Trends in Islamic tech that will affect your finances

Trends in Islamic tech that will affect your finances Featured Image

4 min read




Majida Begum

Although Islamic Fintechs (‘fintech’ is a term that means financial technology, i.e. modern apps that deal with finance in some way) only make up 0.72% of the Fintech market globally, their expected growth is 6% higher than that of conventional Fintech.

Why? Muslims are demographically young and given the historic lack of options we’ve had, we are hungry for genuine solutions.

Over the last decade, Islamic Finance globally has grown from providing just a sharia-compliant alternative to providing bespoke solutions for the Muslim consumer. 

The important of this cannot be understated. For Islamic finance to be viable and attractive, it must be more than just an alternative. Innovation is a demand – and innovation has to have a global reach.

To take an example, Abdul-Rahman on Twitter created a Notion page on the many problems the Muslim community faces.

Under the finance section the following is listed:

  • It’s hard for Muslims to buy a house

  • Muslims lose out on savings due to inflation

  • Lots of Muslims do not have pensions

  • Many Muslims do not know or get involved in investment opportunities (e.g. stock indexes)

  • Lack of low-risk and halal opportunities to grow wealth

  • Muslims earn the least out of all religious & non-religious groups (UK)

  • Most Muslims don’t have a Will

There are a number of Islamic Fintechs developing globally and providing solutions. These are likely to have a positive impact on your lives, so it’s worth paying attention.

Here are three major Islamic fintech trends we’re noticing: 

1. Increasingly, Islamic Fintechs are providing the full package

There is a shift from simply sharia screening to sharia stock brokerage. 

Fintechs like Zoya, Aghaz Invest, Musaffa, Muslim Xchange, Kestrl, Islamicly, Finispia offer Sharia-compliant stock screening. 

Offering an all in one package and often with no brokerage fees. This shift makes investing and growing wealth much more accessible and user friendly for the average Muslim. Some Islamic Fintechs are also providing ISA’s and SIPP accounts. 

As Islamic Fintechs rise, the diversity in choice is finally being acknowledged. For instance, Wahed or Aghaz Invest allow you to invest in their pre-selected portfolio while others like Zoya and Muslim Xchange will allow you to screen stocks and create your own portfolio.

In the long term, this is helpful for the Islamic economy. We spoke to Salem Abu-Hammour, co-founder of Erad who said that these developments “support the efficient allocation of capital” and ultimately, make it easier for Muslims to invest in sharia-compliant stocks and grow their wealth.   

This also marks progress from merely consulting the sharia to fully integrating it and making it a consistent foundation of the investment journey.

2. There is more funding for SMEs and the provision of halal business loans.

Previously, support and investment for SME’s was a huge gap in the market.

Alami, based in Jakarta, Indonesia is amongst others like Qardus based in the UK who are providing halal business loans to SMEs. Dima, founder of Alami tells us so far, this has supported “more than 1,000 MSME’s” and $15million has been dispersed monthly, with a hope to grow this to $30 million every month.  

In the Middle East and Muslim majority countries, there are other business models being explored too. For instance, at Erad, subscriptions are transformed into revenue to support growth for Muslim businesses.

We spoke to Mufti Faraz about this who said he was “very excited” in particular about “supply chain financing and trade financing”. He predicts that things will “really progress” in the next 5 years in this space.

Mufti Faraz also thought that 2022 would be a “groundbreaking year” for fintechs tackling SME financing.

3. This is taken further with a rise in Islamic digital banking. 

Islamic digital banks globally are tapping into the increase money flows into the Islamic economy.

This is even more marked across Muslim majority areas like Pakistan, Indonesia, the Middle East and the UK.

Alami for instance, have acquired Hijra bank and are moving into this model of SME financing and banking. 

The rise in Islamic banking takes away AUM (assests under management) from mainstream banks and will allow Islamic banks to flourish in an interest-free environemnt.

AUM can then be used to fuel Islamic mortgages, insurance or other products which needs large volumes of cash which historically only belonged to interest-based banks.

Concluding thoughts 

Mohsin, co-founder of IslamicFinanceGuru, had this to say:

“As you can see, there’s a lot happening. There’s been a bit of a stop/start approach to Islamic fintechs so far. But the market is warming up and people are increasingly ready to adopt them.

We need to see genuinely top talent moving into the space, working with regulators, and providing solutions designed from scratch fit for the modern, tech-savvy Muslim.

Once we do that, it’s game on.”

We can’t wait.

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Majida holds a BA in English Literature from the University of Cambridge. She is a writer with experience in education, the civil service and charity sector. She is a content writer & researcher at IslamicFinanceGuru. Majida holds a BA in English Literature from the University of Cambridge. She is a writer with experience in education, the civil service and charity sector. She is a content writer & researcher at IslamicFinanceGuru.