What does the future of the Islamic economy look like?

Summary

This video covers the growth and challenges of the Islamic economy, focusing on Dubai's ambition to become a global hub. Key highlights include insights into Islamic banking, fintech disruption, and the significance of Sharia-compliant bonds (Sukuk). Dubai's Islamic Economy Development Center CEO discusses competition from other cities like Malaysia and London. The video also explores the role of millennials and startups in shaping the future of Islamic finance, with a focus on fintech innovations in the UK and their impact on real estate and traditional finance.

Takeaways

• 🌐 Dubai aims to become a global hub for the Islamic economy.
• 📈 Islamic banking is forecasted to be worth $3 trillion by 2021, with Malaysia, Saudi Arabia, and the UAE as leading markets.
• 📊 Islamic finance has less than a 1% share of the global banking industry.
• 🚀 Dubai was ranked third globally for attracting listings of Islamic bonds in 2013, but is now number one.
• 📉 Growth in the Islamic banking industry has slowed in recent years compared to double-digit growth until 2014.
• 🏛️ The IMF will roll out regulations and guidelines for the growing Islamic banking industry.
• 💼 Islamic bonds, or sukuk, currently make up less than 1% of the world's bond market but offer less volatility and often higher returns.
• 💹 Dubai's Islamic economy contributed around 8.3% to its GDP in 2016, with expectations to grow higher when more sectors are included.
• 👥 Muslim Millennials are important to the Islamic economy strategy, with initiatives to support entrepreneurs and SMEs.
• 🇬🇧 London is embracing FinTech to maintain its position as a financial hub, with potential to disrupt the Islamic finance sector.

Q & A

What are the main goals of the Dubai Islamic Economy Development Center?

The Dubai Islamic Economy Development Center aims to make Dubai a global hub for the Islamic economy. It focuses on boosting responsible investment in the industry, promoting halal entrepreneurship and innovation, and expanding key sectors like Islamic finance, halal travel, and modest fashion.

What is Islamic banking and how does it differ from conventional banking?

Islamic banking follows Sharia guidelines, which prohibit interest on loans. Instead, it focuses on profit-sharing arrangements. The industry has grown significantly over the past 50 years, reaching new levels of maturity.

Which countries are leading the global Islamic banking industry?

Countries like Malaysia, Saudi Arabia, and the UAE are leading the Islamic banking industry. Despite its rapid growth, Islamic finance remains relatively small compared to the global banking sector, holding less than 1% of the market share.

What challenges does the Islamic finance industry face in terms of regulation?

The Islamic finance industry lacks standardization, as many institutions follow their own rules. Experts suggest that introducing industry-wide regulations could boost investor confidence and encourage more players to enter the market.

What is the significance of Sukuk (Islamic bonds) in the global bond market?

Sukuk currently makes up less than 1% of the global bond market but is considered less volatile than conventional bonds. Sukuk often provides higher returns, and demand for corporate and sovereign issuances is expected to remain strong.

What role does the Islamic economy play in Dubai's post-oil economic vision?

The Islamic economy is a key pillar in Dubai's post-oil economic strategy. Sectors like Islamic finance, halal products, and halal travel contribute to the emirate's GDP, and the goal is to further develop these sectors as part of Dubai's diversification efforts.

How important are Muslim Millennials to the growth of the Islamic economy?

Muslim Millennials are crucial to the growth of the Islamic economy, particularly in driving innovation. The Dubai Islamic Economy Development Center has launched initiatives, such as supporting FinTech accelerators, to engage young entrepreneurs in contributing to the industry.

What impact has FinTech had on the Islamic finance sector?

FinTech has been disrupting the Islamic finance sector by introducing new, Sharia-compliant financial products and services. Startups like Yielders, which focuses on Sharia-based crowdfunding for property investments, are examples of how FinTech is shaking up traditional Islamic finance.

How does the UK fit into the global Islamic finance industry?

The UK plays a significant role in the Islamic finance sector, being the first Western nation to issue a sovereign Sukuk bond. The country is also leveraging its position as a global financial center to support the growth of Islamic FinTech.

What are the concerns about the UK losing ground in the Islamic FinTech space?

There are concerns that the UK might lose ground to competitors like Dubai and Bahrain in the Islamic FinTech space. Although the UK is strong in terms of talent and regulation, it has been lacking in capital, which is necessary to support the growth of Islamic FinTech.

