Islamic Fintech Speeds Up

According to a new report, the global Islamic FinTech market will reach $128 billion in transaction volume by 2025, up 161 percent from 2020. Saudi Arabia, Iran, the United Arab Emirates, Malaysia, and Indonesia were named as the sector’s leading markets in the 2021 Global Islamic Fintech (GIF) Report, published by Dinar Standard and Elips. Saudi Arabia is currently one of the best-performing Islamic FinTech markets, a position that the GIF Report expects it to maintain in the medium term. Its current value is estimated to be $17.8 billion, but it has the potential to grow to $47.5 billion in just four years. The developments in OIC countries where large target markets exist are particularly encouraging. The number of FinTech’s identified has more than doubled since it was first identified three years ago, demonstrating the sector’s rapid expansion, which is expected to continue at a rapid rate.
Actually, UAE and Malaysia are treated as industry leaders, but Bahrain, Iran, and Indonesia are still ‘mature.’ There will be rapid expansion of Islamic finance in Indonesia in the year 2020. Bank Syariah, Bank Mandiri, and Bank Syar InMeda completed their three-way merger on February 1, 2021. Bursa Malaysia is in the process of forming partnerships with financial technology companies to increase its flexibility and its efficiency. Simultaneously, new technologies will expand financing options and make asset management easier for Sharia-compliant businesses.
In both Islamic and non-Islamic nations Sharia-compliant FinTech’s have emerged, promising to win over millions of young Muslims and to provide financial services to under-banked people. Islamic Fintech is increasingly important against the backdrop of the coronavirus pandemic. For Islamic Finance, the application of FinTech covers conventional aspects and certain special aspects, such as the advisory of Shariah, ethical screening and structuring of partnership products that are solely compliant with Shar’ah. Crypto-currencies are the most innovative and disruptive FinTech application in the Islamic financial services industry, which is gradually gaining traction and generating a series of Shar‘ah debates and regulatory unclarity. Participants in various jurisdictions, particularly in the Middle East, North African and Asian regions, are increasingly accepting the Platform.
The use of the online platform for Murabah and related transactions increased by 100 percent between 2009 and 2014. (MIFC 2016). The Dubai Multi Commodities Center Murabah Trading Platform (CMTP) was fully operational in the United Arab Emirates in 2013. The CMTP uses the tradable guarantee model, so that ownership and possession can be transferred online. By transferring ownership and holding through the online platform, CMTP uses the trading warranty model. The CMTP is a fully electronic commodities platform for Murabahah transactions, similar to BSAS, that is compliant with Shariah. Crowdfunding platforms are increasingly being used to finance Shariah-compliant projects, particularly for SMEs, housing, and agricultural finance, in conjunction with this application of FinTech to the Islamic capital market.
The concept of investing in accordance with personal or religious principles is clearly gaining traction. Wahed, a FinTech investment platform, raised $25 million in funding in June 2020. This money was raised to help customers get Halal-approved financial products and services. It will be interesting to see what other FinTech niches emerge as Islamic FinTech gains traction. The new ecosystem includes Islamic wealth managers like Wahed and Islamic first-time banks, including Niyah in the United Kingdom and Insha in Germany. “Slowly” Capital has become a growing Islamic Fintech ecosystem. Europe’s Shariah Finance start-ups have raised millions of pounds in the last five years, and Insha wants to close this quarter with a total of ~10 M€.
In conjunction with a range of COVID-19 mitigation policies: Saudi Arabia has recently released its digital payment guidelines following the urgent establishment of new Islamic financing facilities in support of its MSME industry, for its debt based crowdfunding regulations, and Bank Negara Malaysia, for its virtual banks, issued its long-awaited draft framework. Public-private partnerships are forming in Muslim markets such as Malaysia. It is also learned that with the IsDB the IAP explores the crowdfunding opportunities for investment. Multilateral institutions, governments and Islamic financial institutions have mobilized social finance solutions compliant with Shariah through FinTech to support communities hit by the virus quickly.