Fintech’s role in the future of Islamic Finance
Sharia-compliant banking is one of the fastest growing sectors in the global financial industry. Today, there are more than 1,400 Islamic financial institutions around the world, in over 80 countries. The Sukuk system (based on Islamic financial certificates, similar to bonds in Western finance) is growing in popularity, even outside the Muslim world, with companies in the UK and Europe offering products to both retail and institutional investors. Companies like the US-based Wahed Invest offer Sharia-compliant investment and tracker funds. Such funds often align neatly with sustainability objectives, because of the “do no harm” principle at the heart of Islamic Finance.
Fintech is playing a vital role in this growth. Abu Dhabi Islamic Bank (ADIB) has set up SimpleLab – an innovation programme to develop Sharia-compliant digital products. ADIB was also the first Islamic bank to successfully execute trade finance distribution transactions using Blockchain technology. And new regulation technologies are enabling Islamic banks to comply more easily with conventional and Sharia banking regulations. This also frees up Islamic scholars to focus on new innovations for the sector.
But this isn’t just about big finance and institutional investment: Islamic Finance is also about ensuring all Muslims have access to safe financial products that can improve their lives. In some parts of the Islamic world, this is about a combination of education and fintech solutions. For example, in wealthy Islamic countries, opening bank accounts is accepted practice. But in many poorer countries, it’s either too expensive, or there is religious resistance to opening an account. Blockchain ledgers allow the poor to open digital wallets on their phones, so they can still participate in financial transactions at a fraction of the cost. And phone-based biometry can give them exceptional security, at no cost.
The result of new technologies like these is a brighter, fairer, more sustainable future for finance: one where more people around the world can participate in, and benefit from, global markets.