Fintech, Digital Currency and the Future of Islamic Finance: Strategic, Regulatory and Adoption Issues in the Gulf Cooperation Council

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 Fintech Digital Currency And The Future Of Islamic Finance Pdf
  • Book Author:
Nafis AlamSyed Nazim Ali
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  • Cooperation Council (GCC) 1
  • Nafis Alam and Syed Nazim Ali
  • A Critical Analysis of Bitcoin from an Islamic Legal Perspective 9
  • Farrukh Habib
  • Combining Islamic Equity Portfolios and Digital Currencies: Evidence from Portfolio Diversification 31
  • Abdelkader O. El Alaoui, Amina Dchieche, and Mehmet Asutay
  • The Potential of Smart Contracts for Murabahah Home Financing: Toward an Integrated Model 49
  • Mohamed Cherif El Amri, Mustafa Omar Mohammed, and Ruslan Sabirzyanov
  • The Application of Fintech in Microtakaful as a Means of Digital Financial Inclusion: Insights from the GCC 77
  • Muhammad Ashfaq and Najeeb Zada
  • Contents
  • viii Contents
  • 6 Gharar-Free ReBittance: Powered by Blockchain 107
  • Lokesh Gupta
  • 7 Regulatory Issues in Cryptocurrency Usage 127
  • Abdolhossein Zameni and Nafis Alam
  • 8 Beyond the Jurisprudential Quagmire: Perspectives
  • on the Application of Digital Currencies and Blockchain
  • Technology in Islamic Economics and Finance 147
  • Evren Tok
  • 9 Does FinTech Revolution Lead to the Disintermediation
  • of Banks? A Study into Islamic Bank Income 169
  • Ruhaini Muda, Mohd Saifulizwan Mohd Lateff, Roshayani
  • Arshad, Arif Azhan Rashdan, Ibrahim Abiodun Oladapo,
  • and Jaizah Othman
  • 10 Utilizing Blockchain Technology for Post-Trade
  • Securities Settlement: A Framework for Islamic Capital
  • Markets in the GCC Region 187
  • Leisan Safina and Umar A. Oseni
  • 11 Any Luck with Bitcoin in Saudi Arabia? 209
  • Umara Noreen, Zaheer Ahmad, Ohoud Saud Mohammed
  • Alfirm, and Nouf Ahmad Hamad Alhomoudi
  • 12 Strategic Assessment of Islamic Fintech in
  • GCC Countries 223
  • Tariq Gulrez

Introduction: FinTech and Islamic Finance in the Gulf Cooperation Council (GCC)


Technology is changing the landscape of the financial sector by rapid changes in the way customers interact with financial service providers. Financial tasks once handled by humans across banking branches are now being completely transformed by technological innovation.

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Financial startups with innovative financial products and services are posing a threat to incumbent financial services institutions (FSIs) including Islamic finan- cial institutions (IFIs). The business models of these startups which work on data-driven models and require very little capital and fixed assets are aiding them to disrupt traditional financial institutions and gain market share quickly.

FinTech is a relatively recent term, and there is no specific definition for FinTech yet, but the online version of the Oxford dictionary defines FinTech as “computer programs and other technology used to support or enable banking and financial services”. FinTech comprises of two words, Finance and Technology. In general, FinTech is the term assigned to financial service companies whose products or services are fabricated on technology, much resulting in highly innovative, disruptive and pioneer- ing services. FinTech firms are trying to shift the finance industry’s activi- ties from physical premises to cloud-based services to make efficient financial services accessible and available to everyone. Many existing finan- cial institutions are implementing FinTech solutions to improve and develop their services, as well as gaining an improved competitive stance. Another comprehensive definition for FinTech would be “FinTech is the new applications, processes, products, or business models in the financial services industry, composed of one or more complementary financial ser- vices and provided as an end-to-end process via the Internet” (Sanicola, 2017). These financial products and services could be categorized as lend- ing, personal finance, retail and institutional investments, equity financing, consumer banking, and several others.

Traditional banks and financial institutions are getting disrupted and transformed by the emergence of FinTech startups (Alam et al. 2019). For instance, basic financial activities such as payment and remittance are get- ting felicitated by the advent of mobile apps that can facilitate financial transactions at almost negligible service charges giving traditional FIs run for their money. Fintech sector mostly is dominated by start-ups and financial accelerators who are emerging or transforming new technologies to change the way financial markets traditionally operate around the globe.

In the GCC nations are well-positioned to adopt FinTech in their financial ser- vices landscape as noted by S&P Global Ratings report (S&P global Ratings, 2019). The report noted that customer preference for digital banking, access to capital and public policy reforms are driving the growth of FinTech in GCC states.

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FinTech ventures in the GCC helped to speed up payments, remittances and strengthen underlying monitoring systems that record such transactions. Remittances sector has been the biggest contributor to the growth of Fintech platform in the region due to its large expatriate

workforce which represents 37% of the total workforce in the GCC. The opportunities for remittance platform can be gauged from the fact expatriates in the GCC sent US$120 billion back home by the end of 2017 (S&P global Ratings, 2019).

GCC governments, particularly of the UAE, are building on the infra- structure and providing incentives to startups to encourage a region-wide FinTech adoption by connecting a multitude of different stakeholders to support financial innovation. For example, the Dubai International Financial Centre (DIFC) rolled out a US$100 million FinTech fund in 2017, to help get start-ups off the ground and help businesses grow. Likewise, Bahrain Development Bank and the Economic Development Board of Bahrain also launched two separate funds of US$100 m each to support FinTech in the region.

A report by Bloomberg Intelligence (Bloomberg Research arm) noted that Fintech startups in the Middle East & North Africa (MENA), which include GCC, are expected to expand from 96 startups in 2019 to 465 by 2020 and the venture capital investment in fintech sector will jump to US$2.28 billion by 2022 from US$287 million in 2019. The same report noted that the UAE with 67 tops the list of countries in the region with the highest number of Fintech startups to date. MENA Research Partners (, a leading research company in the region also noted that the UAE and Saudi Arabia are expected to play a key role in unlocking the GCC growth potential and shaping the MENA fintech sector. Both nations are contributing to fintech transformation in the region. For instance, the banks located in the UAE have already embarked on FinTech. One such example is the Emirates NBD which has stationed itself as the leader of the technology by releasing the Emirates NBD Future Lab. And along with this, they have also declared their commitment to invest AED 1 billion (USD 272 million) in the space.

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Some other notable developments for Fintech in the GCC region


1. Central Bank of Bahrain (CBB) introduced the Fintech regulatory sandbox to enable foreign and domestic startups and financial institutions to test out technology-based products and services. The Sandbox application process is open to both existing CBB licensees and other companies which may include financial sector companies as well as technology and telecom companies intending to test an innovative product or service, professional service firms which partner with or

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