Fintech and the Winds of Change

Nida Khan

Service and Data Management in Distributed Systems (SEDAN)


Islamic finance came as a breath of fresh air for thousands of Muslims who did not want to participate in conventional financial platforms to save themselves from riba or interest.

According to Thomson Reuters projections, Islamic finance assets will rise to $3.2 trillion by 2020, indicating the strong foothold of this relatively new financial industry. Yet, all is not going to be smooth in the coming years, as the industry is facing inevitable disruption by a storm of nascent technologies. Amongst these, blockchain emerges as the most potent to cause such disruption that if the industry does not innovate to incorporate it into their existing information systems, there is a likelihood of loss of the existing client base and possible unattractiveness for prospective clients.


New Developments

There has been much talk about blockchain and fintech, and industry leaders are well aware of the nuances involved. However, what I see as a major impediment to the progress of Islamic finance in the fintech domain is the lack of involvement of Shariah scholars and financial practitioners with technology consultants. Blockchain in itself has proved to be difficult to be understood by average finance professionals. This has resulted in a disoriented product that is verified half-heartedly by scholars and is endorsed by unaware financial leaders. It is designed by technology experts who may lack knowledge in both Islamic finance and Islamic education.

Some years ago, the only grueling issue was that the industry had finance professionals who were not aware of the intricacies of the Shariah. Many Shariah scholars had little to no knowledge of designing financial products. The relatively new addition of a third dimension to the already existing challenging situation came in the form of fintech.


Harmonious Blending

Shariah scholars are the cream of the Islamic finance industry. They help deliver products and services that the user can comfortably exploit knowing that all the tenets of faith have been satisfied in the service/product designing process. If the scholar has to totally rely on the reports of technology experts in forming a judgment on Shariah validity, there is a likelihood of bias creeping into the judgment. Further, the role of finance professionals is reduced to a mere onlooker, who might just offer their views on the financial side without fully comprehending the implementation of the financial product in the new technology. This triad stands as three separate units, with one taking a lead role — those who are aware of the technology.

The need of the hour, therefore, is a harmonious blending of the three forces to become unified to design products and services, failure of which will result in Shariah non-compliance. The differentiating factor between groups of people who excel and those who lag is knowledge. There is no substitute to knowledge and learning. The first step to learning is to understand your own religion. It is shocking that many finance professionals are not even aware of the basic tenets of faith and yet, are practicing Islamic finance. People’s attitude towards accepting this ignorance about religion demonstrates complacency.

How can one expect innovation in a certain industry when its foundation is not strong? Businesses can innovate and excel only when the industry’s roots are firmly placed. Islamic finance hinges on the tenets of Islam. There is a need for products and services that embody the true spirit of Islam in order to bring equality and provide the basic necessities to everyone, preventing the hoarding of wealth in select few hands. There is an urgent need for a revival of knowledge that enabled inventions by great scientific figures such as Ibn Sina, Albert Einstein, Graham Bell, and the like. If this revival is not accomplished, what we have in hand is a bird without wings devoid of the ability to fly.


Urgent Need

In order to witness the same progress and development now, some necessary changes in the Islamic finance industry are vital to make headway and provide Shariah-compliant products and services to users, implemented and delivered using the latest available technologies. The following steps need to be taken to tackle the issues on a short-term basis:


  1. A close-knit working environment where constant communication is maintained between the Shariah department and the technology department of the industry.


  1. Regular lectures within the organization from technology experts.


  1. Short-term courses for scholars and finance employees on new technologies emerging in the financial market.


  1. Introduction to programming to enable an understanding of the codes written to develop financial products/services to the team involved in designing innovative technology products. These courses need to be developed in consultation with technology consultants to deliver easy-to-understand materials in the shortest possible time.


  1. A system of rewards for employees actively participating in changes and assigning non-participants to administrative roles that do not engage in critical thinking for the organization.


  1. A change in recruitment policies to employ graduates with knowledge of at least two of the three subjects involved (Islamic education, finance and computer science).


  1. Incorporation of a review panel to rate the developed product/service on Shariah compliance and technological sustainability before public release.


  1. Steps to pay attention to KYC to redress problems for retaining and expanding the user base.


The following additional steps need to be taken to emerge as an industry that is well-prepared to deal with emerging technology head-on in the long term:


  1. Islamic finance education providers need to incorporate introductory courses on relevant subjects in computer science such as big data, blockchain, and data science, among others.


  1. Leading roles must be assigned to employees with knowledge of all the three core subjects in Islamic fintech. These position holders would manage teams of experts in the three different subjects and coordinate their efforts to give a unified Shariah-compliant output.


  1. Make basic knowledge of an understanding of the Quran and Hadiths mandatory for any role above managerial positions.


  1. Make KYC a priority for the organization.


Change can be good or bad, depending on the level of preparedness of an organization and the initiative-taking capability of its employees. A well-structured approach can assist in maintaining the status quo and enabling future progress in establishing a strong foundation. Some organizations will sink in this disruption, while others will not just manage to swim but win the race. The result will depend on the tools an organization equips its employees with. The time to take the decision to sink or swim is now.


Leave a comment

Your email address will not be published. Required fields are marked *

Interested in investing with Wahed?

Open your account in minutes

Get Started