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Ernst & Young: Islamic Fintech To Attract 150 Mln of New Customers For 3 Years


Oleg Koldayev, Anna Zhygalina

The world is tired of cynical and unscrupulous financial business, which has its profit as the main and only one value. But the need for some intangible criteria of value still remains. And both in the European and American market it is not satisfied. Perhaps it can explain the growing popularity of Islamic banking and other monetary services, which are based on the Sharia moral paradigm. The volume of this market is growing by 20% per year, and it is potentially able to control $3.8 trillion.

A digital segment has now been added to the traditional financial services sector which is provided by credit institutions in the Middle East and South-East Asia. The companies that operate the virtual assets have entered the market with their products based on the Sharia principles.

About the Fintech industry evolving in the countries of the East, as far as the shape of the digital economy can be correlated with the religious tenets and what is the difference between conventional and moral adapted exchange-traded instruments - all about this subject matter we find out from the employee of First Islamic Crypto Exchange, functioning on internal Shariah in ADAB Solutions, mufti Faraz ADAM in an exclusive interview for Bitnewstoday.com

BNT: How do you evaluate the situation in the Fintech space in the Islamic world now? What countries are leading in the industry and in what branches?

FA: Financial technologies that comply with Islamic law, or Sharia, could help attract 150 million of new banking customers in the next three years alone, according to consultants EY.

Malaysia, the UK and Indonesia are leading the race, ranking first, second and third respectively by number of Islamic fintech startups, says Bloomberg Intelligence.

In January, Bahraini banks formed a consortium aiming to create fifteen fintech providers in five years. Last year, the Dubai International Finance Centre (DIFC) launched an accelerator, called FinTech Hive, with a similar aim.

Meanwhile, Abu Dhabi and Bahrain are collaborating to promote fintech and have developed regulatory test beds, known as sandboxes, for emerging technologies.

Such competition and development is healthy for the Islamic finance industry and will lead to better services for the different stakeholders.

BNT: How can development of the Fintech industry affect the global market in the Islamic world?

FA: One of the major potentials of fintech is financial inclusion and microfinance. A number of countries in the Islamic world have an unbanked population. Fintech allows financial inclusion for those who are disadvantaged and needy. There is a lot of scope for Sharia compliant microfinance solutions and economic empowerment facilities.

BNT: What is the difference between the Islamic crypto-exchange and a crypto-exchange which has been built not according to Sharia principles?

FA: There is a range of differences. On conventional platforms, any cryptocurrency regardless of the project it represents can be traded. Such projects relate to adult entertainment, alcohol, gambling and other Islamically prohibited industries. Furthermore, the contracts and investment structures may include non-compliant elements. On an Islamic crypto-exchange, only those cryptocurrencies whose values and projects align with the Islamic ethical teachings are traded.

BNT: What are the principles of Sharia that should be corresponded to the cryptocurrency in order to be on your trading floor?

FA: We are developing a framework to ensure Sharia compliance. This means that Riba (interest), Gharar (gross uncertainty) and other prohibited elements in Sharia are eradicated from the platform. We will analyse ICOs and cryptocurrencies qualitatively and quantitatively, like limits on Debt/Asset Ratio, Interest-related Income, Monetary Assets etc. to ensure the ICO and cryptocurrency is Sharia compliant.

BNT: What financial instruments can be used on the Islamic crypto-exchange and  which ones can not be used? For example, in Islamic banking derivatives are not used. And on the exchange?

The Islamic crypto-exchange will be using Sharia compliant instruments. The likes of margin trading, futures trading, short selling will all be prohibited. All other non-compliant instruments and derivatives will also be prohibited on the platform. The Shariah Advisory Board of our Exchange will be monitoring and advising us on the different Sharia compliant instruments we can use.

BNT: Your exchange is the 1st one. Do you know how many Islamic crypto-exchanges have followed your steps and are operating now?

FA: We have been to a number of events on Fintech across the world and have met with a number of organisations. We believe that Adab solutions has a unique competitive advantage because we have a strong team, network and clear plan of action.

BNT: How the digital coins are defined by Islam and Islamic laws point of view: as money, as stocks or as property?

FA: Digital coins can represent money, equity, utility and property. As such, from an Islamic point of view, the reality of the digital coin will depend on what it represents.

BNT: What Fintech solutions can be used in Islamic banking? For example, is it possible to use scoring based on analysis of big data, when a potential client can not hide the information that does not concern finance and credit?

FA: Fintech can assist Islamic banking in a number of ways. For example, fintech provides a way to improve customer retention and preference. Data enrichment is an extremely powerful tool that quality fintech firms bring to the game. Fintech partnerships can help solve industry-specific points of pain, like securing credit card processing, transferring money, and processing loans quickly.

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