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Friday, July 19, 2024





“To me the rise of FinTech, BigTechs, TechFins and DeepTechs is nothing but a formal advent of what could be termed as “Digitisation/Atomisation of Civilisations”. However, the question may appear plausible and the potentials could soon glide towards disconcertion if and only if this smart financial amplification is not understood, absorbed and utilised via an ecosystem approach. Currently the pandemic-ridden global economy is already adjusting to navigate and acclimatise with a multipolar economic world that is grappling to mitigate ‘black swans while bracing for green swans of climate change. Adopting technology orientations as mere fashion and not as a necessity/proactive need could virtually be the last nail in the coffin with Islamic finance losing a third-time lucky, COVID-ridden opportunity to frame itself as a better, resilient and an all-inclusive financial regime via its risk sharing essence. The submission becomes more plausible via the assertion that the premier Fintech disruption models are nothing but a modern technology-oriented application of the risk sharing finance: the main mandate of Islamic finance. Consequently, this builds the case for Islamic financial institutions to be more agile and receptive to adapting and adopting FinTech solutions. With this as vision and ‘innovation not renovation’ as mindset, a 2021 onward version 2.0 of smart Islamic finance could be forecasted.

Understood and implemented as an ecosystem, the version 2.0 could be branded as a New Age FinTech Islamic/Halal Finance. The ‘magic sauce’ for such an ecosystem would be to rely on innovative capacities of pure experts via structural support, to unbundle to re-bundle a smart and automated version of Islamic finance that is cost, user and efficiency friendly. The same could be linked to better and smartly

serve the UN’s SDGs, VBI and the overall halal economy. For example, the adoption of Blockchain and mobile technology could help provide and promote Smart Islamic banking contracts (SIBCs) solutions (adjustable to fine tune with specificities of regions) and also smart data supply for customer risk profiling and investment risks. Concluding a transparent contract to finance Shari’a-based deposits/ products could then be a mobile app work, with financial institutions smartly equipped to assess risks.

Until now, Islamic/halal finance is usually constrained by end-to-end product innovation, however, with a digital alternative, like the novel payment systems along with SIBCs, could be the basic attractive modes to ease international trade deals for Islamic industry (including takaful) as well as increase customer base that is getting necessarily tech savvy by the day. The value and mechanics of the same could be fully chiseled and endorsed/accredited by WTO, World Bank, IFSB, CIBAFI & AAOIFI. Islamic wealth/asset Management could be served via marketplaces, driven by robo-advisory/ AI and Numerie. This would also transform and lubricate sukuk for public-private partnership, financings institutional investments, Crowdfunding, Angle investing, and P2P financings, promoting the same as New Age Techno Islamic Finance. A red alert in all this will be how to re-orient and re-understand the newage risks that are cyber in nature and black to green swans in effect and process. This will make RegTech supervision/Techvision much more proactively important with an activity than and entity-based regulatory model augmenting the promise to either miss or hit a homerun via the new opportunities on offer.





With the occurrence of the covid-19 pandemic this year, Islamic finance is once again presented with an opportunity for the achievement of a higher degree of standardisation through transformative growth and greater integration, as well as the adoption of financial technology (FinTech).

As always, coordination between the various stakeholders of the industry is fundamental to its ability to leverage any opportunity for sustainable growth. This has always been an issue due to the absence of a single standard governing body which has essentially prevented the rapid advancement of the industry in general and now also could hinder widespread adoption of FinTech.

The arrival of the era of digitalisation will only bring benefits and credence to the Islamic finance industry if it embarks on a concerted effort towards real refinement, adaptation, and enhancement through the incorporation and integration of FinTech. If the industry does not make the right choices and move towards further innovation, as well as increase it agility and scalability, it is destined to face continued constraints and eventual obsolescence.

Since the dawn of Islamic finance what we have seen in abundance is a gap in the existence of expertise between individuals knowledgeable in Islamic finance and those with knowledge of the conventional world of finance. There has always been a lack of overlap in the two worlds. What we are witnessing once again is groups of professionals who understand Islamic finance on the one side, and then financial technology expertise on the other; and once again there is a gap in between.

Having said that, today we see examples of Shari’a-compliant FinTech all over the planet exhibiting significant advantages for those who have taken the leap and given these new technologies a chance.

Lockdown measures around the world have clearly demonstrated the critical nature of a company or bank’s ability to shift its business online for the sake of its continuity. Higher digitalisation and collaboration with FinTech could help strengthen Islamic banks and support sukuk issuances, increasing their resilience in an increasingly volatile marketplace as well as present new avenues for growth.

Islamic banks should be working to adapt to the shifting operating environment through collaboration with FinTech companies. At the same time regulators of the Islamic finance world should increase their efforts to support and protect the financial stability of their respective banking systems.

However, as recent months have demonstrated there is still much room for improvement. Sukuk structuring and issuances have been delayed due to a lack of FinTech, despite the formation of several new issuance platforms that reportedly streamline the issuance process for sukuk and other instruments. These platforms with their simplified issuance processes, if adopted more broadly by the market, should boost issuance volumes. They utilise a set of standardised legal documentation for issuances and are meant as plug-and-play platforms thus reducing time to market and overall complexity. One such platform is even managed using Blockchain. The reduced costs and complexity via such platforms should attract a wider range of issuers into the market who were previously constrained by such factors. Even more importantly, the launch of these platforms demonstrates the fact that standardisation of legal documents and Shari’a rulings is very much attainable.


