Islamic financing has now become a critical component of the Middle East and North African (MENA) countries’ economic plans. It’s also becoming more important in the region’s and individual countries’ financial landscapes. As a developing business, it meets people’s financial necessities while remaining true to their social and religious ideals. Despite this reality, there is little systematic and consistent research of Islamic banks’ asset and liability structures in the region and across specific nations in the literature. Even little is known about the factors that contribute to the growth of Islamic banking.
The Islamic banking sector has evolved in Middle east in recent years, it has as well as expanded in terms of financing, assets, liabilities, and funding arrangements in the region and across nations.
According to an industry analyst, Islamic banking is one of the fastest-growing financial industries, with total assets exceeding $2 trillion and predicted to reach $3.8 trillion by the year 2023.
According to a sector expert, demand for Islamic banking is rapidly increasing in the Middle East and globally, with the sector expected to reach $3.8 trillion by 2023, driven by a growing shift in customers’ preference for social responsibility as a key motivation for using banking and financial sector products and services.
Stamenkovic to Arabian Business, Despite accounting for a modest percentage of worldwide finance, Islamic banking is one of the fastest-growing financial industries, with total assets exceeding $2 trillion. According to Miljan Stamenkovic, general manager MENA at Mambu, prominent banking, and financial sector technology platform, this amount is predicted to reach $3.8 trillion by 2023, indicating a clear direction of trajectory for the market.
Islamic finance has several key ideals in common with ESG (environmental, social, and governance) and ethical banking, which could help it gain traction in the sustainable finance market. We’re [now] seeing a boom in demand for Islamic banking, with social responsibility becoming a key motivator in the products and services people use, Stamenkovic said.
Sectors such as Islamic healthcare, fashion, cosmetics, and others, according to Stamenkovic, are expected to grow at unprecedented rates, bolstering the market’s growth storey and, in turn, Islamic banking. However, the Mambu top executive warned Islamic banking and financial sector organizations in the Middle East that unless they accelerate their embrace of technology and digitalization in their operations, they risk being left behind in the region’s and global growth pace
Traditional Islamic banks’ sustainability, like other areas of banking, will be dependent on agility, digital adoption, and the creation of frictionless customer experiences, he said.
Open banking and collaborating in a “partner ecosystem,” according to Stamenkovic, may also assist giant financial institutions (FIs) stay relevant by providing new product offers and digitally focused features.
Recognizing the opportunity, Islamic banks are beginning to see how technological
advancements will enable them to reach underserved communities around the world, offering access to affordable, digital financial services. We’ve already seen this with the rise of neo banks in general. Disruptors agitate the market and force incumbent players to accelerate their own transformation in order to compete, as is often
the case with innovation,” said Mambu’s senior executive. He works with Islamic banks and financial institutions in the UAE, Saudi Arabia, and the wider Middle East region.
Globally, there are 1.9 billion Muslims, according to the World Population Review. This creates a clear addressable market for Islamic banking services, with the potential to expand the industry’s reach to every corner of the globe, Stamenkovic told Arabian Business.
Islamic finance has risen from a small beginning to have a significant impact on banking, especially in the Middle East and the Far East. Its Sharia principles promote cooperation between supplier and client, which is especially beneficial to small businesses in developing countries. Regulatory compliance, reputation and brand management, and skills scarcity are all challenges. Delivering products and services based on a thorough understanding of Islamic finance concepts can help Western financial and other firms.