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ISLAMIC FINANCE & CAPITAL MARKETS

Why Has Islamic Finance Not Been Able To Reduce Poverty in Muslim Countries?

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By our Special Correspondent

Islamic finance is a financial system based on principles derived from the teachings of Islam. It aims to provide an alternative to the traditional, interest-based financial system, which is considered haram (forbidden) in Islam. One of the main goals of Islamic finance is to promote economic development and reduce poverty in Muslim countries. This is achieved by investing in socially responsible and ethical projects that provide a tangible benefit to society, and by sharing profits and losses among investors.

However, despite its noble goals, Islamic finance has faced numerous challenges in its efforts to reduce poverty in Muslim countries. In this blog, we will examine the principles of Islamic finance and the challenges it has faced in promoting economic development and reducing poverty in Muslim countries. We will also look at case studies of successful Islamic finance initiatives and consider ways in which Islamic finance can be better utilized to achieve its goal of reducing poverty and promoting economic development in Muslim countries.

Background on poverty in Muslim countries

Poverty is a persistent problem in many Muslim-majority countries. According to the World Bank, over 30% of the population in Muslim-majority countries lived below the international poverty line of $1.90 per day in 2015. This is a higher poverty rate than the global average of 9.2%.

Several factors contribute to poverty in Muslim countries. One major factor is conflict and insecurity. Many Muslim-majority countries have experienced ongoing conflicts or civil wars, which have disrupted economic activity and led to the widespread displacement of people. These conflicts have also disrupted the delivery of basic services such as education and healthcare, which can further exacerbate poverty.

Another factor contributing to poverty in Muslim countries is corruption. Many Muslim-majority countries rank poorly on global corruption indices, and corruption can undermine economic development and increase poverty by diverting resources away from those who need them most.

Economic inequality is also a significant factor contributing to poverty in Muslim countries. In many cases, the wealth of these countries is concentrated in the hands of a few elites, while the majority of the population struggles to make ends meet. This can lead to a lack of opportunities for the poor and can make it difficult for them to lift themselves out of poverty.

These are just a few of the factors that contribute to poverty in Muslim countries. In the next section, we will examine the principles of Islamic finance and how they aim to address these issues and promote economic development.

The principles of Islamic finance

Islamic finance is based on several principles that are derived from the teachings of Islam. One of the main principles of Islamic finance is the prohibition of interest-based transactions, which are considered usurious and exploitative. Instead of charging or paying interest, Islamic finance relies on profit and loss-sharing arrangements. This means that investors and borrowers share the risks and rewards of a financial transaction, rather than the borrower paying a predetermined rate of interest to the lender.

Another principle of Islamic finance is the emphasis on ethical and socially responsible investment. Islamic finance prohibits investment in certain industries or activities that are considered harmful or unethical, such as gambling, alcohol, and tobacco. Instead, it encourages investment in projects that have a positive impact on society, such as education, healthcare, and infrastructure.

In addition to these principles, Islamic finance also utilizes profit and loss-sharing arrangements to allocate risk and reward between investors and borrowers. In a profit and loss sharing arrangement, the investor and borrower agree on a fixed return or a percentage of the profits to be shared between them. If the project is successful and generates a profit, the investor and borrower share the profits according to the agreed-upon terms. If the project is not successful and incurs a loss, the investor and borrower also share the loss.

These principles of Islamic finance aim to promote economic development and reduce poverty by providing access to finance for socially responsible and ethical projects, and by sharing the risks and rewards of financial transactions fairly between investors and borrowers. In the next section, we will examine the challenges that Islamic finance has faced in achieving these goals.

Challenges to the effectiveness of Islamic finance in reducing poverty

Despite its noble goals, Islamic finance has faced several challenges in its efforts to reduce poverty and promote economic development in Muslim countries. One major challenge is the limited availability of Islamic finance products and services. Many Muslim-majority countries lack the necessary infrastructure and regulatory frameworks to support the development of Islamic finance. This makes it difficult for Islamic finance institutions to operate and for consumers to access Islamic finance products and services.

