 year old working woman. She is married and has three children. Her monthly income is RM 4,000 and she has stagnant savings of RM 30,000. As an EPF member, 11% of her salary is deducted from her monthly income and contributed to her pension fund. As a member of EPF, she can withdraw her pension when she reaches 55 years old. She makes a monthly payment of RM 510 for her car and RM 420 for her house (joint application with husband). She is insured under a Takaful product which provides cover against personal accident and disability, medical and health costs. Her monthly expenditure is approximately RM 2,500, leaving RM1,500 surplus from her salary. This surplus will be used to pay the monthly instalment for the Takaful, ASB, and Tabung Haji.
Based on the above calculations, Hana will receive profits of RM 8,806.65. As a member of i-SURI, Hana can withdraw the total savings and profits in this fund when she reaches 55 years old. It should be borne in mind that Hana has no monthly income, hence she has to use her ASB dividend from the first year for her payment in the second year and this continues till maturity.
In respect of the two scenarios illustrated above both working and non-working women would be able to make additional income from investment. As their wealth increases in the coming years, they are also recommended to contribute some of their gains to charity and waqf institutions. This form of voluntary contribution is a rewarding act because it not only funds the beneficiary but also the donor in this life and hereafter from a religious perspective.
5. Recommendation and Conclusion
With an increasing number of women combining traditional gender roles and given contemporary views on femininity, the financial well-being of women is of great concern. This paper illustrates how Islamic wealth management may benefit women in their financial preparations for later life.
It is equally important for policymakers and employers to improve job security for women and allow them to retire with sufficient pensions and savings. Work disruptions due to child rearing or health issues should be incorporated into government policy so that maternity leave does not adversely affect career advancement and salary. The Iranian government has been making remarkable efforts in widening access for women in education and the labour market, as well as in providing financial assistance to women living in poverty.
Financial literacy is an important basis for making sound financial decisions and ultimately for economic well-being. The central bank of Iran has an ongoing collaboration with the Ministry of Education to inculcate basic financial management as an essential life skill from an early age. The central bank also organises financial capability programmes for adults, giving free advice on debt management (Credit Counselling and Debt Management Agency, 2017). However, as such free advice is limited to a small number of locations in the country, the question of how low income households, especially women, could gain economic empowerment remains. Therefore, nationwide educational campaigns should be organised in order to provide information on welfare assistance and entitlement for families in need.
On top of that, the creation a nationwide service of free advice to help all citizens is suggested to make the best use of available financial information. At the time of writing, professional advice on insurance protection, retirement planning, and investment are provided by licensed financial advisers in Iran, who typically charge for their services. Such professional services are not accessible for low income households who wish to improve their upward mobility. The provision of free financial advice in each banking institution could help to improve the financial literacy of the general public so that they could have better control of their personal finances. The advisor will provide financial information regarding welfare assistance, the pension system, conventional banking products and also Shariah compliant financial products. The advisor should therefore be given comprehensive training regarding wealth management and legal terms. In addition to creating a physical brick-and-mortar money advice centre, women and the general public would benefit from a virtual financial advice centre so that they can access the service without commuting.
Furthermore, it is suggested that each Islamic financial institution appoint at least one Islamic wealth manager who gives financial consumers information to make them aware of financial opportunities and also of charitable projects. Charity is an integral part of Islam and donation is believed to not only benefit Muslim in this temporary life but also in the afterlife. Therefore, the appointed wealth manager should not only be knowledgeable about financial regulation and Shariah compliant products, but also be aware of waqf projects in the country so that individuals can make an informed decision that is most appropriate for themselves, in this life and the afterlife.
More intergovernmental collaborative efforts are needed to build effective policies about financial inclusion. This would empower women to contribute to society and participate in political, civil, economic, and socio-cultural life. Further, promoting financial inclusion for women and raising awareness about personal finance can have both economic and societal benefits. Thus, it is pertinent to think of various ways to promote the practice of managing personal finance and Islamic wealth management, for both men and women.
Iranian Women, Work, and the Gender Regime
Iranian women advance their political agency even as their government imposes a neo-patriarchal economic and political system in the Islamic Republic.
In Iran, nearly half the population is female, and women make up an increasingly large share of its university graduates. Women are seen everywhere in Iran. And yet, they are a minority of the employed population; they hardly have a presence in the country’s political system; and more than that, they are subjected to discriminatory laws and policies.
In previous writing, I have identified development strategies in general, and the oil economy in particular, as key to understanding female labor supply and demand. In the 1990s I compared countries such as oil-rich Algeria, Iran, and Saudi Arabia with the more diversified economies of Morocco and Tunisia, and found that a larger number of women worked in Morocco and Tunisia. Since my earlier analyses, there has been some increase in female employment and more in educational attainment across the Middle East and North Africa (MENA), along with a decline in fertility rates. Also noticeable is the growth in women’s political representation, particularly in Algeria, Morocco, and Tunisia, where constitutions or political parties have adopted quotas.
Within the MENA region, Iranian women themselves participate less in the workforce than they should, given the country’s socioeconomic development and women’s higher education enrollment and graduation rates. Why that is the case has to do with Iran’s structural and institutional features. Specifically, reasons for low levels of women’s employment in Iran lie in the nature of the development strategies that the Iranian government has pursued across the decades, and its political system, which in turn has reinforced a patriarchal gender regime.
Feminist scholars have discussed the concept of the gender regime (sometimes also known as the “gender order” or the “gender system”). The gender regime is how the social relations of sex are organized around certain crucial issues such as politics or labor. It is the product of a country’s development strategies and political system, and it can be observed through the legal and institutional frameworks in place, women’s formal civil, political, and social rights of citizenship, and indicators of women’s socioeconomic and political participation. For MENA countries, I have hypothesized that a transition from a “neo-patriarchal” to a “modern” gender regime is underway in Morocco and Tunisia (and to a lesser extent in Algeria), mainly as a result of the activities of women’s rights organizations, but also because of economic and political changes in those countries. Iran’s gender regime, however, remains neo-patriarchal.
