Fintechs are bridging the gap in the Islamic finance sector

Qatar has made efforts to support the Islamic fintech ecosystem. Highlighting the role of technology in Islamic finance at an online event, experts said fintech companies have an important role to play as they bridge the gap in the Islamic finance industry. Panelists discussed the ecosystem to support SMEs with solutions to grow Halal economies and promote Qatar as an Islamic fintech hub regionally and globally during an online event.
HBKU, in association with the Qatar Financial Center (QFC), hosted a webinar titled “Islamic FinTechs and the Halal Economy” which highlighted the opportunities of the $1.9 trillion Halal economy in 2020 and is expected to reach $3.2 trillion by 2024, creating huge opportunities across various segments of the Halal economy ranging from food, cosmetics, fashion to travel.
Akber Khan, Senior Director of Asset Management at Al Rayan Investment, said the current happening opportunities in the Islamic finance space are that fintech is looking to fill this gap that currently exists in the finance industry. Islamic finance and provides more opportunities for fintech solutions. About 20% of the world’s population is Muslim, but the Islamic financial industry as a whole represents at most 5% of the global financial industry, so there are opportunities in every possible field. There are opportunities in companies that seek to serve the Muslim population. The advantage of fintechs is that they are able to leapfrog over more traditional businesses that rely on traditional means of accessing a customer. Technology is an enabler that enables very rapid geographical distribution.
Talking about sustainability, Khan explained that there is an overlap between ESG and the “S” of the sustainability part and there is an overlap between Shariah compliant investing and ESG which comes in the social ‘S’ aspect of it.

“Socially responsible investing is what we do, and we also look at the aspect of sustainability from an Islamic perspective, because we cannot invest in companies that are excessively leveraged. Having moderate debt contributes to sustainability through an economic setup. The key aspect of Islamic finance is inherent in its sustainability, so sustainability is key,” he said.
Responding to a question, will venture capital funds for fintechs in Qatar grow and promote innovation for the halal economy in Qatar, Khan noted, “I think there is room for several investors and if there is a fund that combines both public funds and the private sector, that would be great. To evolve the market and come up with more innovative solutions and other players joining in the form of VC or any other form will be helpful.
Ayman Doukali, Head of Islamic and Structured Finance at the Qatar Financial Center Authority (QFC), said: “Four to five years ago, no one had heard of banking as a service or open banking, which brings fundamental changes not only in the way banking manages financial institutions, including both banks and fintechs.
Responding to a question about Islamic fintechs having ambitions to expand geographically and the considerations for fintechs as they move from market to market, he said: “I think from the start , there needs to be a clear understanding of who you are as a fintech or tech company or business and whether you’ve covered your local market well enough before you start looking to expand overseas.
Speaking about the role that regulators, supervisors and legislatures can play in facilitating the adoption of fintech in Qatar, Doukali noted: In Qatar, for the sector to thrive, there needs to be a clear jurisdictional agenda in terms of what is required in the regulations. “There is a great need for clear rules and regulations on the different aspects of fintech, be it digital assets, open banking, etc.
When it comes to fintech success, he pointed out that the focus is on the retail segment and payment processing, but if “we’re talking about financial inclusion from a sector perspective, there’s a lot of work that can be done on the wholesale, private banking and SME side that enables innovations, unlocks additional pockets of cash and changes the way SMEs finance their businesses, so this is an area for improvement from fintech point of view.

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