Another challenge is the lack of regulatory frameworks and infrastructure for Islamic finance. In many cases, Muslim-majority countries do not have clear guidelines or regulations for Islamic finance, which can create uncertainty and hinder the development of the sector. Additionally, many Muslim-majority countries do not have the necessary infrastructure, such as Islamic banks, to support the growth of Islamic finance.

A third challenge is the limited adoption of Islamic finance by governments and businesses. Many governments and businesses in Muslim-majority countries are more familiar with conventional finance and may be hesitant to adopt Islamic finance. This can limit the reach and impact of Islamic finance in these countries.

Finally, Islamic finance faces competition with conventional finance, which is often more established and has a stronger presence in many Muslim-majority countries. This can make it difficult for Islamic finance to gain a foothold and achieve its goal of promoting economic development and reducing poverty.

In the next section, we will examine case studies of successful Islamic finance initiatives and consider ways in which Islamic finance can be better utilized to achieve its goals.

Case studies of Islamic finance initiatives to reduce poverty

Despite the challenges it faces, Islamic finance has had some success in reducing poverty and promoting economic development in Muslim countries. Here are a few examples of successful Islamic finance initiatives:

  • The Grameen Bank in Bangladesh: The Grameen Bank, founded by Muhammad Yunus, pioneered the use of microfinance to provide small loans to poor women in rural Bangladesh. The bank’s loans are based on the principles of Islamic finance and have helped millions of women lift themselves out of poverty and start their businesses.
  • The Islamic Microfinance Network: The Islamic Microfinance Network (IMN) is an international network of Islamic microfinance institutions that provides small loans and other financial services to the poor in Muslim-majority countries. The IMN has helped thousands of people escape poverty and improve their living standards through access to finance.
  • The Islamic Development Bank: The Islamic Development Bank (IDB) is an international financial institution that provides financing for development projects in Muslim-majority countries. The IDB’s projects are based on the principles of Islamic finance and aim to promote economic development and reduce poverty in these countries.

These are just a few examples of successful Islamic finance initiatives that have had an impact on poverty reduction in Muslim countries. Some of the lessons learned from these initiatives include the importance of targeting the most vulnerable and marginalized populations, the need for appropriate regulatory frameworks and infrastructure, and the importance of building the capacity of local institutions.

In the next section, we will consider ways in which Islamic finance can be better utilized to achieve its goals of reducing poverty and promoting economic development in Muslim countries.

Conclusion

Islamic finance has faced several challenges in its efforts to reduce poverty and promote economic development in Muslim countries. These challenges include the limited availability of Islamic finance products and services, the lack of regulatory frameworks and infrastructure for Islamic finance, the limited adoption of Islamic finance by governments and businesses, and competition with conventional finance.

Despite these challenges, Islamic finance has had some success in reducing poverty and promoting economic development in Muslim countries, as demonstrated by the examples of the Grameen Bank, the Islamic Microfinance Network, and the Islamic Development Bank.

To improve the effectiveness of Islamic finance in reducing poverty and promoting economic development in Muslim countries, there are a few steps that can be taken. One important step is to increase the availability of Islamic finance products and services, particularly in underserved areas. This can be achieved through the development of the necessary regulatory frameworks and infrastructure to support the growth of Islamic finance.

Another step is to increase the adoption of Islamic finance by governments and businesses. This can be achieved through education and awareness-raising campaigns to promote the benefits of Islamic finance and through incentives to encourage the use of Islamic finance.

Finally, it is important to build the capacity of local institutions to effectively implement and manage Islamic finance projects. This can be achieved through training and technical assistance programs that provide the necessary skills and knowledge to local institutions.

By addressing these challenges and implementing these suggestions, Islamic finance can play a greater role in reducing poverty and promoting economic development in Muslim countries.