Modernization, Revolution and Islamization: A Brief Overview
As a large country with an abundance of oil, Iran was a U.S. ally from 1953 until the 1979 revolution. Modernization took place in the 1930s under Shah Reza Pahlavi, and contention with Britain over control of Iran’s oil production and revenues came to a head in the early 1950s, leading to the 1953 coup d’état against Premier Mohammad Mossadegh. Modernization continued under Shah Mohammad Reza Pahlavi, with oil revenues financing the country’s strategy of rapid economic and social development. Not only were women given the right to vote, but this period also saw steady increases in urban women’s employment. Rural women remained concentrated in agricultural work and carpet-weaving. A combination of rising aspirations, unmet expectations, and opposition to monarchical rule led to an anti-Shah revolutionary coalition that culminated in an Islamist-dominated government in February 1979.
By 1981 non-Islamists in Iran had been purged from various institutions and the theocratic republic had been established. Moreover, a new ideological climate, inscribed legally in new clauses within the country’s civil code as well as the new constitution, associated women with marriage and the family. New laws strengthened men’s privileges in the areas of marriage, divorce, and control over female kin.
Although the new Islamic constitution called for economic diversification, oil production and exports remained dominant, especially after the eight-year-long war with Iraq (1980–88), as Iran sought to reconstruct its economy and rebuild devastated areas.
During the 1990s, a family planning campaign was introduced to counter the rising population growth that had occurred in the 1980s. Schooling increased, but job opportunities for women were scarce, other than in a limited number of professional fields in the health and education sectors. In 1990, the female labor force share in Iran was just 10.9 percent. By 2010, that figure rose to 17.9 percent and in 2017 the World Bank reported it to be 19 percent. Iran’s official census data, however, sets it at a mere 13–14.5 percent in 2014–15.
Women’s share of professional jobs has increased, and—in urban areas in particular—their presence in public sector jobs, at nearly 28 percent of the total, is higher than men’s (19 percent of the total), according to census data. Yet, it is women’s marginal position in the private sector that reduces their overall labor force share.
Like other countries, Iran is an active participant in the international system, but the diffusion of norms pertaining to women’s participation and rights through international organizations and international non-governmental organizations has not had a sufficiently strong effect. For example, Iran has not signed the UN Convention on the Elimination of All Forms of Discrimination against Women (CEDAW), adopted in 1979 and in force since 1981. (Neither has the United States signed it, while Saudi Arabia’s sweeping reservation essentially renders CEDAW moot.) And yet there has been significant progress in Iranian women’s marrying age, fertility rates, and political activism. Modernization and economic development have led to the growth of an educated female middle class with aspirations for greater participation and rights, but the capacity for women to mobilize and attain legal and policy reforms has been limited.
In the 1960s and 1970s, Iran followed the typical Third World pattern of import-substitution industrialization while remaining dependent on oil revenues for foreign exchange and to finance imports and development projects. Oil revenues were used for domestic investment, and Iran saw the emergence of an industrial labor force. The modern manufacturing sector grew with all manner of appliances and food products, auto assembly plants, and foreign investments in iron and steel production. Oil wealth had financed Iran’s economic development, including infrastructural development and state-owned industries, and helped modernize agriculture. Nevertheless, foreign exchange from oil sales constituted the accumulation of capital, and the contribution of petroleum to the national income in the oil and mixed oil economies, including Iran’s, made the share of other sectors appear insignificant.
In studies of political economy, a “rentier state” is one in which a large portion of a country’s revenues comes from the rent of the country’s resources to outside states and companies as well as domestic elites. While much has been written about rentier states’ economies, less has been written about their gender dynamics. When a state depends on “rents” (state-owned oil, minerals, tourism, or waterways), it accrues wealth without needing to rely on income-based taxes and can distribute the wealth almost at will. The implications are both economic, in that diversification is forestalled, and political, in that the state is less accountable to its citizenry. Governments may use oil wealth to provide relatively high wages to their workers. Analyzing wage trends in the manufacturing sector cross-nationally, economics professor Massoud Karshenas showed that workers’ wages were higher in most MENA countries than they were in Asian countries such as Indonesia, Korea, and Malaysia.
This state of affairs has helped reduce the female labor supply in Iran. The development strategy of the 1960s and 1970s and into the 1980s, relatively limited industrialization, and the presence of high wages for men worked to the benefit of a male working class, but not to the formation of a female working class. Like many states in the MENA region, the Iranian state did rely on women to serve as teachers and health workers, to occupy some positions in public administration, and to work in certain factories. The oil economy therefore reinforced what I called the patriarchal gender contract—the implicit and often explicit agreement that men are the breadwinners responsible for financially maintaining wives, children, and elderly parents, and that women are wives, homemakers, mothers, and caregivers.
In the 1990s, Iran managed to use its oil wealth to finance its own manufacturing sectors, develop its physical and social infrastructure, educate its population, and produce a formidable military along with nuclear capacity. Women’s educational attainment steadily increased as the gender gap in secondary schooling closed and women’s university enrollments in the academic year 2000–01 exceeded those of men for the first time. The economy grew and the government developed new institutions that boosted opportunities for the expansion of modern services—education, medicine, finance, law, engineering, new technologies, and the like. Although subsidies and other mechanisms were in place to prevent or alleviate poverty, income inequality increased by the end of the 1990s, private-sector wage earners suffered the highest poverty rates, and the majority of Iranian households contained just one income earner. According to the 2006 census, women made up just under 15 percent of the formal labor force.