Outlines

00:00

🎙️ Introduction to Islamic Economy & Banking

Rebecca McLaughlin introduces the episode with a focus on Dubai's ambitions to become a global hub for the Islamic economy. The segment teases interviews with key figures, including the CEO of Dubai's Islamic Economy Development Center, and an exploration of how fintech in London may disrupt the Islamic finance sector. The introduction also sets up a discussion on the origins and growth of Islamic banking in the Middle East, with Selim SAE providing an overview of its rise and key markets like Malaysia, Saudi Arabia, and the UAE. The Islamic banking industry is forecast to reach $3 trillion by 2021, despite having a relatively small global market share of less than 1%.

05:02

💼 Deep Dive into Islamic Banking's Growth & Challenges

Islamic banking, rooted in principles such as profit-sharing rather than charging interest, has grown substantially over the last 50 years. The global Islamic banking sector, which reached double-digit growth until 2014, has slowed but still holds vast potential. Experts argue for more industry-wide regulations to boost investor confidence and standardization. The IMF plans to release new guidelines to help the growing industry. Sukuk (Islamic bonds) are gaining traction as an investment option, offering less volatility and, in some cases, higher returns than conventional bonds. As investor appetite for Islamic finance grows, 2018 is expected to see further expansion, particularly in sukuk issuances.

10:03

🏙️ Dubai’s Ambition: A Global Islamic Economy Hub

Dubai has established itself as a key player in the Islamic economy, aiming to become a global leader in sectors like Islamic finance, halal entrepreneurship, and responsible investment. The Dubai Islamic Economy Development Center (DIEDC) spearheads this effort, and CEO Abdullah Al Awar discusses Dubai's progress in becoming a global hub for Islamic finance. The emirate is capitalizing on its strategic location, connecting over 42 countries, and is leading in sukuk listings. Al Awar highlights the contribution of sectors like Islamic finance, halal trade, and other industries to Dubai's GDP, forecasting further growth in the years to come.

🚀 Empowering Muslim Millennials in Dubai's Islamic Economy

Abdullah Al Awar emphasizes the importance of Muslim millennials in Dubai's Islamic economy strategy, noting their role in driving innovation and entrepreneurship. Initiatives such as fintech accelerators and technology-focused programs are designed to support young entrepreneurs in contributing to the economy. Islamic finance and fintech are key growth areas, with Dubai providing platforms for these millennials to thrive. Al Awar also mentions that non-Muslims are contributing to the growth of Islamic financial products, such as sukuk, showing the global and inclusive nature of the market.

💡 Islamic Fintech: The UK as a Fintech Powerhouse

The UK has long been a global financial center and is now embracing fintech innovation to disrupt the Islamic finance sector. Startups like Yielders are using Sharia-compliant crowdfunding to shake up the property investment market in the UK. The rise of fintech, driven by millennial demand for digital banking solutions, is reshaping Islamic finance. However, experts note that the UK needs to attract more capital to keep pace with its competitors in the Middle East. Despite this, the UK's regulatory environment and talent pool position it well for future growth, though Brexit may influence where fintech companies choose to scale.

🏦 Challenges and Opportunities for UK’s Islamic Fintech

Although the UK has strong talent and regulatory support for fintech, it lags in capital investment compared to regions like Dubai and Bahrain. Experts believe British banks have been slow to capitalize on the growing Islamic fintech sector, though there is potential for growth as conventional banks begin to support fintech initiatives. The establishment of the UK's Islamic Fintech Panel aims to protect the UK's competitive advantage in this field. Brexit, however, could push Islamic fintech companies to scale within the EU rather than the UK, although fintech’s growth in the UK is expected to remain strong.

🌍 The Future of Islamic Finance & Fintech

The episode wraps up with a look at the lasting impact of fintech on the Islamic finance sector. Despite uncertainties like Brexit, the UK’s strong foundation in fintech innovation and Sharia-compliant finance ensures continued growth. The segment also touches on notable social media posts, including a photo from Dubai's skyline and a study session in Malaysia, further reflecting the global reach of Islamic finance. With increasing demand for Islamic financial products and a growing fintech ecosystem, Islamic finance is positioned for sustained growth across the UK and Middle East.

Keywords

💡Islamic Banking

Islamic banking refers to a financial system that operates in accordance with Islamic law (Shariah), which prohibits interest (riba) and encourages profit-sharing. In the video, it's mentioned as a rapidly growing sector that has seen maturity in the last 50 years, particularly in regions like Malaysia, Saudi Arabia, and the UAE. Islamic banking is crucial to the theme of how Dubai aims to become a global hub for the Islamic economy.

