What does the future of the Islamic economy look like?
Summary
TLDRThis 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
- π Dubai aims to become a global hub for the Islamic economy.
- π Islamic banking is forecasted to be worth $3 trillion by 2021, with Malaysia, Saudi Arabia, and the UAE as leading markets.
- π Islamic finance has less than a 1% share of the global banking industry.
- π Dubai was ranked third globally for attracting listings of Islamic bonds in 2013, but is now number one.
- π Growth in the Islamic banking industry has slowed in recent years compared to double-digit growth until 2014.
- ποΈ The IMF will roll out regulations and guidelines for the growing Islamic banking industry.
- πΌ Islamic bonds, or sukuk, currently make up less than 1% of the world's bond market but offer less volatility and often higher returns.
- πΉ Dubai's Islamic economy contributed around 8.3% to its GDP in 2016, with expectations to grow higher when more sectors are included.
- π₯ Muslim Millennials are important to the Islamic economy strategy, with initiatives to support entrepreneurs and SMEs.
- π¬π§ 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
ποΈ 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%.
πΌ 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.
ποΈ Dubaiβs 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.
π 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.
π‘ 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.
π¦ Challenges and Opportunities for UKβs 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 fintechβs growth in the UK is expected to remain strong.
π 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 UKβs 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.
Mindmap
Keywords
π‘Islamic Banking
π‘Sharia Compliance
π‘Sukuk
π‘Dubai Islamic Economy Development Center
π‘Halal Economy
π‘FinTech
π‘Crowdfunding
π‘Muslim Millennials
π‘Sovereign Sukuk
π‘Brexit
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
[Music]
[Music]
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
[Music]
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
[Music]
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
[Music]
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