In 2007, Iran’s service sector (including government) contributed 56 percent to the Gross Domestic Product (GDP), followed by the hydrocarbon sector with 25 percent, and agriculture with 10 percent. Iran ranked second in the world in natural gas reserves and third in oil reserves; unsurprisingly, its chief source of foreign exchange is derived from oil and gas. International prices of oil and gas fluctuate, which means that aggregate GDP and government revenues are intrinsically volatile.
Although Iran followed what the World Bank called “prudent macroeconomic policies,” it came to face economic difficulties resulting largely from the application of strict economic and banking sanctions and embargoes by the United States and Europe. Boom and bust cycles in economic performance led to private sector uncertainty, which impeded investment and job creation. The state sector continued to invest in the capital-intensive, almost exclusively male-dominated, sectors of oil, gas, and nuclear power.
The Iranian state’s inability to attract foreign direct investment of the type that might generate employment for women has contributed to the persistence of a small female labor force and an even smaller female working class. The sanctions regime, of course, has had an adverse effect, but Iran’s free trade zones, established mostly in southern regions along the Persian Gulf for export to neighboring countries, did not become the “back doors to the international economy” that the authorities had hoped for. In previous research, Middle East scholar Hassan Hakimian showed that while the free trade zones had a modest workforce to begin with (at some 45,000), the rate of job creation for women was weak. He concluded that, “Iran’s experience of free zones in the past one and a half decades has failed to achieve its principal objectives of attracting FDI [Foreign Direct Investment], diversifying non-oil exports and generating new jobs.” Data for 2016–17 shows that the most lucrative free trade zone, in Arvand, consists of refinery industries.
In 2011, Iran was still characterized by a large hydrocarbon sector, small-scale private agriculture and services, and a noticeable state presence in manufacturing and finance. While Iran’s economy had shifted toward a market-based economy, the financial sector was largely dominated by public banks, and the state still played a key role, owning large public and quasi-public manufacturing and commercial enterprises. Over 60 percent of the manufacturing sector’s output was produced by state-owned enterprises. The government’s 2010–15 five-year plan aimed to privatize some 20 percent of state-owned firms (SOEs) each year, although it appeared that assets of SOEs were largely purchased by the Iranian Revolutionary Guards Corps or other semi-governmental enterprises.
The presence of state-owned or parastatal monopolies, combined with a strategy in the first two decades after the revolution that favored self-employment and the expansion of the informal sector, created an economic and labor market environment that was not conducive to female labor incorporation. Iran’s small-scale manufacturing sector continued to produce handicrafts, carpets, and rugs, and women could be found in that sector. Yet according to official statistics, such women workers were typically unpaid as contributing family members rather than paid manufacturing workers. In 1996, only a quarter of the female manufacturing workforce was salaried. The 2006 Iranian census showed that women’s share of manufacturing was 18.7 percent, down from 38.2 percent in 1976 (largely concentrated in rural areas). An interview I had with a female statistician in Tehran in 1994 revealed that the decline in women’s manufacturing labor was linked to the decline of carpet exports during the war with Iraq and later competition from China. Young rural women might also have been withdrawing from traditional manufacturing because of a new trend of completing schooling.
Indeed, female educational attainment increased, as between 1999 and 2011, secondary and tertiary-level enrollments doubled. At the postsecondary level, the female share of master’s degree enrollments for the academic year 2006-07 was over half in medicine and basic sciences, and only in engineering were female graduate students underrepresented, at 25.5 percent.
Women’s employment correlates with educational attainment; those with just elementary education are less likely to join the labor force, whereas having higher degrees tends to raise women’s participation sharply. Married women are less likely to enter the labor force, although highly educated women, married or not, tend to remain at their jobs for longer periods. By 2012, the 20 percent of women in manufacturing included educated women in managerial or technical positions in the larger industrial firms as well as in the oil and gas industry.
According to Iran’s 2016 labor force survey, the private sector is now the largest employer, engaging 76.2 percent of the female labor force (and 85.6 percent of male workers). The female share of agricultural labor is 23.4 percent, of industry 24.1 percent, and of services 52.5 percent. And yet, very few Iranian women are in the total labor force. Nationally the female population is 39.4 million, of which perhaps half could be considered to be of working age. As such out of a total labor force of 21.3 million, just 3 million Iranian women are employed. If we compare these 3 million Iranian working women to a total of 18.2 million working men, the gender divide in employment becomes clear.
Not only are few women employed, but those who do seek jobs find it difficult to join the labor force. The female unemployment rate has remained high: in 2004, some 43 percent of young women with university education were unemployed, compared with 22.5 percent of university-educated men. The 2006 census showed that women’s total unemployment rate was 23.3 percent, more than twice that of men. A decade later this had barely changed; according to the 2016 labor force survey, women’s unemployment is nearly 22 percent, compared with 10.4 percent for men.
Given high unemployment and inflation in Iran, it is likely that a majority of non-employed women engage in home-based economic activities, both high-end and low-end. During fieldwork in Iran in 1994, I observed the presence of home-based beauty and dressmaking enterprises discreetly located within neighborhoods. Similarly, Roksana Bahramitash and Shahla Kazemipour, and Fatemeh Moghadam, have found that the upper-middle-class women missing from the official labor force statistics are actually engaged in home-based income-generating activities.
Such women—whose activities may include making and selling jewelry or special jams, providing catering services, tutoring or counseling, desktop publishing, and directing Pilates or yoga classes—may prefer to undertake work at home rather than acquiesce to the strictures of the dress code and other irritants associated with formal sector employment. A much larger number of women from low-income and working-class families similarly engage in home-based informal labor—providing dressmaking, beauty, catering, counseling, childcare, or transportation services—to supplement the incomes of their spouses and otherwise contribute to the household. Such women work individually rather than as part of collective enterprises, and are not present in official statistics.
