Women control a surprising amount of Saudi Arabia’s wealth, yet many large banks are failing to cater for their specific needs, says Tanzeel Akhtar
AN ASTONISHING VICTORY for women was announced in September by HRH King Abdullah bin Abdulaziz: by 2015 women will be given the right to vote and run in elections in Saudi Arabia. The separation of the sexes, mandated by strict Islamic laws, is prevalent in this conservative country, as in other parts of the Gulf.
Women in the Middle East are distinct investors and increasingly important to wealth managers. BCG’s white paper ‘Levelling the Playing Field: Upgrading the Wealth Management Experience for Women’ states that in the Middle East, women are estimated to control 22 per cent, or about $500 billion, of the region’s wealth. In another report, by Al Masah Capital, it is estimated that women in Saudi Arabia are sitting on $11.9 billion in pure cash. Some men have multiple wives and thus the wealth is shared out.
Since men are rarely allowed to mix with unrelated women (unveiled), more and more financial institutions are finding ways to tap into Muslim women’s wealth with female-only private banks.
When it comes to the basic principles of Sharia law, the main difference is the ban in claiming interest on wealth. HSBC Amanah (which offers Islamic financial solutions) confirmed that banks in the Middle East tend to have different regulations: ‘I think the key here is Sharia law, and how that naturally favours male succession. There’s a number of plans people can opt for to help, such as effective use of trusts, but these require planning,’ said a spokesperson from the bank.
As women become more liberated, more boutique firms are being created. In Abu Dhabi there are investment banks that target women, as well as in Qatar, Bahrain and Oman. Gulf One Investment Bank and Global Investment House provide female-centric solutions in Saudi, while the Kuwaiti Stock Exchange has allocated a whole floor for women.
Sabila Din, the CEO and founder of Din Consultants, which has clients in Saudi, identifies that around 40 per cent of Saudi wealth is owned by females — that is about $160 billion. ‘If you look at how the wealth is split, over 40 per cent is in family-run business, about 30 per cent is in brokerage accounts, about 20 per cent is in mutual funds and about 10 per cent is in real estate and thereabouts.’
When looking at the Middle Eastern market, one of the most important factors to take into consideration is the historic role of women in finance. ‘Women have been very passive in decision-making but I think they need to take a more active role. There is a huge change occurring,’ Din adds. She identifies a new generation of women rising in the Middle East — she calls them ‘the 30-plus women’ — who have been educated abroad. Din says that this new generation of women is more prepared to take an active role when it comes to running family businesses: ‘Decisions are normally made by the husband. I work with a number of these women and they take quite a global view of investing. Right now, the whole area of Asia is of great interest to them as well.’
Illustration by Sonia Hensler
Alex Ruffel, a partner at Berkeley Law, represents female HNWs from the Middle East. One client, a young entrepreneur who had a business in the region, had diversified her assets to ensure that she had some outside the Middle East in case of financial or political instability there. She held bank accounts and assets in Europe and employed investment managers to manage her wealth. As well as purely monetary matters, the client’s particular concern was her daughter’s financial welfare. Under Sharia, her daughter’s inheritance from her would be half of her son’s and the client wished to make other arrangements.
The client was also concerned about her daughter’s inheritance coming under the control of a future son-in-law. Her priorities were to leave the money she had generated from her own business equally between her children and to ensure that her daughter had a nest egg. On Ruffel’s advice, the client established a trust for herself and her children in an offshore jurisdiction. The trustees were asked to treat the client as the main beneficiary and after her death to treat her children equally.
‘We have seen an increasing number of highly educated and entrepreneurial female clients from the Middle East who often feel happier dealing with a female adviser outside their home jurisdiction for a variety of reasons relating to culture and privacy,’ says Ruffel.
‘The fact is,’ says Sabila Din, ‘women are the single most powerful engine of growth in emerging markets.’ Yet too many global banks do not know how to cater for them in an Islamic context.
Tanzeel Akhtar contributes to Marketing Week and Wall Street Journal