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ISLAMIC FINANCE & CAPITAL MARKETS

Islamic Finance Industry Still Facing Shortages of Scholars, Trained Professionals

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The Islamic finance industry has grown rapidly over the past few decades, evolving from a niche market into a global phenomenon with assets exceeding $3 trillion. Despite its remarkable growth, the industry continues to struggle with a critical issue: a shortage of qualified scholars and trained professionals. This talent gap poses a significant challenge to the sustainability and further expansion of the sector.

This article explores the reasons behind the shortage, its impact on the industry, and potential solutions to address the gap. We will also discuss the opportunities this situation presents for aspiring professionals and the steps needed to build a more robust talent pipeline in Islamic finance.

Current State of the Islamic Finance Industry

Islamic finance refers to financial activities that comply with Shariah (Islamic law), which prohibits interest (riba), excessive uncertainty (gharar), and investments in businesses considered haram (forbidden), such as alcohol and gambling. The industry encompasses various segments, including Islamic banking, Takaful (Islamic insurance), Sukuk (Islamic bonds), and Islamic funds.

The sector’s assets are expected to grow significantly, driven by the increasing demand for ethical finance and the expansion of Islamic finance markets in countries like Malaysia, Saudi Arabia, and the United Arab Emirates. However, to sustain this growth, the industry requires a steady supply of scholars and professionals who can navigate the complexities of Sharia-compliant finance.

Shortage of Qualified Scholars in Islamic Finance

One of the key challenges facing the Islamic finance industry is a shortage of qualified Shariah scholars who possess both in-depth knowledge of Islamic jurisprudence (Fiqh) and a strong understanding of modern financial practices. Here are some reasons behind this shortage:

1. Limited Number of Dual-Qualified Scholars

The field of Islamic finance requires scholars who are well-versed in both traditional Islamic law and contemporary financial systems. However, there are only a limited number of scholars who possess this dual expertise. Many traditional Islamic scholars lack formal education in finance, while finance professionals may not have a deep understanding of Islamic jurisprudence.

2. High Demand for Shariah Compliance Services

The rapid growth of the Islamic finance industry has outpaced the availability of qualified scholars. Financial institutions need Shariah scholars to review and certify the compliance of their products and services. This high demand has resulted in a small pool of scholars being stretched thin, leading to potential conflicts of interest and a heavy workload.

3. Aging Workforce of Shariah Scholars

Many of the leading Shariah scholars in Islamic finance are nearing retirement age, and there are not enough younger scholars to replace them. This generational gap could further exacerbate the shortage as the industry continues to grow.

4. Complex Regulatory and Jurisdictional Requirements

The requirements for Shariah compliance can vary significantly across different jurisdictions. Scholars need to understand the local regulatory environment and how it aligns with Shariah principles. This complexity adds to the difficulty of finding qualified scholars who can operate across multiple markets.

Shortage of Trained Professionals in Islamic Finance

Beyond the need for Shariah scholars, the Islamic finance industry also faces a shortage of trained professionals across various roles, including banking, insurance, asset management, and legal advisory. The reasons for this shortage include:

1. Limited Educational Programs

While there has been some progress in establishing academic programs and certifications in Islamic finance, the availability of specialized training remains limited. Few universities and institutions offer comprehensive courses that cover both theoretical and practical aspects of the industry.

2. Lack of Awareness and Interest

Many young professionals and students are not fully aware of the career opportunities within Islamic finance. There is often a perception that the industry is niche and offers fewer opportunities compared to conventional finance, leading to a lower level of interest among potential talent.

3. Insufficient Professional Development Opportunities

There is a lack of structured career development programs for those entering the Islamic finance field. While some institutions offer on-the-job training, few provide a clear career path or specialized training for new hires.