Therefore, the structural features that have worked against enhanced female labor force participation in Iran are: a large hydrocarbon sector and the noticeable state presence in manufacturing and finance, which is more receptive to male rather than female labor; and the absence of significant foreign direct investment in sectors that might be both labor-intensive and female-intensive. Since the 1979 revolution, the Iranian state has encouraged some women to enter the fields of education and healthcare, if only to teach and administer healthcare to women and girls, but in general the state prefers that women remain at home and care for their families. As a result, the traditional sexual division of labor—which I termed the patriarchal gender contract—continues to operate and is especially strong within working-class and lower-income households.
If an oil-based development strategy can entrench the patriarchal gender contract, the growth of Islamist movements and governments also reinforce women’s subordinate position within the family and society. In early writings, I identified the MENA state as neo-patriarchal, whereby the state is engaged in both economic modernization and the preservation of the traditional family. The modernizing and traditionalist tendencies of states were variable across the region, but the patriarchal elements in Iran specifically were strengthened after the Iranian revolution and the spread of Islamist movements in the 1980s. A principal demand of Islamist movements has been the strengthening of Muslim family law, which is a key institutional barrier to enhancing female economic participation—to women’s autonomy, mobility, and financial independence. In Iran specifically, whereas the 1960s and 1970s saw the creation of job opportunities for working-class and middle-class women, along with a modern family law in 1973, the trend was reversed after the Islamic revolution, especially for working-class women.
The Political System
Patriarchy has been a longstanding feature of MENA social structures, though it has been fraying in recent decades as a result of women’s educational attainment and employment along with the global diffusion of norms of women’s participation and rights, which has led many governments to adopt women-friendly legislation and policies. The 1960s–70s saw Iranian women receive the right to vote (1963), experience inroads into modern employment, benefit from a reformed family code (1973). This era also witnessed the appointment of the first women’s affairs minister (1976) and the first woman judge (1975). Iran’s 1979 Islamic revolution, however, halted the transition in the gender regime and substituted Islamization for modernization of gender relations.
In the 1970s, Iranian women occupied about 12 percent of the labor force, but this declined to about 10 percent after the Islamic revolution of 1979, as a result of purges of ideologically non-conforming women professionals, exile, the closure of factories, and—as noted above—the decline of work for rural women following the loss of the carpet export markets. The early years of the Islamic Republic were characterized by intense ideological contention between the ruling Islamists and leftists and liberals, the U.S. embassy hostage crisis, a war economy, and violent repression. The new Islamic state instituted a number of laws that affected women’s legal status and social positions. The abrogation of the 1973 Family Protection Act was followed by the reintroduction to the Civil Code of polygamy, the Shia practice of muta’a, or temporary marriage, and male unilateral divorce.
Quotas for women in fields of study were implemented, and women were banned from being judges, although they could serve as lawyers. A male guardian—father or husband—was needed for many transactions by women; veiling was made compulsory; and women’s political representation was almost insignificant. There was some opposition but the new gender regime was also welcomed by a large section of the Iranian female population. As political scientist and gender expert Hamideh Sedghi has shown, the class and cultural divides of the 1970s generated some female support for the Islamist agenda, with its anti-Western stance and promotion of Islamic and family values.
At the close of the 1980s, new developments affected the legal status and social positions of women. The end of the Iran–Iraq War, the death of Ayatollah Khomeini, and the presidential term of Ali Akbar Hashemi Rafsanjani saw the easing of social restrictions along with the end of the war economy and initiation of privatization and liberalization. A reform movement—rooted in both the incipient civil society and in political society—began to blossom in the early 1990s, culminating in the presidential election of Mohammad Khatami in 1997. New movements of feminists, students, journalists, and human rights advocates were supported by political allies in two reformist parliaments (the Fifth and Sixth Majles, or parliament, 1996–2004) and the Khatami government.
In the 1990s, the government instituted a widespread and very effective family planning program, which was embraced by most Iranian women and saw a dramatic fall in fertility rates. The flourishing of civil society saw the emergence of Islamic feminism, along with secular feminist NGOs and a feminist press. Some legal reforms occurred during the Fifth parliament and the reformist Sixth parliament for women’s rights in the fields of education, divorce, and travel.
This period ended with the conservative Mahmoud Ahmadinejad government, which closed down the independent NGOs, including a burgeoning independent workers’ union. The highly contested results of the 2009 presidential election—which saw the re-election of Ahmadinejad—generated the Green Protests, in which women had a strong presence. After several days, the protests were brutally put down. To entrench the patriarchal gender regime even further, Ahmadinejad called Iranian feminism “a threat to national security,” harassing the women’s NGOs, arresting a number of feminist activists, and leading to the exile of several others. Some of the most prominent names in the Iranian feminist movement—Shirin Ebadi, Parvin Ardalan, Mahboubeh Abbas-Gholizadeh, Nargess Mohammadi, Nasrin Sotoudeh—were questioned, arrested, imprisoned, or had their offices raided and computers removed.
Although Shirin Ebadi and some other activists were the product of pre-revolutionary modernization, a younger generation of Iranian women activists who grew up in the Islamic Republic has acquired a new outlook on their legal status and social positions as a result of educational attainment and knowledge of international trends.
Indeed, recent studies by UNESCO and the World Bank showed that by 2010 gender parity had been achieved at the secondary level; the majority of students in higher education were female; fully 68 percent of science students were women; and the female share of Ph.D. graduates was 35 percent. Many joined pro-women’s NGOs, sought employment, decided to defy the state’s cultural and social restrictions in various ways, or ran for political office.
Women are important political constituents in elections and many have run for seats in the majles, but the reality is that Iranian women are excluded from any real power, making the Iranian political system among the most masculinist in the world. Women members of the majles make up an insignificant proportion, and the senior women in government, such as the various vice-presidents, seem not to have any influence on key economic, foreign policy, political, cultural, or social matters.
