Islamic banking is currently experiencing a significant transformation driven by fintech advancements. Over the past four years, assets in Islamic banking have surged from $1.8 trillion to $2.8 trillion, and it is projected to reach $4 trillion by 2026, with the GCC nations playing a pivotal role in this growth. The exclusive report by red_mad_robot, titled “State of Fintech: The Islamic Banking Industry,” provides a comprehensive exploration of this financial evolution.
Key insights
- Current state of Islamic Banking: The report details the current state of Islamic banking across various countries and regions.
- Reshaping of Islamic Finance by Fintech Firms: It highlights how fintech firms are reshaping the landscape of Islamic finance.
- Digital Solutions Revolutionising Operations: An exploration of new digital solutions and services that are revolutionising the operations of Islamic banking.
- Promising Regions: The report identifies promising regions such as the UK, Russia, Kazakhstan, and Australia, poised to set new standards in Islamic banking.
- Challenges of Islamic Fintech: It delves into the main challenges associated with Islamic fintech and the digitalisation of Islamic banking.
Islamic finance, an integral part of the Islamic economic system, adheres to Islamic law in fund distribution and utilisation. Originally rooted in rural and agricultural economies, Islamic banking has evolved into a comprehensive system of financial services, products, and principles.
The report examines variations in banking systems globally, ranging from those entirely based on Sharia principles to others incorporating Islamic financial services within conventional banks.
The digital transformation and fintech in Islamic banking present numerous opportunities. Financial institutions in the Islamic sector aim to differentiate their business while ensuring competitive prices to capture new market space and generate economic demand.
The global Islamic fintech market is estimated to reach approximately $79 billion in transactions in 2021, with an expected average annual growth of 18%, reaching $179 billion by 2026. Key markets include Saudi Arabia, Iran, Turkey, UAE, Malaysia, and Indonesia, with Indonesia leading in the number of Islamic fintechs. Promising directions for the digital transformation of Islamic banking include crowdfunding, investment platforms, robo-advisors, payment services, digital banks, smart contracts, blockchain, cryptocurrencies, information security in the financial sector, and insurtech.
