2018 may prove to be a pivotal year for Islamic finance stakeholders and their approach to developments in FinTech.
Potential areas where FinTech is likely to have an impact on Islamic finance are remittances, insurance (or takaful), investment advisory services and online trading. The overlap between Islamic finance and ethical finance and the opening of financial services to the “unbanked” are important issues to be tackled. In the coming years, demand from consumers (mostly millennials who form a large part of the populations of Muslim-majority countries) is expected to give rise to the faster adoption of these technologies across various verticals in the banking and financial sector.
Although a contentious issue, some people perceive non-banking financial intermediation via FinTech as an opportunity for re-aligning Islamic finance to become more “authentic”. Instead of mirroring conventional financial products, commentators see the opportunity to provide genuine Islamic-compliant alternatives to the traditional banking model.
In December 2017, a consortium of three Bahraini banks announced the establishment of a company dedicated to research and development in the Islamic-compliant FinTech sector. KFH Bahrain, Al Baraka Banking Group and Bahrain Development Bank said they will set up ALGO Bahrain. In addition, a facility opening in Bahrain in February 2018 will be the largest dedicated FinTech hub in the Middle East and Africa, according to its developer and manager. Bahrain FinTech Bay is operated by Singapore-based fintech incubator FinTech Consortium.—Agencies