New technologies and innovative solutions being deployed in Islamic finance has the potential to spur growth, strengthen mechanism for Shariah compliance and streamline traceability of transactions, according to industry experts.
"Technological innovation and the tech sector on the whole is an avid segment of interest and key business vertical that Gulf Islamic Investments provides advisory services on as we acknowledge the key role this segment is playing in the UAE and the wider Gulf market," says Pankaj Gupta, CEO, Gulf Islamic Investments.
"We have seen the development of Dubai closely linked to its adoption of disruptive technologies over the past few years which has allowed the emirate to significantly improve its services both in the public and private sector," Chilwan points out. "A typical example is the SMART Dubai concept which has several projects and initiatives designed to ensure that residents get convenience, efficiency, cost effectiveness and of course, happiness in every aspect of their daily lives."
Chilwan believes that the emergence of fintechs and AIs have completely reshaped how some major institutions operate. "We have seen some financial institutions partnering with fintech solution providers to improve and enhance their operations particularly in areas of payments, transfers and remittances and insurance," Chilwan says.
Indeed, with consumers increasingly becoming sophisticated, "they want the best and they want it wherever they are and they want it now," Chilwan notes. "That is a challenge but then, it also offers the opportunity to cater to this new age customer."
Anita Yadav, Senior Director and head of FI research at Emirates NBD, asserts that new technology that disrupts old ways of financing is here to stay. Importantly it is a challenge for not only the Islamic banks but also the conventional ones.
But correct use and adoption of the new technologies can actually facilitate deeper and faster dissemination of banking services to the unbanked masses, she adds.
"The future prospects for fintech appear sound," says Yadav. "However, like all previous technological developments, it may take some time to evolve and mature."
With rapid transformation in banking in general, Islamic finance and banking is also gearing ahead and adapting to the rapid changes. For instance, the burgeoning growth of Islamic microfinance institutions also has a huge demand for high-tech fintech products and services.
Many of these new institutions are introducing Shariah-compliant financial products, which not only help consumers, but enable Islamic banks to become more efficient while dealing with modern technologies and products and services.
Over the last decade, Islamic finance has emerged as a stable, sensible and pragmatic system, attracting billions of dollars in funds.
The International Monetary Fund (IMF) estimates that Islamic finance has now ballooned to over $2 trillion of assets globally and is available in over 60 countries around the world. According to the IMF, Islamic banking has outperformed conventional banking in recent years, with its penetration rate increasing above 15 per cent in more than a dozen countries in the Middle East and Asia.
The IMF has also decided to incorporate Islamic finance into its financial sector assessments of select countries from 2019.
S&P Global Ratings, the leading international agency owned by Standard & Poor's Financial Services, revealed that Sukuk issuance in 2017 shot up by a phenomenal 45.3 per cent, reaching $97.9 billion.
This remarkable growth was attributed to good liquidity conditions in the GCC and, more generally, globally, as well as activity by some countries with the goal of further developing their Islamic finance industries.
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