• | 11:00 am

Islamic banking expected to hit $4 trillion driven by fintech innovation

The adoption of fintech in Islamic finance has its challenges – lack of understanding of Islamic products and a small market share –says a new report

Islamic banking expected to hit $4 trillion driven by fintech innovation
[Source photo: Anvita Gupta/Fast Company Middle East]

Now accepting applications for Fast Company Middle East’s Best Workplaces For Women 2023. Click here to register.

In a remarkable transformation, Islamic banking is embracing the power of fintech in a rapidly evolving banking sector.

Over the past four years, assets held in Islamic banking institutions have skyrocketed from $1.8 trillion to $2.8 trillion, with projections indicating an astonishing leap to $4 trillion by 2026. This surge is primarily attributed to the pioneering efforts of GCC nations, which have embraced fintech as a catalyst for growth.

A new exclusive report titled State of Fintech: The Islamic Banking Industry, by red_mad_robot, delves into the intricacies of this financial revolution. 

The global Islamic fintech market is estimated to have reached a staggering $79 billion in transaction value in 2021, and it is poised for continued growth, with projections indicating an average annual growth rate of 18%, reaching $179 billion by 2026. Saudi Arabia, Iran, Türkiye, UAE, Malaysia, and Indonesia are currently leading the pack as the largest fintech markets.

Crowdfunding platforms, investment platforms, robo-advisors, payment services, digital banks, smart contracts, blockchain, cryptocurrencies, insurtech, and enhanced information security are just a few fintech innovations reshaping the Islamic finance sector.

The adoption of fintech in Islamic finance has its challenges. A lack of understanding and awareness of Islamic products and a relatively small market share pose significant hurdles. Additionally, a shortage of qualified human resources, a lack of comprehensive regulations, and the need for widespread internet access to facilitate digital financial inclusion remain key obstacles.

Islamic finance, deeply rooted in Islamic law, governs economic interactions and the distribution and utilization of funds. Initially emerging in rural and agricultural settings, Islamic banking has matured into a comprehensive financial services, products, and principles framework.

Further insights gleaned from the report spotlight the preeminent players in Islamic finance, hinged upon assets amassed across the GCC, MENA, and South-Eastern countries. Iran, Saudi Arabia, Malaysia, South Africa, and Qatar emerge as pivotal hubs in this ecosystem, with the world’s largest Islamic banks anchored in Malaysia, Indonesia, Bangladesh, and Bahrain. 

Notably, Al Rajhi Bank, headquartered in Saudi Arabia, clinches the crown among the largest Islamic banks globally.

More Top Stories: