The global Islamic banking industry is projected to grow to $4 trillion by 2026, primarily driven by the GCC nations, a report said.
The report by red mad robot, titled State of Fintech: The Islamic Banking Industry, revealed that in the last four years, assets in Islamic banking have surged from $1.8 trillion to $2.8 trillion,
The future of Islamic finance is tied to digitalization, with fintech companies leading the way in adopting new technologies and setting new standards for interaction in the financial world, which will drive the development of the Islamic financial system.
The global Islamic fintech is estimated to be around $79 billion in terms of transactions in 2021. The market is expected to grow on average by 18 per cent annually, to reach $179 billion by 2026. Saudi Arabia, Iran, Türkiye, UAE, Malaysia, and Indonesia are the largest fintech markets.
Innovative fintechs of the most involved countries in the Islamic economy have found applications in several sub-sectors. These include crowdfunding, investment platforms, robo-advisors, payment services, and digital banks, smart contracts and blockchain, cryptocurrencies, information security in the financial sector, insurtech, and other fintech products.
The main challenges of Islamic fintech/digitalisation of Islamic banking lies in the lack of understanding and awareness of Islamic products. The market share of the Islamic economy is not large. These, along with a lack of qualified human resources, lack of regulation, and the need for ubiquitous and quality Internet coverage to provide access to new digital financial products, remain major challenges, the report said.
Islamic finance is an integral part of the Islamic economic system, encompassing economic relations adhering to Islamic law regarding fund distribution and utilization. Originally emerging in rural and agricultural economies, Islamic banking has evolved into a coherent system of financial services, products, and principles.
Digital transformation and fintech in Islamic banking present many opportunities. Islamic financial institutions seek to differentiate their business while ensuring competitive prices to capture new market space and generate economic demand.
The future of Islamic finance is obviously linked to digitalisation. While banks have never been the trendsetters of digital trends, fintech companies are completely based on new technologies, the report noted.
Digital transformation and fintech for Islamic banking is a plethora of opportunities, Islamic financial institutions are looking to simultaneously differentiate their business while ensuring low prices to capture new market space and create new economic demand.
“It should be noted that in recent years it is fintech companies that have set new standards of interaction in the financial world: ease of use, quick access, and continuous improvement to maximise customisation.—Khaleej Times