4. Complex Skill Requirements

Islamic finance requires professionals who understand both finance and Shariah law. Bridging this gap can be challenging, as it involves acquiring knowledge in two distinct fields. Additionally, financial institutions need professionals who can develop innovative Sharia-compliant products to meet evolving market demands.

Impact of the Talent Shortage on the Islamic Finance Industry

The shortage of scholars and trained professionals in Islamic finance has several far-reaching effects on the industry:

1. Slow Product Development

A lack of qualified Shariah scholars and experts can delay the approval process for new financial products. This not only affects the speed at which Islamic financial institutions can innovate but also limits the variety of Sharia-compliant products available in the market.

2. Inconsistent Shariah Interpretations

With a limited number of scholars handling multiple assignments, there is a risk of inconsistent Shariah rulings, which can lead to confusion and a lack of standardization in the industry. This inconsistency makes it difficult for financial institutions to operate across different jurisdictions.

3. Higher Costs for Shariah Compliance

The high demand for a small number of qualified scholars can drive up the cost of Shariah compliance services, making it more expensive for financial institutions to certify their products. This, in turn, can increase the overall cost of Islamic financial products for consumers.

4. Limited Geographic Expansion

The shortage of trained professionals also hampers the expansion of Islamic finance into new markets. Without the necessary human resources to support growth, institutions may struggle to establish a strong presence in regions with emerging Islamic finance sectors.

Strategies to Address the Talent Shortage in Islamic Finance

To overcome the shortage of scholars and trained professionals, the Islamic finance industry needs to take proactive steps to build a robust talent pipeline. Here are some strategies that could help:

1. Enhancing Educational Programs

Expanding the number of universities and institutions offering specialized courses in Islamic finance is crucial. Programs should focus on providing a comprehensive curriculum that covers both Islamic jurisprudence and modern financial practices. Partnerships with established Islamic finance institutions can also offer practical training opportunities.

2. Promoting Dual Qualifications

Encouraging professionals to pursue dual qualifications in both finance and Islamic studies can help address the skills gap. Financial institutions could offer scholarships or sponsorships for employees who wish to gain expertise in Islamic finance or Shariah law. Additionally, certification programs from institutions like AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) or INCEIF (International Centre for Education in Islamic Finance) can provide specialized training.

3. Developing Shariah Scholars Training Programs

To address the shortage of Shariah scholars, targeted training programs can be established to groom the next generation of scholars. These programs should focus on mentoring young scholars, providing them with practical exposure to Islamic finance, and equipping them with the skills to handle complex Shariah compliance issues.

4. Increasing Awareness About Islamic Finance Careers

Raising awareness about career opportunities in Islamic finance is essential for attracting young talent. Outreach programs, university partnerships, and industry conferences can help promote the benefits of working in the sector. Highlighting success stories of professionals in Islamic finance can inspire more people to consider it as a career path.

5. Leveraging Technology and Fintech

Technology can play a significant role in bridging the talent gap. Islamic fintech solutions can automate some Shariah compliance processes, reducing the reliance on a limited number of scholars. Additionally, digital learning platforms can offer accessible training programs for aspiring professionals, allowing them to gain skills remotely.

Opportunities for Aspiring Professionals

The talent shortage in Islamic finance presents a unique opportunity for aspiring professionals who are willing to bridge the gap between finance and Islamic studies. With the right skills, there are significant career opportunities in areas such as:

  • Shariah Advisory: Providing Shariah compliance services to banks, insurance companies, and asset management firms.
  • Islamic Banking: Developing and managing Shariah-compliant banking products, such as profit-sharing accounts and Sukuk.
  • Takaful (Islamic Insurance): Offering risk management solutions that comply with Islamic principles.
  • Legal Advisory: Specializing in Islamic finance law and helping institutions navigate the regulatory landscape.
  • Fintech: Creating innovative digital solutions for the Islamic finance market, including mobile banking and investment platforms.

Aspiring professionals who acquire dual qualifications in finance and Islamic studies will find themselves well-positioned to fill high-demand roles in a growing industry.

