Islamic fintech is gaining more mainstream recognition, evident by greater investments into Shariah fintech start-ups and stronger regulatory support for the sector. These, along with swelling demand and the growth opportunities fintech brings to the Islamic finance industry, lend strength to Islamic fintech being a mainstay of the industry, and not just a flash in the pan, according to Muneer Khan, a partner and the regional head for the Middle East at Simmons and Simmons.
“I think the Islamic finance industry is coming to the realization that in order to continue the levels of growth that we have seen in the past and in order to scale up in an increasingly complicated and regulated world, we have to look at digital financial services — I think that has definitely dawned on the Islamic finance industry,” Muneer tells IFN.
The establishment of Nomo, which Simmons and Simmons was involved in, for example, demonstrates how the industry is adapting. Nomo, set up by Kuwaiti-owned Bank of London and The Middle East, is the world’s first international Islamic digital bank regulated by the UK’s Financial Conduct Authority. The comprehensive cross-border project was conducted under a compressed timeline involving an international team.
“I think with developments like this, what we are doing is we are showing that it is possible to compete and it is possible to do this in relatively short time frames. So, I am excited about that and I think that it is really important for the industry, and I think that is definitely the way to go, and it is the future,” said Muneer, who also revealed that the law firm has received interest from a number of other groups who are looking at doing something similar.
Islamic fintech has been steadily gaining more attention and support in recent years, in both Muslim and non-Muslim jurisdictions.
“We see markets with natural potential because they have got large populations, young populations and a large Muslim population as well, although that’s not the be all and end all because I think there’s crossover potential here. But the missing piece is top-down government support, which is really important,” shared Muneer, who highlighted the likes of Malaysia and Indonesia having a holistic ecosystem to support Islamic fintech developments.
“There are also markets such as the UAE, which is a smaller market, but there’s a lot of government support especially from the government of Dubai and Abu Dhabi. Also, in Saudi Arabia where there is untapped potential, because there is a bigger domestic market and a growing young population who are internet- and social media-savvy.”
Funding, education, regulatory support and accelerators are crucial to building a healthy Islamic fintech ecosystem, according to Muneer and over the years, the industry has seen key markets establish enhanced regimes for fintech, which has spurred the ecosystem.
“I think [there is] a growing appetite from investors in the region, as well as investors from outside who may be more sophisticated [and] can see the opportunities more easily. There’s definitely been a shift in the last few years, a positive shift. You are seeing some of these start-ups actually raising money around the world, and significant sums as well,” Muneer elaborates.
For the full discussion with Muneer Khan, a partner and the regional head for the Middle East at Simmons and Simmons, which covered opportunities, challenges and the outlook for Islamic fintech, log on to IFN Podcast.