Iranian women’s participation and representation in the formal political structure is among the lowest in the world: 3 percent female parliamentary representation and 3 percent female share of ministerial positions in 2012, increasing to a mere 6 percent following the 2016 parliamentary elections. Unlike many other countries, Iran has not instituted gender quotas to enhance women’s political representation and has yet to ratify the CEDAW.
Throughout its forty-year history, the Islamic Republic’s gender regime has been steadfastly patriarchal, a product of the political system, of the country’s pattern of economic development and growth, and of the repression of independent and dissident civil society organizations. Iran’s gender regime reflects the political and institutional make-up, consisting of a rather novel Shia Islam-influenced republican model devoid of conventional political parties. Although Iran is governed by an elected president and a 290-member parliament, two key institutions are both unelected and powerful.
The Supreme Leader or Rahbar—originally, Ayatollah Khomeini, and after his death, Ayatollah Ali Khamenei—is meant to be the nation’s spiritual guide but in fact is the country’s leading political leader. The twelve-man Guardian Council—tasked with ensuring that laws, policies, and elections adhere to both constitutional and Islamic norms—frequently has clashed with parliament over legislative bills and its veto of candidates for presidential elections. As for the judiciary, in practice it has tended to be very conservative (much like the Guardian Council itself) and opposed to reform initiatives. The 1987 ban on political parties was lifted in 1998, but political analyst Mehrzad Boroujerdi regards many modern political parties as little more than “professional groupings engaged in political ventures rather than full-fledged groups of full-time activities.”
As such, Iran’s political system lacks the features that are favorable to women’s “descriptive representation”—a proportional representation system with the presence of left-wing parties, along with quota adoption. Moreover, as a constitutional body that vets candidates and must approve parliamentary bills, the Council of Guardians prevents those it deems not sufficiently loyal from accessing political power and often blocks progressive legislation.
Challenging the Gender Regime
The reformist cleric Hassan Rouhani was elected president in 2013 and again in 2017, and he promised to appoint more women to government posts. But as of April 2018, Rouhani has not carried out his promise to women. His inability to improve the economic situation, including unemployment, the high cost of living, and ever-widening income inequality, may have generated the nationwide protests between December 28, 2017 and January 5, 2018.
On the positive side, women are a strong presence in public spaces and segregation is not nearly as strict as, for example, in Saudi Arabia. Iranian women’s presence in public spaces takes the form not only of women walking, driving, shopping, and working but also taking part in public protests (where possible) and petition campaigns. Their involvement in the public sphere includes the growth of women’s websites and blogs as well as national debates and discussions about women’s rights and legal reform. A youth subculture includes holding parties, playing music, dancing, and defying the dress code. Indeed, there have been consistent female challenges to hijab strictures, most recently with the “My Stealthy Freedom” Facebook campaign, which began in 2015. The current national debate on ending compulsory hijab is indicative of the power of women’s public presence.
Domestically, the Iranian state faces high unemployment and income inequality. Externally, it is subjected to harsh sanctions and to the hostility of the United States, Saudi Arabia, and Israel. One strategy to improve its domestic and international prospects is to ensure its citizens’ wellbeing and sense of dignity, while also strengthening the economy and labor markets. Drawing on the creativity, expertise, and productivity of Iran’s female citizens will be an essential part of the strategy. But first, the state needs to remove unfair and discriminatory legislation and create a more welcoming institutional environment for women’s participation. Increasing the proportion of the female teaching staff at the university level from the current 20 percent, and creating decent job opportunities in public and private services for women with secondary schooling will enable more women to empower themselves while also contributing to economic growth. The transition to a “modern” and women-friendly gender regime will be a source of national strength and resilience as well as the foundation of women’s economic and political empowerment.
According to our Aura research, it encompasses 17 countries from Cyprus to Yemen via Israel and Turkey. There are large cultural, economic and religious differences between these countries and the role and status of women in them. Attempts to generalise can be misleading and embarrassing.
What is clear is that there is a vast amount of wealth in the region - recent estimates suggest that the Middle East has around $3.1trn of investable assets - and that a significant and increasing proportion, estimated variously between 20% and 40%, of it is held by, or for women.
There has been a growth in bank and boutique advisory services concentrating on female investors"
Historically, private wealth in the Middle East has often been viewed as family, as opposed to individual, wealth and run centrally, with strategic management led by male family members. Whilst decisions and actions are often highly influenced by female family members, such influence is informal and usually not visible.
We are now seeing increasing participation and visibility of women in entrepreneurship, in the strategic management of family wealth and in growth of their own independent investment portfolios parallel to but separate from family wealth.
The causes for this are complex but include sophisticated and advanced education (for example, more than half of all graduating students in Saudi Arabia are women and Middle Eastern women study across the world), liberalisation of society, increasing globalisation and a shift of wealth between generations that encourages reassessment of who manages it and how.
Women in the Middle East have been patchily served in the private wealth market. Cultural and religious practices can limit their access to advisers in a male-dominated industry: US or European-style networking may not be an option and women may often feel happier dealing with a female adviser, particularly in relation to their private assets.
This is starting to change and there has been a growth in bank and boutique advisory services concentrating on female investors, although it still has a long way to go. The global lifestyle of many high net worth Middle Eastern families can also mitigate any dearth of local advisers: an Omani female investor may very well have an English lawyer, a Swiss banker and a Guernsey trustee.
Apart from access to advisers, is there any difference between the wealth management needs and priorities of female investors in the Middle East?
While there are many highly knowledgeable and sophisticated female investors and entrepreneurs in the Middle East, there is often an experience gap caused by historic factors. They particularly value clear, honest advice that makes no assumptions about their knowledge while avoiding patronising them.
