Great opportunities for enhancing Islamic Financial services Industry
in Arab Countries by fostering the use of Financial Technologies
Adequate funding and talent development remain critical success factors for the Shari’ah compliant Fintech industry in the region
The paper provides set of policy recommendations to embrace Shar’iah compliant digital financial products & services, how to employ them properly and the related requirements
The Arab Monetary Fund (AMF) issued today Sunday November 28, 2021, a policy paper on “Islamic Fintech in the Arab Region: Imperatives, Challenges and the Way Forward” prepared by the Arab Regional Fintech Working Group (WG), which AMF acts as the technical secretariat of the group. The paper is issued under the framework of the Fund's endeavours to promote awareness of the requirements for developing Fintech, hand in hand with Islamic Financial Services Industry while supporting digital financial transformation efforts in Arab countries.
The paper aims to provide policy advice on how to adopt these technologies in the Islamic Financial Industry, how to employ them properly, in addition to the related pre-requisites, and how to overcome the implementation challenges. Thereby how to improve the efficiency of Islamic banking and financial services, aiming to support digital financial inclusion in the region.
The paper highlights the opportunities that innovative technologies can bring to the Islamic financial services industry for the Arab region focussing on micro and SMEs finance, Islamic Social Finance, as well as improving Regulatory and Supervisory processes amid the COVID-19 repercussions and the digital transformation in the Islamic Financial Services Industry.
The paper refers to the main Islamic Fintech Hubs across the region and globally, and elaborates on the various modes of Shari’ah compliant digital financial services such as Payments, Deposits and Savings, Wealth Management, Investments (Robo Advisor), diversified Shari’ah compliant modes of financing including fundraising for micro finance, Digital Assets, as well as Social Finance that involve direct and indirect cash Waqf, and Waqf Sukuk.
Moreover, the paper provides sets of recommendations highlighting (i) the crucial role that Standard setters and International organisations play regarding the issues of regulatory uncertainty, in particular the Arab Monetary Fund (AMF) role in facilitating regulatory harmonization across the region, (ii) international collaboration among AMF and other international organisations to observe and share best practices and case studies as a form of general principles across their member jurisdictions; the need for (iii) adequate funding, and (iv) talent development, as well as (v) initiating educational and awareness programs about Islamic Finance and Fintech. This is in addition to the existence of (vi) a collaboration approach among ecosystem partners including Fintech innovators, incumbents, regulators, governments and funds providers to create an Islamic Fintech acceleration program to address emerging gap areas.
The paper was prepared by experts from Islamic Financial Services Board (IFSB), Fintech Bazaar, members of the Arab Regional Fintech Working Group, and the Arab Monetary Fund (AMF). It has been reviewed by representatives of Arab Central Banks and Monetary Authorities members of the group.
In this context, His Excellency Dr. Abdulrahman Al-Hamidy, Director General Chairman of the Board of Arab Monetary Fund, noted with appreciations the initiatives of the Arab Reginal Fintech Working Group in issuing policy notes providing advice to the relevant authorities in the areas of Fintech. He stressed on the importance of strengthening digital financial services and supporting innovations and access to formal financial services. H.E referred to the great opportunities resulting by the adoption of digital Shari’ah compliant services and solutions and expressed his wishes that the paper would contribute to raise awareness of deploying such technologies. Finally, H.E praised the ongoing cooperation of the Arab Reginal Fintech Working Group with international organizations, research centers and universities.