The Islamic finance industry continues to face a significant shortage of qualified scholars and trained professionals, presenting both challenges and opportunities. To sustain growth and address this talent gap, the industry must invest in education, promote dual qualifications, and leverage technology to build a more skilled workforce.

By taking proactive steps to develop the next generation of Islamic finance experts, the industry can not only overcome current challenges but also position itself for long-term success. The shortage of talent should not be viewed solely as a problem but also as an opportunity for aspiring professionals to make a meaningful impact in a dynamic and ethically driven field.


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ISLAMIC FINANCE & CAPITAL MARKETS

What is a Halal Economy?

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A halal economy is an economic system based on Islamic principles, encompassing various sectors like food, finance, tourism, and fashion that adhere to halal (permissible) standards. It emphasizes ethical, transparent practices in line with Shariah law. Globally, the Halal economy is rapidly growing and is projected to exceed $2.3 trillion, driven by the increasing demand for halal products and services among Muslim and non-Muslim consumers.

What is a Halal Economy?

A halal economy is an economic system based on Islamic principles, encompassing various sectors like food, finance, tourism, and fashion that adhere to halal (permissible) standards. It emphasizes ethical, transparent practices in line with Shariah law. The halal economy is rapidly growing globally, driven by increasing demand for halal products and services among Muslim and non-Muslim consumers.

While food is the most commonly recognized aspect, the halal economy includes finance, tourism, fashion, cosmetics, pharmaceuticals, and entertainment. It’s an ecosystem that ensures ethical practices, transparency, and moral values, offering a holistic approach to commerce that appeals not just to Muslims but to many non-Muslims as well.

Key Sectors in the Halal Economy

Halal Food and Beverages

The most prominent sector of the halal economy is food and beverages. Halal food is prepared following Islamic dietary laws. It must be free from pork, alcohol, and other prohibited substances. The meat must be slaughtered humanely and with specific prayers. The global halal food market is rapidly expanding, offering opportunities for businesses and consumers who value high-quality, ethically sourced products.

Islamic Finance

Islamic finance is another cornerstone of the halal economy, distinguished by its adherence to Shariah law. Key principles include the prohibition of interest (riba), risk-sharing, and ensuring that financial activities are tied to real assets. Common Islamic finance products include Sukuk (Islamic bonds), Takaful (Islamic insurance), and Murabaha (cost-plus financing). Islamic banking has grown exponentially in recent years, providing an ethical alternative to conventional finance for millions worldwide.

Halal Travel and Tourism

The halal travel industry caters to the specific needs of Muslim travelers, offering services like halal food, prayer facilities, and family-friendly entertainment. Halal tourism is designed to respect Islamic values, allowing Muslims to explore the world comfortably while adhering to their religious beliefs. Countries like Malaysia, Turkey, and Indonesia have developed comprehensive halal travel sectors to attract this market.

Halal Cosmetics and Pharmaceuticals

Halal cosmetics and pharmaceuticals are rapidly growing sectors of the halal economy. Products in these categories are free from haram (prohibited) ingredients like alcohol and animal derivatives not slaughtered according to Islamic guidelines. Halal certification for beauty and health products is becoming increasingly important to ensure that Muslim consumers can maintain their lifestyles without compromising their beliefs.

Modest Fashion

Modest fashion, also known as halal fashion, is designed to align with Islamic guidelines for dressing modestly. This sector has gained global attention in recent years, with brands and designers creating stylish yet modest clothing. The rise of modest fashion showcases the demand for apparel that respects cultural and religious values while staying on-trend.

The Global Growth of the Halal Economy

The halal economy is not confined to Muslim-majority countries; it is a global phenomenon. The increasing demand for halal products and services is driven by the growing Muslim population, higher awareness of halal standards, and a desire for ethical and sustainable options.