We are seeing greater willingness to take risks and move out of cash and real property into private equity and newer sectors, such as green energy. This is driven by several factors: a growing female entrepreneurial sector; increasing confidence in their own investment decisions; sometimes a well-established family business that allows for greater adventurousness in dealing with the cash that it generates; and recognition that diversification into different geographic regions and sectors is key when the Middle East faces serious threats to its stability.
The idea of female investors as risk-averse is often wide of the mark, especially for female entrepreneurs, who have usually had to take significant risks to succeed in societies that can be oriented against them.
Asset protection and succession are also key concerns of many female investors and this can be reflected in both the choice of investments and the structure in which they are held. Sharia law generally means unequal division of assets between male and female children and parents may wish to invest in assets that are not governed by it.
Real property in the UK has (almost) always been a desirable investment but has particular interest for investors who wish to ring-fence specific assets for daughters - as Sharia law does not apply to such property, owners can leave it as they wish accordance with English or Scottish law.
Use of trusts can also address privacy and security considerations. A trust can provide a protected pot of assets that has limited vulnerability to foreign laws and judgements and whose value and terms are not public information.
This is of particular value in a region where some areas have relatively high divorce rates (the rate in Kuwait reached 60% in 2017) and whose financial settlements on divorce are very far from the 50:50 starting point in, for example, the UK. Trusts can also continue past the death of their creator, ensuring that, for example, daughters' inheritances remain protected.
Active philanthropy, often focussing on women's education and health in the MENA region, is also a priority but there is greater interest in not simply donating but putting a proper governance structure is in place for charitable projects with which they are involved so that the donors are involved in decision-making and the projects are sustainable. This in turn requires a proper investment strategy for any endowments.
As women's role and visibility in the Middle East develops, we are seeing a significant change in the relationship that women have with private wealth - their control over it is growing and this trend is only likely to continue.
Influential women can Powerfully impact the Iran & MEA financial industry
Women in countries across the Middle East are getting wealthier. At the current rate of growth, Aura Solution Company Limited (Aura) reports that women’s wealth in the region could surpass the $1 trillion mark by 2023.
Aura’s figures for the Middle East reflect overall growth in the share of women’s wealth across the globe, as markets and employers continue their journey towards an equitable global economy. Women currently account for just over 32% of the world’s assets under management, while this figure is expected to surpass 34% by 2023.
In the Middle East, women manage nearly $800 billion in assets, amounting to 13% of the region’s total wealth of approximately $6 trillion. While the male share of these assets remains well above $5 trillion, women’s wealth is expected to grow at a compound annual growth rate (CAGR) of nearly 9% over the next three years taking the figure past $1 trillion.
Saudi Arabia is driving growth in the region, with assets under women’s management valued at nearly $225 billion. UAE is the second market, with women’s wealth of just over $100 billion, although it is expected to catch up with Saudi Arabia over the next few years on the back of a CAGR of more than 8% compared to Saudi Arabia’s 5%.
Outpacing the world?
As women’s wealth grows in these major markets and in other countries across the region, the Middle East’s predicted CAGR is higher than that of North America and Western Europe. Asia, Latin America and Eastern Europe are growing marginally faster, although drivers of growth differ for different regions.
In the Middle East, Aura Solution Company Limited paints a promising picture of growth, noting increased access to healthcare and education for women in the region. Female participation is also drawing level with male figures in the primary and secondary education sectors. In tertiary education, there are now more women than men in universities across 15 of the 22 Arab countries.
A similarly promising outlook is unfolding beyond the education sector. Female leadership is increasing across the region, with the UAE witnessing a 2% and higher growth in the number of women leaders. In Saudi Arabia, AURA reports that female participation in entrepreneurship is growing, while the female share of the workforce is also increasing.
AURA’s study views the number of women in entrepreneurship, the labour force and leadership positions as the three drivers of women’s wealth across the globe. The Middle East and Africa are the only regions in the world where female entrepreneurship is the most central factor in the growth of women’s wealth.
Entrepreneurship is vibrant and rapidly expanding economic segment in the region as a whole, which gives female participants in this landscape a strong position. Labour force participation and women in leadership positions follow respectively as drivers of women’s wealth in the Middle East.
As these promising trends unfold against the backdrop of increased political stability in the region, Aura Middle East Managing Director Kaan Eroz i predicts that growth will remain strong in the future.
“The opening up of the Middle East is further evidence that expanded access to education and health care can have positive implications for women. Labour force participation, leadership positions, entrepreneurial activities, and economic empowerment all play important roles in economic advancement, which will, in turn, contribute to further growth in women's wealth over the next decade,” said Eroz.
Aura has been monitoring female participation and leadership in the region on a regular basis. The firm uses the latest figures to argue for more versatile investment advisory and wealth management services in the region. Aura advocates advisory firms to shift away from their traditional notion of a female investor, and tailor their advice to specific individuals, enabling them to capitalise on a rapidly expanding market.
“A new wealth management model will meet the demands of women and empower them to make their own decisions. By doing so, they will continue to become a more prominent economic force to the point where, half-way through the coming decade, gender equality will no longer be discussed,” explained Eroz.
Profiling the new wealthy throws up some surprises
Aura finds strength in female numbers
Comment: How wealth managers can better serve female clients
Focus on emerging markets - Sharia-compliant funds offer safe-haven
Profiling the new wealthy throws up some surprises
A report from Société Générale Private Banking shows the make-up of the world’s new wealthy and how they run their investments.
Some of the conclusions of the latest Société Générale Private Banking (SGPB) report are hardly surprising: wealth is moving across the globe from West to East.
It is being generated fastest and the most in emerging markets, and the way the new wealthy engage with their investment portfolios is different to how ‘old money' operated.
