Here are some of the hot topics in Islamic finance nowadays ¹ ²:
- Sustainable Development: Islamic finance offers benefits for economic growth, reducing poverty, and fostering shared prosperity. It can significantly contribute to economic development, given its direct link to physical assets and the real economy.
- Financial Inclusion: Islamic finance helps promote financial sector development and broadens financial inclusion. By expanding the range and reach of financial products, Islamic finance could help improve financial access and foster the inclusion of those deprived of financial services.
- Financial Stability: It helps strengthen financial stability. As the 2008 global financial crisis ravaged financial systems around the world, Islamic financial institutions were relatively untouched, protected by their fundamental operating principles of risk-sharing and the avoidance of leverage and speculative financial products.
- Public Sector Support: The International Islamic Trade Finance Corporation (ITFC) acted as a vital source of pandemic relief for many countries last year, and as governments look to gear their economies towards recovery, the development finance institution has said it will provide hundreds of millions more in Islamic trade finance support.
- Digitisation Efforts: According to the ICIEC, even before the COVID-19 pandemic, Islamic banks had been trying to “catch up” with conventional banking counterparts by stepping up investment in trade digitisation to reduce operating expenses, boost revenue and automate internal processes.
Here are some of the hot topics in Islamic finance and finance more broadly in 2024:
**Islamic Finance:**
- Growth of Islamic banking and fintech - Islamic financial institutions and products have continued to see strong growth, particularly in regions like the Middle East and Southeast Asia. There is also increasing adoption of Islamic fintech solutions.
- Sustainability and green Islamic finance - There is rising interest in developing Shariah-compliant sustainable and green financial products to fund environmentally-friendly projects.
- Blockchain and cryptocurrencies - Some Islamic finance institutions are exploring the use of blockchain technology and even issuing their own digital currencies that comply with Islamic principles.
- Harmonization of regulations - There are ongoing efforts to harmonize Islamic finance regulations and standards across different jurisdictions to facilitate cross-border transactions.
**General Finance:**
- Artificial intelligence and machine learning - The use of AI and ML is transforming various aspects of finance, from risk management to portfolio optimization and trading.
- Fintech and digital transformation - The rapid digitization of financial services continues, with growing adoption of mobile apps, digital wallets, peer-to-peer lending, and other fintech solutions.
- Climate finance and ESG investing - Investors are increasingly considering environmental, social, and governance (ESG) factors in their investment decisions, driving growth in green finance and sustainable investing.
- Crypto assets and decentralized finance (DeFi) - Cryptocurrencies, stablecoins, and DeFi applications are continuing to gain traction, though regulators are working to establish appropriate guardrails.
Sustainability and Ethical Investing: Islamic finance principles align with sustainability and ethical investing, making it increasingly attractive to investors seeking socially responsible opportunities. Green sukuk (Islamic bonds) and ethical funds are gaining traction.
Islamic Fintech: This niche within fintech focuses on developing Sharia-compliant financial technology solutions, catering specifically to the Islamic finance market. This includes Islamic robo-advisors, peer-to-peer lending platforms, and blockchain-based solutions.
Regulatory Frameworks: Regulatory bodies in Islamic finance jurisdictions are continuously evolving to adapt to changing market dynamics and ensure compliance with Sharia principles. Updates in regulations governing Islamic banking, insurance, and capital markets are closely monitored.
Islamic Banking Expansion: Islamic banking is expanding beyond traditional markets in the Middle East and Southeast Asia, with increasing interest from regions like Africa, Europe, and the Americas. This expansion presents opportunities for growth and diversification within the industry.
Digital Transformation: Islamic financial institutions are undergoing digital transformation to enhance customer experience, streamline operations, and improve efficiency. This includes digital onboarding, mobile banking, and AI-driven services tailored to Sharia principles.
I think, There are many important topics in the field of Islamic finance recently, the most important of which are gouvernance and Islamic finance
Financial technology and Islamic finance
Islamic finance in the fourth industrial revolution