Towards an exponential digital growth in Islamic Finance

Towards an exponential digital growth in Islamic Finance

To date, there more than 70 Islamic Finance Institutions (IFIs) operating in 75+ countries across the globe ranging from full-fledged Islamic banks, Insurance to capital market. The disrupting technology industry also have recorded exponential growth over the recent years and it becomes the true key enabler for the future businesses and banking with the growing global competition and tech-savvy clients.

The world is moving towards an unpredictable technological change with disruptors and hi-tech entrepreneurs. Sooner we will be driven by electric & autonomous car with zero accidents and people will no more own cars. The manufacturing industry & related jobs will be replaced by 3D printing which is printing the cars and equipments for flights. Software industry will be disrupting the traditional business models such as travel sector by AirBnB, tai services by Uber and service industry by IBM Watson.

In the last decade, there were immense contribution of technological change led the many industries in new directions including banking & finance. As per the market, the autonomous cars will be widely used all over the world by 2020 with zero accident. This leads the insurance industry to be innovative and find the business opportunity to when there is no predictable accidents. Mean while, it is also predicted that the people will no more interested in owning & maintaining a car so this will be leaving huge vacuum for the bank’s lending products too. These nature of the technological changes in the banking & finance eco system will be totally leading for a new way of banking.

New way of banking

The UAE’s Dubai Multi Commodities Centre (DMCC) Commodity Murabahah Trading Platform (CMTP) is one of the initiative enables the electronic transfer of ownership and possession through tradable warrants. This move approved by the renowned Sharia’ah scholars is a bold move and it provides a holistic solution to the Islamic finance industry through a fully electronic commodity Murabahah trading platform with a complete transfer of ownership. This facilitates the high efficient, availability of  options in a high tech proven methodology in a Sharia’ah compliant way. This way of innovation increases the bank’s efficiency and reduce the operational costs. This is an inward technological innovation in Islamic banking financing.

Another important milestone is the technology advance outward to leave a better end-to-end customer experience when they are banking. The concept of Fintech (the financial technology sector) has emerged over the recent years with the strength and viability of replacing the main stream banking activity with a simple URL / Website. The necessity & usage of this is largely attributed to the internet penetration and smart phone users with subject to the stringent regulatory environment for the financial industry. One of the latest move by Malaysia is through, is a platform to facilitate channeling funds from investors to finance viable ventures and projects. IAP is backed by Islamic banking institutions which will facilitate the matching of investments with the identified ventures or projects that are in need of funding. The following diagram will illustrate the mechanics of IAP.


The innovation in the banking can range from the delivery channels (ATMs are no more require pin code or ATM cards), process innovation (DMCC illustrated above) and product innovations (IAplatform illustrated above). The followings are the innovators of 2016 as per the Global Finance magazine (June 2016).

Innovation & Creativity in Islamic Economy

In the recent report “State of the Global Islamic Economy” published by Thomson Reuters Islamic Finance Gateway, Islamic Economy includes Sharia’ah compliance Finance, Food, Fashion, Tourism, Media, Pharmaceuticals and Cosmetic. This inclusion different sectors within Islamic Economy has been widely recognized by the “50 most Innovative Global Muslim Start ups’ report. For instance, Have Halal Will Travel mobile app has raised a $50,000 seed round from one angel investor in Singapore and a FinTech site from  Singapore has raised $363,000 seed round / Key Traction — Crowdfunded $2.6 Million dollars to build 5000 affordable homes in Indonesia.

These are few the recent Muslim start ups shown using the technology with Islamic Principles to do the business transactions in an ethical and moral way. The concept of global Islamic Economy is becoming more interesting to the market with the different sectors and advanced technology. Unfortunately, the modern high tech way of business have been opened in very late state within Islamic finance comparatively with the traditional banking & business sectors.

In need of Tech-savvy talent pool

The Global Islamic Economy is in need of tech savvy leaders, entrepreneurs and professionals to explore the current technology to the different sectors of the growing industry. The technology industry is having the doubling effect in terms on exponential growth paving new way of doing things for the people which will change the entire eco system of the economy and not only in Islamic finance. The financial service industry will have a paradigm shift in terms of social media banking, mobile cash banking, crowd funding, FinTech, cloud banking and high tech-enabled (social media & big data analytics) financial services in the near future. This will inevitable for the Islamic Finance industry also to be competitive in the market with most cost-effective way to reach out the target market segments through the high-tech enabled delivery channels.

Islamic finance is expected to grow USD 5 – 8 Trillion global asset size by 2020 but the experience of high tech financial instruments may result in multifold asset size than expected. The growth drivers have to address the challenges faced by the industry including the regulatory frameworks to the awareness of general public but most importantly the use of advanced technology to make the customer / end user experience an easy, safe and secured one from any devices at any given point of time without delay in responses.

In conclusion, the exponential technology growth story not exceptional for Islamic finance industry. Sooner the stakeholders of the Industry will be expecting the unparallel technology experience from the respective banks and sectors so let’s build the new generation with a new breed of tech-savvy customer oriented bankers to serve the smart customers. The responsibility of nurturing, funding and guiding the niche creative idea of an entrepreneur and business enterprises becomes pivotal role for the Islamic banks & financial institutions. With the growth of Islamic finance industry coupled with the exponential growth of technology will fuel the growth of global Islamic Economy.

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