As a means of evolving the Islamic Financial system, Abu Dhabi Global Market (ADGM) has partnered with Abu Dhabi Islamic Bank in an effort to support Shariah-compliant Fintech -related measures. These measures include the development of online banking, artificial intelligence, distributed ledgers, blockchains etc.
ADGM will be launching its Inaugural Fintech Innovation Challenge where they will, in collaboration with Securities Commission Malaysia, be accepting 11 technology startups for a five week program.
“Both entities will also seek to develop local Fintech entrepreneurship through mentorship and knowledge transfer across incubation, accelerator, academic and internship programs.” Said the international finance center.
The Dubai International Financial Center signed an MoU in July with the Dubai Islamic Economy Development Center in an effort to enhance the emirate’s Islamic Fintech ecosystem. As Malaysia leads the race in Sharia-compliant Fintech companies, with UK and Indonesia following their lead – major Islamic Financial markets such as Bahrain and UAE are also following suit. These late comers have now seen the potential of what can become a revolutionary implementation as smart phones and other sophisticated gadgets invade the Middle East. According to Accencure, a consultancy firm, only 1% of US$50 billion in Fintech investment (globally since 2010) went to the Middle East and North Africa.
However, it goes without saying that times have changed, and one must change with it to benefit the Muslim population. In the 9th century, a Muslim man from Baghdad could cash his check in China. Checks were derived from an Arabic instrument, a written vow that goods would be paid upon delivery, as a means of protecting traders from traveling with large sums of money which exposed them to robbers. Innovation in Islamic Financial systems has always been a tradition and this was pointed out by Khalid AL Rumaihi – head of Bahrains Economic Development board. He complained at Arab and Middle Eastern companies’ procrastination and lack of infrastructure and venture capital.
Other cities like Cairo have launched two tech incubators to nurture startups. Abu Dhabi has masterminded the regions first “regulatory sandbox” which allows new products to be tested for two years without the whole regulatory compliance. Dubai’s new Fintech accelerator, also the first in its region, is now accepting applicants. The number of Fintech startups has risen from 20 in 2010 to 105 to 2015 and is expected to grow.
A report by EY, a consultancy, claims that 40 of the biggest Islamic banks have approved investment of up to $50 million in digital initiatives. At almost 100 million customers worldwide, Fintech can help it reach its potential at six times that amount. Blockchain technologies can streamline transactions between institutions which offer different Shariah-compliant options.
Ranking above Frankfurt, Dubai which wasn’t even considered as part of the financial world just few decades ago, now have a foothold as the world’s 18th largest financial center. This growth proves that it can also become a hub for Fintech companies. They can provide services that would link Asia to Africa, for example, in ways that were hitherto unimaginable. So for the smart countries that can forecast the new wave, its either surf or drown. Countries that do not have the opportunity to surf due to lack of mentors or training centers, may perhaps stay afloat and catch a wave when the opportunity arises.