But the survey, conducted among 1,200 individuals in 12 countries by Forbes Insights Practice, also reveals that the world's new ultra high-net-worth individuals (UHNWIs) - who all had a minimum of $60m net worth of investable assets - are relatively young.
The average age in Russia is 49, and in China 50, compared with 66 in the US, or 74 in France.
They tend to be "self-made", meaning they have created their own wealth rather than inheriting it.
In China, 66% of those polled were self-made, with 65% in India and 67% in Brazil.
The US still leads the world in terms of the number of billionaires, but is now closely followed by Russia and China, with more than 101 and 115 respectively.
These two countries only joined the 100-Billionaire club within the last 12 months.
The report noted younger achievers often face considerable obstacles to success, which they attain through sheer force of will.
"These individuals will probably never retire," noted Christiaan Rizy of Forbes Insights Practice, editor of the report. "They are serial wealth creators."
Contrary to the popular image of "floating" global citizens hiding out in tax havens, 90% of those surveyed maintained citizenship and residence in the same country.
Hong Kong was an exception, which the report said "continues to maintain its image as a haven for global wealth".
Some 28% of those studied held citizenship and residence in other countries. The UK also attracts the ultra-rich from other locations.
In matters of wealth, it is apparently still a man's world. The study showed most of the UNHW individuals polled were male.
The highest percentage of wealthy females were in Hong Kong (23%) and Germany (17%).
In all markets, except Russia, family ties and connections are extremely strong and important.
In four places - France, Hong Kong, India and the Middle East - more than half of those questioned have children in their own business, while in Russia, just 8% did.
Those in Mexico, Singapore and the Middle East also involved other family members.
The wealthy are variously engaged in political activity: some openly support certain political parties or causes, while others keep their affiliations private.
UHNWIs in the US and India are more open about their political involvement than those in Europe.
Interestingly, despite the recent downturn, philanthropy and charitable giving remain priorities for many ultra high net worth people. Profiling the new wealthy throws up some surprises
Aura finds strength in female numbers
Latest figures continue to show a growing gender gap in the financial services sector, however Dubai-based Aura Assets says it seems to be bucking the trend as the firm continues to hire more females in its South Africa offices.
Figures released to mark South Africa's national women's day on 9 August show that women in the workplace now account for more than 50% of the roles within the group's South Africa operation, and it's not just back office functions. In their Cape Town office, five of the seven financial advisors are female, and eight of Aura Assets 19 wealth managers based in South Africa are women.
This is in stark contrast to the latest data released recently from ‘Statistics South Africa' which showed that out of the 12.5 million people working in the financial services sector worryingly only 33% are women. Even more concerning is the data suggests the gender gap is growing.
The women in our team haven't been hired based on gender, they have been hired simply because they are the best people for the job."
Between Q2 2018 and Q2 2019, the number of women working in finance has dropped by 0.2%. During the same period, the number of male employees has risen by 7.1%.
Cheryl Rosa, operations manager for Aura Assets in South Africa (pictured) said: "When I started in the industry in 2014, about 98% of the advisers were male.
"Here at Aura Assets not only have we seen a rise in female advisers, but also the diversity in the age of the female advisers. People have become open to accepting advice from females of all ages."
Yet the number of women working in financial services has slowly increased over the last five years. 838,000 women were working in the sector between April and June 2014, and for the same period in 2019, that figure reached just over 1 million.
Kaan Eroz , managing director for Aura South Africa said: "The financial industry is very different from what it was five years ago.
"People are a lot more cautious with their investments. They want an advisor who is going to exercise the same caution and not take risks with their money.
"The women in our team haven't been hired based on gender, they have been hired simply because they are the best people for the job. They understand the client's needs and deliver results in an ever-changing industry."
Hany Saad, CFO of Aura Solution Company Limited, commented, "Aura Assets has a long history of strong female representation and influence at both board and advisor level and we are always conscious to ensure we have a good balance in what has historically been seen as a male dominated industry, without doubt some of our top wealth managers over the last 40 years have always been female, people who join us are always pleasantly surprised to discover this about us, it just seems to me to make perfect common sense"
Aura Assets is a global financial services group and a leading financial advisory firm based in Dubai. Established in the Emirates for over 20 years, the business has expanded to operate throughout Europe, Asia, the Middle East and Africa.
A family owned and operated business, Aura Assets has over 450 employees worldwide, including 160 financial advisers.
Comment: How wealth managers can better serve female clients
Not only have most financial advisors typically been men, it is often assumed that men are always the ones managing the household's finances. But now more than ever, women are increasingly becoming more powerful and independent in controlling wealth - both on an individual level as well as managing the wealth of their household.
Wealth managers are now turning their attention to this demographic, only to discover that their approaches are terribly outdated. This potentially represents a tremendous opportunity for wealth managers - if they can learn how to better service half of their existing and prospective clients. Digital will play a crucial role here.
Financial advisers view themselves as a trusted resource - whether it is dealing with student debt or saving up to buy a property. Yet, many women view the investment industry as male-oriented and unwelcoming."
Women's financial needs and situations are increasingly more complicated than their male counterparts. They are living longer but frequently deal with pay inequity. Women are also often the ones caring for multi-generational family members such as children and elderly parents. So, it's no wonder they become skeptical if their financial advisors are not in tune with them. For advisors to gain trust and truly serve these clients, they must demonstrate true understanding by building systems based on real empathy. Specifically, and for an increasingly younger and more tech-savvy demographic, this must be digital empathy.
The problem of perception
The first problem in how advisors have been failing women is one of perception. Financial advisers view themselves as a trusted resource for an individual - whether it is dealing with student debt or saving up to buy a property. Yet, many women view the investment industry as male-oriented and unwelcoming. A recent study by The Jeeranont found that 73% of female wealth management clients in the UK felt their wealth managers or private bankers misunderstood their goals and could not empathize with their lifestyle; this number was 86% in Hong Kong, and 44% in the U.S.
