The value of the Islamic finance market worldwide is set to almost double to $3.25 trillion by 2020. Will the industry be able to keep up the pace?
The global Islamic economy is worth more than $6.7 trillion. This can be split up into a series of sub-sectors, such as the Islamic finance market, for example, which is worth $1.81 trillion. Then there is commercial banking, which is worth $1.34 trillion, then takaful, valued at $22.4 billion and sukuks at $295 billion. The sheer scale of the numbers involved illustrates the need for a broad based, sophisticated, and dynamic legal framework in which to operate. Jamal Bin Ghalaita, CEO of Emirates Islamic, told TBY, “Further improvements need to be made to legal regulations to support the growth of the industry.” An EY report predicts that the UAE Islamic banking industry will be worth $263 billion by 2019. Yet, respondents to the Islamic Banking Index by Emirates Islamic, the first consumer-focused survey on Islamic Banking in the UAE, expressed that they found conventional banks to have a better range of technological and innovative offerings than their Islamic counterparts.
Despite concerns about the development of Islamic finance, the UAE is one of the most active and healthy Islamic economy ecosystems in the world. Dubai in particular has always taken a proactive approach in stimulating the regional and global development of the Islamic economic system. During the Global Islamic Economy Summit 2015 held in Dubai, HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, officially launched the Salaam Gateway. This is the first online platform where Islamic economy professionals can access all Islamic related industry intelligence, information, data, and news. This joint effort between the Dubai Islamic Economy Development Centre and Thomson Reuters covers seven key sectors: food; finance; fashion, art, and design; travel; pharmaceuticals and cosmetics; digital, and media and recreation.
Dubai is famous for launching such innovative projects. In March 2016, Dr. Abdulrahman Bin Saleh Al-Atram, President of the International Centre of Islamic Economy, launched a digital portal for the first global incubator for innovation in Islamic economy. The “Oasis of Innovation” is aimed at incubating creative ideas to develop products and services in finance and investment institutions, as well as applications and programs. By disseminating best practices and offering the latest advisory services, the portal will support the development of high-quality, practical products and services that will bolster the necessary Islamic economic growth and turn Dubai into the capital of the global Islamic economy.
The initiative, which was showcased to the world during the International Innovative Platform for Islamic Economy Products 2015 (IIPIEP 2015), is the first of its kind. Its ambition is to incubate and develop creative ideas and entrepreneurial projects to support Islamic finance and the broader Islamic economy. Incubators like the Oasis of Innovation will help set up an integrated and practical framework that will establish Islamic finance as a key driver of Dubai’s economy. The digital platform offers a modern interactive methodology in which to stimulate this growth and transform ideas into reality in accordance with sharia law.
The Oasis of Innovation was not the only initiative unveiled at the IIPIEP 2015 in DAFZA. Other ideas about how to integrate financial activities with the real economy were presented during the event. One idea was Cash-Financing Through Telecom Services, a creative tool that secures the provision of cash payments in exchange for a set amount of call minutes delivered to the customer under a joint framework between telecommunications companies, banks, and individuals. Another idea was an Endowment Bank, which proposed the use of cash investments and in-kind endowments, which represent the majority share of the bank’s capital, to establish financial institutions.
The ideas presented as the IIPIEP show the game-changing role that innovative entrepreneurs could have not only in the future of Islamic finance but on people’s everyday lives. Digital technology solutions for Islamic finance have the potential to change existing trends and habits. There is still more room for Islamic banking consumers in the UAE, where 75% of those surveyed in the ISLAMIC BANKING INDEX said they are open to Islamic banking products. There remains much room for growth.