Tehran (IQNA) – Digital acceleration is happening all over the world and Islamic finance should be connected to it and recognize it as a growth driver.
Since the establishment of the Islamic Development Bank and the Islamic Bank of Dubai in 1975, the market for Sharia-compliant financial solutions has grown rapidly, with regional banks capitalizing on citizen and business demand for halal banking services.
In a recent webinar hosted with Meed and Emirates Bank, Ibrahim Al Muhairi, Executive Vice President and Head of Islamic Banking at Mashreq Bank, said: “Islamic banking growth in the Middle East is averaging 14%, while conventional banking is 8%.
Mohammad Damak, senior director of Islamic finance at S&P, explained that the historical development of the Islamic finance market – with a current global asset value of $2.5 trillion – has been influenced by several factors, and that recent geopolitical and macroeconomic challenges should not limit further growth. this sector.
“Obviously, there are risks to the growth outlook, such as the conflict between Russia and Ukraine lasting longer than expected, continued high inflation, and quicker than expected monetary policy normalization. However, we believe that new sukuk issuance levels will exceed $90 billion and will contribute to the overall growth of the Islamic finance industry. This means that there is great scope for Islamic finance to grow in the Gulf Cooperation Council region, supported by government policies. Overall, despite these risks, the overall movement of the industry looks positive and the Sharia compliant lending sector is projected to grow by 10% during 2022-23. However, despite these signs of future growth, more needs to be done to develop Islamic finance for a wider and more relevant audience, and to make it more responsive to market needs,” he said.
Rafiuddin Sheko, CEO of Dinar Standard Investment Consulting, said that although the Islamic finance sector has developed well in recent years, it still represents only a small fraction of the total financial transactions in the world, and noted: “New generations have a different view of the world and look at Islamic finance from a different perspective compared to the previous generation. They want everything to revolve around sustainability, and they need help to make finances more realistic. We also need to connect the behavior of this generation with the ethical, social and global principles that the Islamic finance industry uniquely brings. It is these pillars that make Islamic finance relevant worldwide and will serve as the basis for its future strategic growth.”
Workshop participants noted that the Islamic finance industry often failed to sell its advantages to potential clients and that the lack of innovation, especially in technology, hindered its access to the younger generation.
The launch of fintech startup Wahed, an online ethical investment platform, gives people the opportunity to grow their assets in a way that aligns with their values while leveraging digital opportunities.
Omar Suleiman, head of risk group at Wahed, said: “We are reaching out to ordinary people, especially young tech-savvy Muslims who may not have a bank account but have a mobile phone, and let them know that there is a new way to increase their wealth. It’s time for innovation and digitalization. Islamic financial principles are more important than disputes between Muslims and non-Muslims. These principles apply to the world in which we live. When thinking about what products to invest in or not to invest in, you are considering social optimization. People who run multi-billion dollar businesses have a responsibility to their customers and should strive to create a circle of sustainability.”
Dinar Standard’s Shokweh also takes a similar stance and points to the synergy between Islamic finance and the growing demand for ESG (environmental, social and corporate governance) compliant investments. “The Islamic finance that exists in the UAE has the ability to support ESG initiatives, but the traditional way of doing so needs to change,” he said.
Al-Muhari of Mashreq Bank said: “While there is still no regulatory guidance on how the Islamic financial system can drive change in the energy sector, local banks are moving ahead based on established targets to reduce greenhouse gas emissions (Net Zero). at the national level. This approach is relevant as banks like Mashreq are committed to ESG principles and can fund Zero Profits initiatives. Whenever financial opportunities come to us or large companies with financial needs related to zero projects, we support them, conduct the necessary investigations and help borrowers support national goals.”