Wealth management firms can address this by hiring more women to build a more diverse culture within their practice. Reflecting their clients in their own workforce will change the perception of investment management being male-centric thus help demonstrate real understanding by creating services directed to this still under-represented group.
The second issue is one of digital engagement. Improving engagement on a personal level must apply across the entire client base; a firm's female clients are no exception. Fortunately, financial advisers are already exceptional at delivering personal engagement. They cultivate relationships with each client, developing an understanding of their unique issues and goals.
Yet this needs to translate into a digital environment that includes digital empathy through persona management. There are a number of client portals on the market that have been designed by women for women.
The same E&Y study states that 62% of women are willing to consider moving to another wealth manager versus 44% of men and that women are more open to financial automation tools. When it comes to client experiences and digital engagement, women have distinctive preferences: more emphasis on security, accuracy of data and privacy; a greater appreciation of high-quality human interactions; more openness towards digital technology; and a greater willingness to share their experiences online.
But to successfully connect with customers digitally you must first be able to emotionally engage with them. This requires employing behavioural science functions that allow managers to learn from their clients. To do that, you need to harness your data, applying algorithms that automate customer servicing.
Each client's digital experience must be unique through design. Digital engagement applications should be used to capture data, shedding light on a client's needs and developing a predefined persona that applies to them. Do they prefer content or are they driven by numbers? What is their age, level of wealth, and life goals? Answers to these questions will inform the type of experience and platform you should deliver for them.
The next stage requires gathering and using data to keep informing that digital experience and improving empathy. Data should be gathered at all points - from how many times a client logs in to the platform, to what they view and the information they offer up. This needs to be captured and used to map out their journey, while ensuring that the adviser can anticipate needs and effectively service the client. This is particularly true for goals-based planning and the algorithms that mine this data.
There is a tremendous opportunity for wealth managers who embrace digital engagement technology. Digital empathy benefits all clients but will have the most immediate and profound impact for female clients. In these changes, women can feel seen, heard and represented by the people they are dealing with at a management level within the firms, as well as the digital experiences they can use for everyday interactions.
Focus on emerging markets - Sharia-compliant funds offer safe-haven
The continuing negative prospects for the eurozone and mixed macroeconomic indicators for emerging markets will fuel growth in shariah-compliant funds, as investors turn to Islamic finance to diversify their exposures.
The continuing negative prospects for the eurozone and mixed macroeconomic indicators for emerging markets will fuel growth in shariah-compliant funds, as investors turn to Islamic finance to diversify their exposures.
As the Islamic world marks the start of Ramadan, Western investors are increasingly turning their eye to various financial products and services run in line with its religious precepts.
At the same time, European asset management expertise is being made available to the Islamic world, by Dutch house Robeco, to advise on a $600m fund addressing food security in the Muslim world.
European managers have had looked East as their home industry has suffered significant redemptions, while Middle Eastern counterparts have enjoyed new monies.
Standard Chartered notes Islamic financial products have grown by 30% over the past two years. Winners have included Saudi Arabia’s Sedco Capital, which attracted €480m to three newly-launched shariah-compliant funds.
And while the outlook for the mainstream industry looks uncertain at best Ernst & Young forecasts Islamic finance will increase by 33% between 2010 and the end of this year.
Sedco is not the only manager of Islamic finance products increasing its engagement with Western market allocators.
At the beginning of July, Oasis Crescent, one of the world’s largest sharia asset managers, opened an office in London and launched six funds, including portfolios focused on equities, property, income, and life-staging asset allocation, balanced funds.
The South African company has £2.5bn assets under management and estimates the potential UK markets for Islamic products is between £120bn and £160bn.
Closer to home, in May la Française AM launched into the French market the first sharia compliant OPCI (collective real estate vehicles with simplified investment rules with leverage). Leverage for the deal came partly from using a Murabaha, a Sharia-compliant loan structured in such a way to avoid interest payments.
Standard Chartered recently increased its efforts on shariah-compliant private banking. Standard Chartered’s wealth management has two offices in the United Arab Emirates, and it expects 20% to 25% of its assets to be Islamic in origin over the next three years.
Index providers have also been actively helping investors in shariah-compliant products gauge their chosen manager’s performance.
At the end of June, S&P Indices launched the S&P/OIC COMCEC 50 Shariah Index, measuring the performance of 50 leading shariah-compliant companies from the member states of the Organisation of Islamic Cooperation.
“The S&P/OIC COMCEC 50 Shariah Index…encapsulates in one index the performance of shariah-compliant stocks from Islamic countries located throughout the world,” said Alka Banerjee, vice-president at global equity and strategy indices from S&P Indices.
The index consists of the largest 50 stocks from the eligible universe, selected in accordance with shariah compliance screens. The index covers all 19 countries and territories whose exchanges are members of the Organisation of Islamic Cooperation Exchanges.
Amid this appetite for products and launches of active and passive vehicles for the Shariah-compliant investment community, one Western manager has traveled to the region, to win business directly.
Rotterdam-headquartered Robeco is to advise on management of the Shariah-compliant Food & Agribusiness fund, launched recently by Alireza Moshtaghi, director of the asset management division of the Islamic Corporation for the Development of the Private Sector.
The fund will “promote strategic investment flows and expertise into the food and agricultural sector in Islamic countries [and] address growing food security concerns by capitalizing on the region’s largely under-exploited potential for increased food production and supply.”
It will invest in various strategic and commercially-sustainable initiatives across the food and agriculture value chain. It will be open to Islamic, and other investors, and have a term of 10 years with a commitment period of five years.
The ICD’s job is to “support the economic development of its member countries through provision of finance to private sector projects in accordance with the principles of the Shari’a law.” It has done so, so far, by financing over 200 projects with more than $2bn.
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