Mr. Daniel Ahmed, a fintech entrepreneur, is committed to shaping up Islamic finance. He created a sharia-compliant cryptocurrency through funding from affluent Gulf investors raising over two million dollars. With the emergence of blockchain, Mr. Ahmed decided that it might not have been the right time. Mr. Ahmed succeeded in blending tradition and technology by matching investors with projects that had been fully funded by Islamic finance. Islamic finance has thrived in some countries in Asia such as Malaysia and also in the Middle East. However, conventional banking poses a great threat everywhere else.
The head of Islamic finance at Norton Rose law firm says that fintech and Islamic finance are coming together. Mr. Mohamed Paracha added that fintech is going to develop change that banks have been resisting when it comes to applying Islamic finance in other regions and markets. The Islamic Financial Services Board (IFSB) announced in 2018 that the Islamic finance value had hit over two trillion dollars. The board said that economic factors had caused the growth figure to drop by 1.6%, from $8.5 trillion to $6.9 trillion.
Mr. Paracha, who worked in the UK’s first financial laws, said his personal disappointment was Islamic finance not being successful in Europe as much as he expected. However, he added that it had become a success in some countries, especially the Gulf Cooperation Countries, where it had become a default system. Having a financial institution closer to the Muslim faith makes it preferable to most people. IFSB data shows that Islamic banking has thrived compared to non-sharia counterparts like the UK and the US. It recorded a ROI of 16.3% while the UK recorded 7.2%, and the US 11.9%. The most notable difference in Islamic banking is charging 0 interest rates. The chief executive of a startup funding known as Souq, Mr. Martin Jaouni, compared it to breaking the Ten Commandments in the Christian faith.
Instead of giving out loans, the lenders collaborate with the borrowing party to complete the project. After that, the profits and losses are shared as partners. In instances where the party borrowing wants the money to pay off something like salaries, it will have to sell an item of as much value to the lender where the lender will sell it at a profit. The co-founder of Islamic Finance Guru says that they are coming up with something massive, and his firm aims to be a money-saving expert for Muslims. Mr. Mohamed’s only worry is that the young generation of Muslims is skeptical about sharia compliance. However, startups such as Mr. Mohamed’s give hope to Islamic finance products through widening access to this service.
Dil Bole Oberoi