💡Sharia Compliance

Sharia compliance means adhering to Islamic law in business, finance, and lifestyle choices. In the context of finance, it prohibits earning money from interest or speculative practices. The video discusses how financial products like sukuk (Islamic bonds) and fintech innovations must be Sharia-compliant to meet market demands and foster trust in the Islamic finance sector.

💡Sukuk

Sukuk are Islamic financial certificates similar to bonds in conventional finance, but they comply with Shariah by avoiding interest payments. The video highlights that sukuk provide less volatility and potentially higher returns compared to conventional bonds. They have a significant role in Dubai’s strategy to strengthen its position in Islamic finance, with large issuances seen in recent years.

💡Dubai Islamic Economy Development Center

This center is an organization aimed at making Dubai a global hub for the Islamic economy. The CEO, Abdullah Al Awar, discusses how initiatives such as the listing of sukuk have propelled Dubai to the number one position in global Islamic finance markets. The center plays a pivotal role in Dubai’s post-oil economic vision, fostering growth in sectors like halal products and responsible investment.

💡Halal Economy

The halal economy encompasses industries that follow Islamic law, including halal food, finance, fashion, media, and travel. Dubai aims to become a global leader in the halal economy, and the video discusses the importance of innovation and entrepreneurship in sectors like halal products, which are forecasted to grow significantly in the coming years.

💡FinTech

Financial Technology (FinTech) refers to innovative technology that improves and automates financial services. The video explores how FinTech is disrupting Islamic finance by offering new, Sharia-compliant solutions, such as Sharia-based crowdfunding. London's FinTech sector is described as a leading hub for innovation in Islamic finance, which could provide new growth opportunities.

💡Crowdfunding

Crowdfunding is a way of raising money from a large number of people, typically via online platforms. In the video, companies like Yielders are using Sharia-based crowdfunding to disrupt traditional property investment markets. This is part of the broader trend of FinTech innovations reshaping the Islamic finance industry.

💡Muslim Millennials

Muslim Millennials are a key demographic driving demand for modern, tech-based financial solutions. The video emphasizes their importance in the Islamic economy, with many seeking alternative finance models that align with their values, such as Islamic FinTech. Dubai is actively fostering startups and initiatives aimed at engaging this group.

💡Sovereign Sukuk

Sovereign sukuk are Islamic bonds issued by governments to raise funds in compliance with Sharia law. The video mentions that the UK was the first Western nation to issue sovereign sukuk, highlighting its role in Islamic finance. These bonds are seen as a tool for raising investment capital without conflicting with Islamic prohibitions on interest.

💡Brexit

Brexit refers to the United Kingdom’s exit from the European Union. The video discusses how Brexit could impact the UK’s position in Islamic FinTech. Although some Islamic fintech companies may establish EU-based operations, experts believe that the UK will remain a major hub for Islamic finance due to its regulatory environment and talent pool.

Highlights

Dubai aims to become a global hub for the Islamic economy, with major initiatives led by the Dubai Islamic Economy Development Center.

Islamic banking, following religious guidelines of profit-sharing instead of interest, is projected to be worth $3 trillion by 2021.

The Islamic banking sector, although growing, only has a global market share of less than 1%.

Growth in the Islamic finance sector has slowed since 2014, but standardization and regulation could boost investor confidence.

Sukuk (Islamic bonds) offer less volatility than conventional bonds and often provide higher returns, especially in emerging markets.

The Islamic economy's food and lifestyle sectors are expected to reach $3 trillion by 2022, highlighting potential growth areas.

Dubai is ranked number one globally for attracting Islamic bond listings, surpassing competition from other hubs like Malaysia and London.

Muslim Millennials are seen as key drivers for the growth of the Islamic economy, contributing through entrepreneurship and innovation.

FinTech is rapidly disrupting the Islamic finance sector, with companies like Yielders using Sharia-based crowdfunding for property investment in the UK.

Millennials are shifting away from traditional banking models, favoring online and technology-driven solutions for Islamic finance.

The UK has been a leader in Islamic finance, being the first Western country to issue a sovereign Sukuk bond and funding major projects like The Shard.

London remains a global financial center, embracing FinTech and competing with Middle Eastern hubs in the Islamic finance space.

UK experts are working to address the gap in capital for Islamic FinTech, although the country excels in talent and regulation.

Despite potential Brexit challenges, the Islamic FinTech sector is expected to maintain its strong foundations in the UK.

