Financial inclusion through digitalisation

Despite global pandemics and geo-political turbulence, the past few years has seen the Islamic financial and banking industry experience significant levels of growth across the globe. In its report released in October last year, ratings agency Standard & Poor’s (S&P) highlighted this continued growth through 2024, with total industry assets expecting to reach USD 4.4 trillion. Whilst Islamic finance continues to be seen as a niche market, it is worth noting that recent analysis of over 3,000 hedge funds indicates that industry tipping the scales at just under USD 3 trillion.

This ‘niche’ market is one where the synergies between Islamic finance and sustainable finance have been widely discussed and actively explored for a number of years now. This momentum will continue, given not only the significant strategic initiatives under way in the global hubs for Islamic finance, but also evidenced by the scheduling of COP27 in Egypt in 2022 followed in 2023 by COP28 in the UAE.

One area, however, which has received particular attention from policymakers is the role Islamic finance can play as a viable means by which financial inclusion, especially amongst the Muslim populations in rural areas, can be increased. Numerous research papers have flagged the common theme amongst nations with a large Islamic population whereby a significant share of the population would be categorized as currently being ‘excluded’ from the financial system as they are not using bank accounts, often citing religious reasons as the primary reason for this.