FinTech can boost the Islamic finance sector and allow it to flourish
FinTech has spurred the evolution of the Islamic finance industry over the past year. It helps to address a need for simplification and innovation in the sector, which will support longer-term acceptance and growth.
More importantly, it provides a great opportunity for the sector to streamline services and attract new segments, with the key being digital-savvy millennials.
Younger customers are expected to play a crucial role in the growth of Islamic finance and expand its customer base, with the younger segment expecting to contribute to as much as 75 per cent of total bank revenue by 2030.
Dubai and Dubai International Financial Centre – which are driving the future of the Middle East, Africa and south Asia’s Islamic finance sector – are well placed to tap into this promising segment. In 2019, DIFC experienced a marked rise in the volume of Islamic assets being managed here, with 33 per cent growth year-on-year.
The Measa region continues to be an important operator in an industry that is worth more than $2.1 trillion (Dh7.7tn), fuelled by the growing popularity of Islamic banking. Sharia-compliant assets represent 14 per cent of total banking assets in Measa and 25 per cent of banking assets in the GCC.
Last year, DIFC welcomed Malaysia’s largest lender and the fifth largest Sharia-compliant bank in the world, Maybank Islamic Berhad, to the centre. The move bridges two of the world’s biggest centres for Islamic finance, allowing it to service the GCC market and access one of the world’s leading exchanges for sukuk.
Dubai is one of the largest centres globally for sukuk listings by value at $68.35 billion, with $49.06bn listed on Nasdaq Dubai.
DIFC has been investing heavily into FinTech to spur the growth of the Islamic finance industry. The centre’s FinTech ecosystem has contributed to the UAE’s position as the fourth-largest such hub in the world.
For DIFC’s 2019 FinTech Hive programme, there were many Islamic start-up ideas amongst the 450 applications. Four Islamic finance start-ups were selected to join the elite group of participants.
Their ideas were varied and innovative. HelloGold, based in Malaysia, is developing the world’s first Sharia-compliant gold mobile application. IslamiChain is a start-up leveraging blockchain technology to enable philanthropy and compassionate giving.
Hakbah is an Islamic FinTech start-up specialised in co-operative savings and Wethaq is a platform focused on the structuring and distribution of securities in sukuk capital markets.
The centre has become a nexus for 46 Islamic finance institutions to engage with start-ups. The FinTech Hive accelerator also partners with specialist organisations including the Dubai Islamic Economy Development Centre, Emirates Islamic bank, Dubai Islamic Bank and Abu Dhabi Islamic Bank.
DIFC and Dubai Financial Market have brought together representatives of leading banks, financial institutions and public and private companies in the first Dubai
Sustainable Finance Working Group launched this year.
The group will focus on combining Dubai’s finance sector’s initiatives to create a sustainable financial hub in line with the UAE Sustainable Development Goals 2030 and Dubai’s Strategic Plan 2021, encouraging the use of green financial instruments and responsible investing. The synergies between Environment, Social and Governance goals highlight that Islamic finance can be a prime driver for ethical financial solutions.
As the DIFC progresses in driving the future of finance, Islamic finance and the principles that guide it will continue to play a significant role in supporting sustainable growth within the regional financial services sector.