The IMF is expected to release new regulations and guidelines to support the growth of the Islamic banking sector in 60+ countries.

Transcripts

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hey everyone I'm Rebecca McLaughlin

drainin this week we have an exclusive

interview with the CEO of the dubai

islamic economy development center now

dubai has big ambitions to become a

global hub for the islamic economy we'll

find out if they're on track and see

what the competition looks like if there

wasn't any competition I don't think

Dubai would have you know achieved where

we are later in the show we'll find out

how fin tech companies or financial

technology firms in London have the

potential to disrupt the Islamic finance

sector

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but first let's put Islamic banking in

the Middle East under the microscope to

discover when it began where it's

growing the fastest and what kind of

return you could expect to see on your

investment Selim SAE has more Islamic

banking is arguably as old as the

religion itself and in the past 50 years

it's reached new levels of maturity the

banking system that follows Islamic

guidelines including the sharing of

profit instead of charging interest on

loans is forecast to be worth 3 trillion

dollars by 2021 with countries including

Malaysia Saudi Arabia and the UAE

leading the market despite being one of

the fastest growing banking sectors

Islamic finance is relatively small

compared to the global industry

estimated to have less than a 1% share

according to Emirates NBD Bank the

Islamic banking industry which saw

double-digit growth annually until 2014

has seen the pace of things slowed a

little in recent years one way to

encourage new players to enter the

market and boost investor confidence and

Sharia compliant financial products

would be to introduce industry-wide

regulations say some experts if you

allow individual institutions to go by

their own book of rules you will have a

hot watch and it would be very difficult

to painting up that mess sooner or later

you will find more standardization

[Music]

development of new and innovative

products

in the meantime given that Islamic

banking is offered in more than 60

countries the IMF will roll out

regulations and guidelines by early next

year for the growing industry some

analysts believe that responsible

Islamic banking is easily done through

investing in school or Islamic bonds

which prohibits the generation of money

from money

Anita Yadav of Emirates NBD says that

suku which currently make up less than

1% of the world's bond market provide

less volatility than conventional bonds

and often give a higher return emerging

market u.s. dollar bonds here today to

return has actually been a loss of 3.8

percent whereas if we consolidate all

emerging markets o cook the return on

them has been a loss of only 2.0 lines

so it's less loss the Bank forecasts

that investor appetite for corporate and

sovereign Islamic bonds will remain

strong and more issuances will be seen

in the next six to 12 months

also when corporates are doing well they

tend to have need for investment and

more need for funding that may see more

saqqaq issuance so we are expecting that

maybe 2018 Islamic finance will grow at

somewhere between 5 to you know a very

high single single-digit and with record

high levels of issuances seen in the

Arabian Gulf region in 2017 whether that

70 billion dollar figure can be topped

this year remains to be seen

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an initiative called Dubai capital of

