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The Second day of the 15th IFSB Summit brings together industry leaders in discussions on FinTech, financial inclusion and sustainability under the theme ‘Digital Transformation of Islamic Finance: Innovation and Resilience’

Date posted: 11 November 2021

11 November 2021, Jeddah –The second day of the 15th IFSB Summit  hosted by the Saudi Central Bank in Jeddah, Kingdom of Saudi Arabia, saw thought leaders and key players of the Islamic financial services industry (IFSI) come together to exchange views on the opportunities, challenges and policy considerations related to financial, supervisory and regulatory technologies, digital financial inclusion and sustainability.

The first session on “FinTech and Islamic Financial services: Market Developments and Effective Regulatory Approaches” was chaired by Prof. Dato' Dr. Azmi Omar, President & Chief Executive Officer, INCEIF, and featured the distinguished panelists Ms. Sharifatul Hanizah Said Ali, Executive Director, Islamic Capital Market Development, Securities Commission Malaysia, Mr. Imansyah, Deputy Commissioner, OJK Institute and Digital Finance, Indonesia Financial Services Authority (FSA), Mr Ijlal Ahmed Alvi, Chief Executive Officer & Secretary to the Board, International Islamic Financial Market and Mr. Shina Akeem Oyewale, Chief Executive Officer, Marble Capital Limited. 

The session discussed the market developments in different jurisdictions, highlighting different regulatory approaches applied by different jurisdictions and discussed the challenges in terms of innovation and financial stability and resilience. The discussion touched on the impact of the pandemic in changing the way financial services are provided and the resulting innovation and increased use of technology and digital services that has brought about the need for more forward-looking regulations. The panelists also discussed Islamic finance-related developments in digital financial innovations, including Islamic crowdfunding, promoting micro sukuk issuance, utilisation of blockchain technology in the Islamic capital market, micro waqf banks and Islamic P2P lending as well as well as the still untapped opportunities in social finance and Islamic Fintech. The panel session provided further insights on the digital future of financial markets including smart contract initiatives and potential issues and regulatory considerations.

The second session on “Effective use of Supervisory and Regulatory Technology by Authorities and Regulated Islamic Financial Institutions”, chaired by Dr. Zamir Iqbal, Vice President Finance and Chief Financial Officer, Islamic Development Bank, featured the distinguished panelists, H.E. Dr. Yakup Asarkaya, Second Chairman, Banking Regulation and Supervision Agency, Republic of Turkey, Dr. Bashir Aliyu Umar, Deputy Chair, Financial Regulation Advisory Council of  Experts, Central Bank Nigeria, and Professor Volker Nienhaus, Consultant, IFSB. 

The session highlighted the pertinence of Fintech, Suptech, and Regtech for enhancing operational efficiency, regulatory compliance, remote operation, and both on-site and off-site supervisory oversights in the IFSI. The positive impacts of adopting these technologies for financial inclusion, wealth creation, shared prosperity, customer value, risk management, financial data compilation and preservation, disclosures, transparency and market discipline and overall financial soundness and stability of the Islamic financial services industry were highlighted with notable examples. The session also highlighted the fact that Islam is not averse to innovations that are beneficial, and that while technological tools may be neutral, their adoption for operation and regulation in Islamic finance should not inflict significant ethical, social or environmental costs. This will require that the Sharīʿah scholars understands and contextualises the complexities of the rapidly evolving financial technology, and promptly respond to emerging prudential and other related issues. Numerous examples of key regulatory initiatives and techniques used across jurisdictions were highlighted. In particular the issuance of various regulatory guidelines, establishment of regulatory sandboxes for both incubators and accelerators, and general awareness creation to ensure customer protection and financial inclusion were highlighted. Key technological tools used in Islamic finance include artificial intelligence, blockchain technology, cloud computing, data mining and analytics etc. Some key factors impeding the use of technology in the IFSI highlighted include budget constraints, legacy infrastructure, cyber-security risks, lack of requisite qualified human capital resources, and regulatory uncertainty, etc.  The role of the IFSB and other similar organisations in promoting the international collaboration and providing guidance notes on best practices across jurisdictions was also highlighted.

The third session on “Harnessing Technology in Islamic Financial Services to Improve Financial Inclusion” chaired by Dr. Sami Al-Suwailem, Acting Director General & Chief Economist, Islamic Development Bank Institute (IsDBI), featured the distinguished panelists, Mr. Saud Al Busaidi, Deputy Chairperson, IFSB Technical Committee and Manager, Islamic Banking Department, Central Bank of Oman, Dr. Aamir A. Rahman, Senior Advisor on Islamic Finance, United Nations  Development Programme, Mr. Francesco Di Salvo, Senior Financial Sector Specialist, World Bank , and Mr. Nik Kamarun, Senior Manager, SME Finance, Alliance Financial Inclusion. 

The session highlighted digital inclusion initiatives and the financial inclusion frameworks in different jurisdictions, a framework to support SME’s that caters to their training and funding and capacity development. The discussions noted the need for enhancing risk-sharing in Islamic finance, integrating Islamic social finance platforms in financial inclusion policies and regulatory support to guide the industry, as well as collaboration among the mainstream financial service providers and Fintech’s.  The session also highlighted the potential to increase access to financial services through digital platforms, application of digital technologies for zakat, enabling micro domestic savings through digital finance and other applications of digitalisation in Islamic finance. The panelists further discussed the importance of regulation, infrastructure and systems to facilitate the take up of digital financial inclusion and the necessary safeguards to increase trust in the system. The session touched on the role of Islamic finance as a catalyst for enhancing financial inclusion as well as the issue of rates and costs of financial services and possible solutions such as the need for proportionate charges and pricing to support financial inclusion. 

The fourth session on “Achieving Synergy between Digital Islamic Finance and Sustainability”, chaired by Dr. Bello Lawal Danbatta, Secretary-General, IFSB, featured the distinguished panelists, Mr. Henk Hoogendoorn, Managing Director, Qatar Financial Centre Authority, Mr. Syed Samar Husnain, Executive Director, Development Finance Group, State Bank of Pakistan, and Dr. Yahia Abdul-Rahman, Chairman and Chief Executive Officer, LARIBA Bank of Whittier. 

The session highlighted fact that there is a connect between Islamic finance given its underlying communitarian and social philosophy and ESG especially when rendered via technological platforms. In fact, this practice has become mainstream in the financial ecosystem in some countries in which case ESG compliance framework is put in place and thus creates a lot of opportunities for sovereigns to patronise Islamic investment which is inherently aligned with the sustainability agenda. A clear delineation of each of the component of the ESG and its synergy with Islamic finance was also highlighted. Notable examples across jurisdictions were also highlighted especially how digitalisation have been used to promote financial inclusion through blockchain for SMEs financing, affordable remittances charges for migrant workers, use of biometrics to enhance digital identity towards inclusion etc. In addition to the possibility of using green financing for the purpose of environmental preservation, Islamic crowd-funding and the various Islamic social finance platforms were highlighted as being crucial to realising the ‘spirit’ of Islamic finance, without compromising on its ‘mechanics’. The session also highlighted the fact that there are already existing commendable models in some countries that have successfully deployed technology to render Islamic finance to cater for the financially-repressed in the society. Strengthening this would require further regulatory support and guidelines that promote financial inclusion and consumer protection driven by technology and based on Islamic finance principles. 

The two-day Summit, which saw the participation of key Islamic financial services industry leaders was closed by H.E. Dr. Fahad Aldossari, Deputy Governor, Saudi Central Bank.

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