When fast paced growth meets regulatory framework for compliance to Islamic principles
Islamic Financial Technology (FinTech) stands out as a rapidly growing sector that is revolutionizing the financial landscape for Muslims worldwide. By blending the principles of Islamic finance with advanced technology, Islamic FinTech companies are offering innovative solutions that meet the ethical and religious needs of the Islamic community
are projected to exceed 1% of the global FinTech sector by 2025, compared to the current 0.8%. This sector has seen a remarkable 61% growth, with its transaction value reaching $79 billion by the end of 2021, accounting for 0.8% of the global market. Moody’s report also highlights that Indonesia, the UK, the UAE, Saudi Arabia, and Malaysia host the largest number of Islamic FinTech companies, housing approximately 59% of the industry’s current global presence. Interestingly, the UK, despite being a non-Muslim country, boasts the highest adoption rate of Islamic banking services in the market, with 45 Islamic FinTech companies currently operating
Digital Islamic banking services represent a significant contribution of Islamic FinTech. Digital banks offer Sharia-compliant alternatives to traditional banking products, such as savings accounts, current accounts, and personal financing. Through mobile applications and online platforms, users can access a range of financial services while adhering to Islamic principles
Islamic FinTech has also opened new avenues for ethical investment and crowdfunding. Platforms like Ethis and LaunchGood cater to Muslim investors and entrepreneurs, providing a space for ethical projects and startups to secure funding from the Islamic community. These crowdfunding platforms strictly adhere to Islamic Sharia principles, ensuring that investments are directed toward socially and ethically responsible projects
Another exciting development in Islamic FinTech is the digitization of Zakat, one of the Five Pillars of Islam that mandates charitable giving. FinTech companies have created online platforms and apps to calculate and distribute Zakat more efficiently and transparently. These platforms connect donors with verified beneficiaries, making Zakat distribution easier and more secure
According to Moody’s credit rating agency predictions,
assets in the Islamic FinTech industry are projected to
exceed 1% of the global FinTech sector by 2025.
THE SPREAD OF ISLAMIC FINANCIAL SERVICES
IN COUNTRIES AROUND THE WORLD
Despite the rapid growth of Islamic FinTech, it faces regulatory challenges in many countries. The absence of comprehensive regulatory frameworks for Islamic FinTech activities can lead to uncertainty and potential risks. However, this presents opportunities for regulatory bodies to collaborate with industry stakeholders to develop robust regulatory frameworks that promote innovation while ensuring compliance with Islamic principles
Some governments in certain countries have recognized the potential of Islamic FinTech to drive economic development and financial inclusion, aligning with seven of the seventeen Sustainable Development Goals. As a result, these governments have taken proactive steps to support and encourage the growth of these technologies within their financial sectors
The absence of comprehensive regulatory frameworks for Islamic FinTech activities can lead to uncertainty and potential risks
In conclusion, Islamic FinTech is poised to shape the future of finance while maintaining its ethical and moral foundations. For instance, companies are exploring the potential of artificial intelligence and blockchain to develop new products and services. Artificial intelligence can automate tasks such as risk assessment and underwriting, making Islamic financial services more efficient and accessible. Blockchain technology can create transparent and tamper-proof financial transaction records, particularly crucial for Sharia-compliant transactions
Islamic FinTech plays a crucial role in advancing financial inclusion in the Muslim world by offering Sharia-compliant services to underserved populations. Overall, Islamic FinTech is a dynamic and rapidly growing sector that has the potential to transform the financial landscape for Muslims worldwide. As it continues to evolve, Islamic FinTech is poised to play a significant role in shaping the future of financing