According to the State of the Global Islamic Economy Report, the global halal economy is projected to exceed trillions of dollars. Muslim consumers are looking for products that align with their values, and non-Muslim consumers are also turning to halal products for their perceived benefits, such as ethical sourcing and high quality.

Benefits of a Halal Economy
Ethical Standards and Transparency

The halal economy emphasizes ethical production, consumption, and financial practices. From humane animal treatment in halal food to profit-sharing models in Islamic finance, transparency and moral responsibility are cornerstones of the halal economic system.

Economic Opportunities

The halal economy creates opportunities for entrepreneurs and businesses worldwide. The demand for halal products has led to increased exports, new job opportunities, and the rise of innovative halal startups. Countries like Malaysia and the United Arab Emirates have become global hubs for halal certification and trade.

Social Well-being and Community Support

Since the halal economy aligns with the moral and social principles of Islam, it supports community welfare, fair trade, and ethical consumerism. Islamic finance, for example, includes the concept of Zakat (charitable giving), ensuring wealth distribution and helping those in need.

Challenges and Opportunities

While the halal economy offers tremendous growth potential, it is not without challenges. These include:

  • Standardization and Certification: The lack of uniform global halal standards can lead to confusion and hinder market growth. Efforts are being made to develop universal certification processes.
  • Consumer Awareness: Educating consumers about halal products’ benefits is crucial for expanding the market beyond Muslim communities.
  • Market Accessibility: Expanding into non-Muslim markets requires addressing misconceptions and emphasizing the ethical and high-quality aspects of halal products.

However, these challenges also present opportunities. As awareness and demand increase, businesses can innovate to provide better products and services that cater to both Muslim and non-Muslim consumers alike.

Frequently Asked Questions (FAQs)

Q: Is halal only about food?
A: No, halal extends beyond food to include finance, tourism, fashion, cosmetics, pharmaceuticals, and more.

Q: Can non-Muslims participate in the halal economy?
A: Absolutely! The halal economy is open to everyone who values ethical practices and high-quality standards.

Q: How can a product be certified halal?
A: A product can be certified halal by meeting specific Islamic guidelines and obtaining certification from recognized halal authorities.

Q: What is the difference between halal and haram?
A: Halal means permissible or lawful, while haram means prohibited or unlawful according to Islamic teachings.

The halal economy represents a holistic approach to commerce that aligns with Islamic principles while offering ethical, high-quality options for all consumers. Its impact extends across food, finance, travel, cosmetics, and fashion, fostering a growing global market. With increasing demand and awareness, the halal economy holds significant opportunities for businesses and communities alike, offering a sustainable and value-driven path to growth.


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ISLAMIC FINANCE & CAPITAL MARKETS

How Islamic Finance and Digital Identity are Advancing in Kenya and Somalia

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By Aamer Yaqub

Africa’s financial and digital landscapes are experiencing a remarkable transformation, driven by the rapid adoption of digital banking and the development of innovative market solutions such as Sharia-compliant online services. This shift is particularly evident in Kenya and Somalia, where the integration of Islamic finance principles with modern digital platforms is revolutionizing financial inclusion and modernizing the banking sector.

Kenya’s Digital Identity and Sharia-Compliant Banking Revolution

Kenya is at the forefront of integrating digital identity systems with Sharia-compliant banking services, marking a significant milestone in the country’s financial evolution. The National Integrated Identity Management System (NIIMS), also known as the Huduma Namba, is a key initiative designed to provide every Kenyan citizen with a unique digital identity. This system aims to streamline access to various services, enhance transparency, and improve financial inclusion by making it easier for citizens to interact with government and financial services.

Craft Silicon, a prominent Kenyan fintech company, is playing a crucial role in this transformation. Craft Silicon’s digital banking platforms cater specifically to the needs of Kenya’s unbanked population, enabling users to perform a wide range of financial transactions via mobile phones. This includes making payments, accessing loans, and conducting everyday transactions. The company has also developed Sharia-compliant banking products, reflecting a growing emphasis on inclusivity and accessibility within Kenya’s financial sector.