There is a clearneed forthe presence of adequate infrastructure along with the development and implementation of the required supporting regulatory frameworks and supervision in order for FinTech to be able to take a stronghold in the Islamic finance industry. We have seen several authorities and regulators in the GCC and in many other locations work towards the launch of several incubators or specific regulatory sandboxes for FinTech companies to establish themselves and test innovations. However, this is just the start, and for the industry to not miss the boat once again a lot more consensus and concerted effort will be required.







The Muslim population comprises more than half of the global population of under 34-year-olds. They are young, digitally savvy and future customers of financial services. They are more environmentally conscious and believe in sustainable food, clothes and living. Furthermore, if educated (about halal and tayyib), they will definitely opt for the SDGs, which mirrors the Maqasid al Shari’a (HOSs). This digitally- literate population responds well to FinTech, enabling young entrepreneurs to create challengers that provide digital solutions to meet post-pandemic needs.

Islamic finance and FinTech adhere to Shari’a; businesses must be concerned with both profitability and making positive social contributions through zakat, sadaqa, and waqf. Zakat can potentially contribute USD200 billion to USD1 trillion globally towards poverty alleviation according to UNDP in 2018, and waqf assets in only Indonesia and India are estimated to have an economic value of USD84 billion (World Bank report on financial inclusion). This latent potential of Islamic social finance, if tapped successfully, via Islamic FinTech can help bridge the USD2.5 trillion annual gap in the budget.

Studies suggest proper collection and distribution of zakat from domestic sources could eliminate extreme poverty (those who live below USD1.25 per day) in 20 out of the 39 OIC member countries. Examples from countries with some of the largest Muslim populations include Indonesia that has potential waqf assets of USD60 billion and India where waqf properties have an estimated market value of USD24 billion.

Despite rapid growth, support from governments, and a vibrant ecosystem, the following are still key areas that require attention for Islamic FinTech to maintain its sustainability:

  • Islamic finance should apply AI and big data analytics in more areas of business and social finance.
  • Machine-learning capabilities could reduce operating costs in banks by improving productivity in both front and back-office functions and reducing operational errors. Big data analytics could help identify customers eligible for certain services or accelerate the KYC process, considerably reducing customer onboarding times.
  • Distributed ledger tech could boost Islamic trade financing.
  • Alternative community finance like Akhuwat in Pakistan and waqf models in Malaysia must be implemented via FinTech.
  • Wealth management can be simplified using AI. AI can be utilised to determine optimal investments or portfolios for particular clients based upon their preferences. Robo- advisory can be explored, which will further reduce costs.
  • Shari’a-compliant criteria can also be made part of the AI’s algorithm to ensure perpetual compliance and attract customers previously reluctant to invest due to product complexity or scepticism in relation to Shari’a compliance.
  • Developments and gaps in Islamic FinTech takaful need traction and innovation to capture the Muslim insurance market. Studies have shown that the unbanked also desire protection on wealth and health, but cannot obtain appropriate products due to increased costs and other reasons that classify them as unbanked in the first place.
  • Furthermore, Muslim populations that could reach nearly 3 billion by 2060, require Shari’a-compliant protection against loss of health, income and wealth as the pandemic has exposed.





During the financial crisis of 2008, the global financial system collapsed and key stakeholders realised the gap between the real economy and the practices of the banking sector meant financial institutions failed miserably in mobilizing and allocating funds towards building the real economic activity.

The majority of stakeholders have agreed for a new financial architecture which was more inclined towards bringing banking to its basic function meaning providing services that would help build a real economy rather than supporting a virtual economy. This message reflects the principles and essence of Islamic banking, which is based on asset-backed banking. In very simple terms, Islamic banking supports productive economic activity bringing macroeconomic benefits for the wider community. Evidently, the Islamic financial system is built on its inherent characteristics of transparency and full disclosure by providing complete checks and balances.

Soon after the 2008 crisis, regulators identified the key cause of financial crisis is transparency and information disclosure to clients. These findings support new business models to emerge and FinTech brings those inherent characteristics that could bring transparency and efficiency in the system by providing real time information to customers.

FinTech can be used as a tool to simplify current complex systems and procedures which are the hindering blocks for the growth of the industry globally. Use of emerging technologies for Islamic financial transactions may help in automating the operational aspects of the Islamic financial transaction, which in turn helps in reducing cost, saving time and making more liquidity available in the system. It helps the Islamic finance industry to standardise the entire or part of the process, increasing the adaptability by simplifying the process and ultimately helping to realise its true potential.

If we look at the national level, successful deployment of FinTech helps in financial inclusion. It gives access to the communities in rural areas more access to financial products, which encourages them to save and grow their business by using formal banking channels. FinTech immensely helps in financial inclusion by offering the same level of products and services to the communities, which in today’s financial system are only available to the elite and Middle-class consumers. Islamic financial institutions need to have more focussed approach and realign their directions. Rather than being only a commercial organisation, they need to focus on the wider impact on the society by following the HOSs. So far ISFI’s have been followers simply replicating the conventional products rather than brining innovation in the industry. If the basics wouldn’t be re-defined and reviewed thoroughly, FinTech is going to be another missed opportunity for IFI’s. IFI’s always complained about economies of scale, complex product structuring, high cost of funding and liquidity management. Today all of these issues or most of them can be resolved by adopting FinTech. If we can have likes of Nubank, Revolut, Chime and Monzo in the conventional world then why can’t we have an equivalent Islamic financial institution? Today, there is no excuse for Islamic financial industry to be more competitive as compared to their conventional counterpart but it requires a coordinated and sincere approach of all the industry stakeholders, which include regulators, Shari’a scholars, educational and research institutions and unquestionably industry practitioners. Time is ticking!



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