What opportunities can fintech bring to Luxembourg’s Islamic finance industry?
We don’t have an Islamic bank in Luxembourg yet; we therefore see most Islamic fintech developments taking place in the asset management sector. Fintech will certainly be a helpful management tool for Shariah compliant funds. It can help reduce compliance and legal costs, thus boosting performance.
While the programs will need their algorithms approved by Shariah scholars, fintech will be able to do a lot of the groundwork. Companies such as Eethiq (based in Luxembourg) and Arabesque (London-based with funds in Luxembourg) use fintech-based solutions to help with product development and management. Rasmala has funds in Luxembourg and uses fintech solutions as well.
We also see opportunities for fintech and Islamic finance in the field of peer-to-peer lending and crowd funding. As regards to Islamic finance, automation will certainly reduce the amount of work. Luxembourg is a major e-commerce and e-payment hub and therefore hopes to attract Islamic finance systems as well.
Luxembourg is making a strong play to position itself as a preferred destination for fintech. What differentiates the Grand Duchy from its peers in this respect?
Luxembourg has the necessary facilities and infrastructure and is particularly well equipped to become a base for Islamic fintech start-ups.
Luxembourg offers a wide spectrum of fintech activities such as: compliance and risk management, blockchain and cryptocurrency, security and authentication, automated investment services, big data analytics, mobile and e-payments. These activities are supported by an innovation-friendly and responsive financial regulator as well as the most modern data center parks in Europe and ultra low-latency connections with major hubs in the EU.
Luxembourg just launched the LHoFT – Luxembourg House of Financial Technology. The LHoFT’s new Innovation Hub aims to drive financial technology innovation within Luxembourg’s financial services community to ensure the future competitiveness of the industry as well as foster a comprehensive and collaborative globally connected ecosystem of innovators across all sectors including financial institutions, fintech trailblazers, IT industry, research and academia as well as regulatory and public authorities. The LHoFT offers start-up incubation and co-working spaces including a soft-landing platform.
The LHoFT is open to all fintech initiatives and we encourage Islamic fintech start-ups to join as well.
The convergence of fintech and Islamic finance is one that holds great potential. In the context of Luxembourg and wider Europe, what role do you see fintech playing in advancing Islamic finance?
The Muslim community in Europe is quite dispersed. We believe that the best way to reach the customers is through fintech solutions – this reach won’t be achieved through traditional branch banking. As a hub for cross-border finance in the EU, Luxembourg is well placed to play a role here.
Luxembourg’s cross-border expertise and access to the EU market can provide Islamic fintech companies with important opportunities for the future. It’s perhaps worth noting that Luxembourg, in 2015, was the first country to grant a European payment institution license to a virtual currencies operator. In 2016, Luxembourg had the first fully EU-licensed and regulated bitcoin exchange.