Digital services offer potential for Islamic economy initiatives
DELOITTE-LED STUDY DEFINES ONLINE ISLAMIC SERVICES UNDER NINE INDUSTRY VERTICALS
Agrowing global Muslim population with a dominant youth demographic, besides high consumption and expenditure patterns coupled with a rising level of technology readiness, are creating a largely untapped need for Digital Islamic services, according to a recent study by Deloitte and Noor Telecom, a Kuwait-based, Sharia-compliant closed-shareholding company, in association with Dubai Islamic Economy Development Centre (DIEDC).
“The Digital Islamic Economy is a key pillar and area of focus for DIEDC and the Islamic world. The report underscores the criticality of building a sound digital infrastructure and ecosystem to foster the development of online services for the Islamic economy,” said Abdullah Mohammad Al Awar, CEO, DIEDC.
The study, a serious effort in studying and assessing the global Digital Islamic Economy points to a wealth of opportunities that could be tapped into by investors, as well as governments and non-profit organisations.
“Technology is arming us with tools that are far more powerful and effective than anything in the past — the impact of which is fully evident in the Muslim community. By observing and following this trend, we have identified a strong need for Digital Islamic Services” said Ayman Al Bannaw, Chairman and CEO, Noor Telecom.
The study builds and expands on Deloitte’s previous report Defining the Digital Services landscape for the Middle East, which identified digital services under social needs, specifically hobbies, education, health and religion as emerging categories with unique niches for the Arab world. Of these, religion was identified as the category with the greatest prospects that could surge with continued activity and development.
Significant scale
“Although the prospects are noteworthy, our findings reveal that very few Islamic internet platforms have achieved a significant scale. Some verticals are being catered to, but monetisation remains a challenge,” said Santino Saguto, Partner and Technology, Media and Telecommunications Leader, Deloitte Middle East.
Experts say funding remains a key challenge in developing the digital Islamic opportunities. “Currently there are no venture capital funds in the Middle East that specifically target Islamic needs, signifying a huge gap that could and should be filled,” said Saguto.
The study defines the Digital Islamic Services landscape under nine key industry verticals and areas, such as halal food, travel, Islamic finance, modest fashion, Islamic art and design, Islamic economy education, Smart Mosques, Islamic media and Islamic standards and certification.
Among these verticals, notably, the Islamic finance industry has made significant progress over the past decades but the sector has still to mature. This is evident when comparing the total asset size per capita of all Islamic banks globally, $750 per capita, against conventional banks in key economies, each larger by a factor of 100 or more. The study estimates that least two decades will be needed to bridge this gap.
Given ample room for growth and development, populous OIC countries — most notably Turkey, Pakistan and Indonesia — are also now emerging as high growth Islamic finance markets. But low asset penetration and GDP per capita in these countries is driving the need for access to digital Islamic funding services, especially those that can open up access to financing for the wider rural population through via microfinancing, crowd funding and mobile payments.
Proliferation
“The report findings indicate that the Islamic online services will continue to proliferate across the Middle East and the world at large over the next few years,” said Dr Hatim Al Tahir, Director, Deloitte Islamic Finance Knowledge Centre in the Middle East. “In some areas we can expect to see the region following global trends whereas in others we will see a unique, home-grown approach. We expect these developments to create interest for global, regional and local players and stakeholders alike.”
❝ The report underscores the criticality of building a sound digital infrastructure and ecosystem to foster the development of online services for the Islamic economy.”
Abdullah Mohammad Al Awar (left) | CEO, DIEDC