Islamic economy was established in the

UAE five years ago since then its

development and the contribution of key

Islamic sectors to devise GDP has been

very closely monitored the growth and

development of the Islamic economy is a

key pillar in Dubai's post-oil

economic vision the emirate has its

sights set on becoming a global hub for

the Islamic economy by boosting what it

calls responsible investment in the

industry as well as halau

entrepreneurship and innovation and the

pickings could be rich with spending in

the Islamic economy food and lifestyle

sector alone forecast to reach three

trillion dollars by 2022 other sectors

expected to be key growth drivers for

Dubai are Islamic finance halal travel

modest fashion and even halal media and

pharmaceuticals leading the charge on

the Emirates initiatives to harness

their potential is the Dubai Islamic

economy development center its CEO

Abdullah Al awara sat down with inspired

to explain the challenges and the

opportunities that lay ahead your

excellency a very warm welcome to

inspire Middle East

thank you it's good to be here let me

start by asking you what are the

priorities of the center this year the

vision is there the ambition is there

but are you on track we have already

launched a series of initiatives 36 to

be very specific for example the

listings of Islamic bonds also cook when

the initiative was launched back in 2013

Dubai was ranked third globally in terms

of the leading markets to attract

listings today Dubai is number one but

there is competition out there with

other countries and cities wanting to be

that hub for the Islamic economy not

least Malaysia and even London

so isn't consolidation a smart idea

there wasn't any competition I don't

think Dubai would have you know achieved

where we are with respect to other

centers for the Islamic economy I do

believe Dubai

an advantage and it's in the middle of a

very dense economical region I'm not

referring only to the GCC or the Middle

East I'm referring to around 42

countries including the Middle East

North Africa South Asia in 2016 it was

recorded that the Islamic economy

contributed around 8.3 percent to

Dubai's GDP what are the latest figures

and what are the forecasts of the next

year we didn't even measure all of the

sectors yet but from three key ones like

the Islamic finance the Halal industry

and trade with regards to halal products

that contributes only 8.3 percent so if

we include the other sectors which we

will in the next year's studies that

figure itself I'm sure will be higher

than 8.3 percent how important are

Muslim Millennials to this overall

strategy quite important we are actually

enabling those Millennials and

entrepreneurs and you know the various

SMEs to contribute to the to the economy

by their ideas the technologies this is

why some of our initiatives are actually

directly geared towards them we have the

FinTech you know sector for example our

efforts in supporting an accelerator

that attracts these young entrepreneurs

and provides them an ideal platform for

them to suggest you know technologies

and we link them to the community

whether it's the Islamic finance

community or the broader Islamic economy

community of that investment community

that you speak of who are they are they

exclusively Muslims consumers globally

in 2016 have spent over 2 trillion u.s.

dollars on products that are considered

Shariah compliant and that expenditure

came from Muslims as well as non-muslims

similarly Islamic bonds you know usually

are raised or issued by by institution

there's always government's to raise

financing for products a lot of the

Islamic bonds were issued by non-muslim

you know government says what abdullah

it's been a pleasure to speak with you

thank you for your time the pleasure was

mine

according to a standard & poor's report

the global Islamic finance industry is

set to encounter a relatively slow

growth over the next couple of years

FinTech however could provide growth

opportunities

Damon ambling traveled to London to meet

tech innovators shaking up the industry

London's long been a global financial

centre now it's embracing new

technologies to seal his place as a

leading Fidan tech hub disrupting the

Islamic finance sector fertilizing new

startups spawning new Sharia compliant

products in what is a rapidly growing

sector 27 year-old Zhi Shan who pal

runs one of those startups this company

yielders is shaking out the property

investment markets in the UK through

Sharia based crowdfunding there is a

seismic shift at the moment away from

traditional finance you know especially

with the Millennials growing up and not

needing traditional finance or or not

feeling the impact as as the previous

generations could have the disruption of

FinTech has really allowed for people in

the UK to be involved in in real estate

as well as the Sharia element of what we

do the retail element of Islamic finance

and Sharia Finance in particular has

been has been left behind and that's

really an element of the market that

we're addressing its people like 22

year-old Joseph who are not interested

in traditional banks constantly craving

new technology actually I like to do it

all online I guess yeah it's better to

do you know I don't like going to banks

and things like that I actually do it on

my phone so much much easier Islamic

finance is lifeblood of UK

infrastructure funding iconic projects

like London shard skyscraper prison was

the first Western nation to issue a

sovereign suit coop bond the UK

treasurer is behind the Islamic FinTech

Revolution

it recognizes its potential but industry

experts say Britain still has work to do

is to keep up with this Middle East

competitors the FinTech sector is

strongly built on three main pillars

capital talent and regulation and where

we are strong in the UK zone talent and

regulation we've we've been underweight

on capital for a long time and that's

that's slowly changing and that's

predominate enging of conventional

FinTech sector because banks are

starting to participate and support

clean tech businesses that are growing

in partner with them and from them in

the Islamic sector banks are really yet

to really catch on to the opportunity

although that's beginning to start that

was our aspiration in setting up the

UK's I

in tech panel in that we felt that there

was the need for network within the

Islamic finance and fin tech space and

really to help protect the UK against

losing ground to other jurisdictions

such as Dubai Bahrain and GCC and what

about brexit what impact could that have

on the growth of FinTech in the Islamic

sector here in the UK much like the

conventional FinTech sector most Islamic

fintechs will probably set up some

jurisdictional presence in the EU we

don't think that will have a huge impact

the the real question is about where do

those companies then tend to scale do

they scale within the UK which is their

their home base or do they look to scale

within the EU whatever happens with

brexit it seems fintax here to stay

enjoying firm foundations in Britain's

Islamic finance sector well that's a

wrap for this week and don't forget you

can catch all of our episodes online at

Geary news comm before I leave you

here's what caught the attention of the

inspire team on social media UAE based

property broken Matt from the UK

uploaded this pic against Dubai's

commercial skyline with a caption happy

people sell and Irfan from Malaysia

instagrammed this shot of him swatting

up on Sharia compliance at the Islamic

banking finance Institute in Malaysia

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