By incorporating Sharia-compliant features into its digital banking solutions, Craft Silicon addresses the needs of a diverse customer base, including those who seek to adhere to Islamic financial principles. This approach not only broadens the appeal of digital banking but also supports Kenya’s efforts to integrate digital ID systems with financial services, aiming to improve overall financial inclusion and modernize the banking infrastructure.

Somalia’s Focus on Sharia-Compliant Banking Amidst Financial Rebuilding

Somalia’s financial sector is undergoing a significant transformation as the country works to rebuild its banking system following years of instability. Central to this transformation is a strong emphasis on Sharia-compliant banking, which caters to the needs of Somalia’s predominantly Muslim population. Salaam Bank, a leading financial institution in East Africa, has partnered with Paymentology to introduce a cutting-edge financial solution: a co-branded, tokenized tap-to-pay digital companion card, alongside a physical card for users of its Waafi mobile money app.

This innovative solution represents a significant advancement in Somalia’s efforts to enhance financial inclusion through Sharia-compliant products. The integration of mobile banking technology has been particularly impactful, enabling users to access banking services through their mobile devices. This is crucial in a country where traditional banking infrastructure is limited, and mobile technology offers a viable alternative for reaching underserved populations.

The introduction of Sharia-compliant financial products by Salaam Bank aligns with Somalia’s broader goal of rebuilding its financial system while adhering to Islamic principles. By offering Sharia-compliant solutions, Somalia is not only addressing the needs of its local population but also positioning itself as a progressive player in the region’s financial sector.

Global Impact of Sharia Compliance on Digital Finance

The influence of Sharia-compliant banking extends beyond regional innovations, with global technology companies recognizing the importance of aligning their solutions with Islamic finance principles. IOTA, a leading blockchain technology company, has recently achieved Sharia-compliant certification, underscoring its commitment to adhering to Islamic finance principles. This certification enhances IOTA’s credibility and appeal in Muslim-majority countries, reflecting a growing recognition of the need for Sharia compliance in the global financial technology landscape.

Dominik Schiener, co-founder and chair of the IOTA Foundation, highlights the significance of Sharia compliance for the IOTA Ecosystem DLT Foundation. “Shari’a compliance significantly benefits the IOTA Ecosystem DLT Foundation by enhancing its credibility and ethical standards, which are essential for promoting IOTA technology and the IOTA token within Muslim communities,” Schiener notes. This certification supports the Foundation’s efforts to foster blockchain projects in the Middle East and other regions, illustrating the broader impact of Sharia compliance on global technology and finance.

The Future of Sharia-Compliant Banking and Digital Identity

The advancements in Sharia-compliant banking and digital identity systems in Kenya and Somalia represent a pivotal moment in the evolution of financial services across Africa. Kenya’s integration of digital identity with Sharia-compliant banking reflects a strategic approach to enhancing financial services and accessibility. The National Integrated Identity Management System aims to simplify interactions with financial services and government agencies, while Craft Silicon’s innovative banking solutions demonstrate a commitment to inclusivity and modernization.

In Somalia, the focus on Sharia-compliant banking products highlights the country’s dedication to rebuilding its financial sector by Islamic principles. Salaam Bank’s introduction of a digital companion card and mobile banking services signifies a significant step toward improving financial access and inclusion in a region with limited traditional banking infrastructure.

Globally, the recognition of Sharia compliance by technology companies like IOTA underscores the growing importance of aligning financial and technological solutions with Islamic finance principles. As these trends continue to develop, they will play a crucial role in shaping the future of banking and financial services, offering new opportunities for individuals and businesses around the world. The convergence of digital innovation and Sharia compliance is paving the way for a more inclusive and modern financial landscape, creating pathways for growth and development in diverse markets.


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