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Home / Insights

Featured Insights

Islamic Finance

Can blockchain redeem global finance?

17 Jun 2025
Insight

Islamic Finance
Creating impact through future-first investments 
16 Jun 2025
Insight

Islamic Finance
IsDB prize laureate on how his initiative will tackle Indonesia's waqf challenges
01 Jun 2025
Insight

Islamic Finance
How AI is powering the future of the Islamic economy
30 Apr 2025
Insight

Islamic Finance
Pakistan’s push for interest-free banking faces challenges
22 Apr 2025
Insight

Islamic Finance
Reimagining Zakat management for greater impact 
10 Mar 2025
Insight


All Other Insights
Islamic Finance
Can blockchain redeem global finance?

It’s easy to say people have lost faith in the financial system. But what does that actually look like?

It looks like savings shrinking under inflation while banks post record profits. It looks like being denied a loan despite working two jobs. It’s paying years of insurance premiums, only to be told your claim doesn’t qualify when tragedy strikes.

In countries around the world, trust in financial institutions is eroding. A 2023 global survey by Edelman found that fewer than 50% of people trust banks to do what’s right and that figure drops even further among Gen Z and millennials.

These generations have watched bailouts flow to the powerful, while ordinary families are left with overdraft fees and frozen accounts. They’ve grown wary — not just of banks, but of systems that profit from complexity and exclusion.

But maybe the problem isn’t people. Maybe it’s the system itself.

When systems are built on asymmetry
Most financial structures were designed to be top-down. You deposit your money and trust that the institution will handle it ethically. But time and again, that trust has been tested and often broken.

And for Muslims, that breakdown goes deeper. Even in Muslim-majority countries, many financial offerings labeled ‘“Islamic’” still feel like conventional products wrapped in Shariah marketing.

According to a 2022 study by the International Shariah Research Academy (ISRA), over 70% of Islamic financial institutions engage in dual models that may not align fully with ethical or faith-based expectations.

What’s missing isn’t just trust. It’s transparency, participation, and real-world alignment. That’s where blockchain and more specifically, decentralized autonomous organizations (DAOs) present a potential shift.

Understanding blockchain and DAOs minus the hype
A blockchain is a digital ledger that records transactions publicly and immutably. Once data is added, it can’t be changed. Everyone can see what’s happening, but no one can alter it behind closed doors.

DAOs build on that infrastructure. A DAO isn’t a company or an app. It’s a collectively governed organization that runs on code, not executives. Rules are written into smart contracts that automatically execute decisions based on the consensus of its members. Voting is open. Funds are traceable. No individual holds the keys.

This model challenges the very foundation of how most financial systems work and offers a new blueprint.

When technology reflects timeless values
For Muslims, this isn’t a foreign idea. Shura (consultation), waqf (endowment), and the ummah (community) have long served as frameworks for mutual aid and collective governance.

In early Islamic history, financial structures weren’t built to extract profit from the many, they were designed to circulate wealth fairly, fund public good, and preserve human dignity.

The Bayt al-Mal (public treasury), managed with community oversight, distributed resources to widows, orphans, and the poor. Waqf systems funded schools and hospitals across the Muslim world for centuries.

DAOs don’t replicate these frameworks perfectly but they echo the same spirit. They offer a path forward that’s less about disruption and more about restoration.

Intentional innovation is what matters
Some critics dismiss blockchain as overhyped or too technical. Others fear it will replicate the very power imbalances it claims to dismantle. And they’re right to be cautious. Technology is neutral, it reflects the intent of the people using it.

When guided by ethics and inclusion, blockchain can become a powerful tool for rebuilding trust.

Consider The LifeDAO (TLD). It’s not the only example and it shouldn’t be the focal point but it does offer a working case. TLD operates as a DAO to provide financial protection without traditional insurance structures.

Members voluntarily contribute to a communal fund, and when one passes away, their nominee receives a direct payout, without gatekeeping, delays, or profit motives.

Everything from fund governance to decision-making happens transparently, guided by consultation (shura) rather than executive fiat. It’s a financial tool that feels more like a community than a corporation.

Elsewhere, DAOs are funding regenerative agriculture, supporting decentralized journalism, and offering peer-powered alternatives to health insurance. The point isn’t to romanticize the tech but to spotlight a growing movement of people using it to build systems that serve, not extract.

What stands in the way
Of course, this model isn’t without its challenges.

According to the World Economic Forum (2023), more than 60% of adults globally lack the digital skills needed to securely use blockchain tools. There are also legal gray areas: DAOs remain unregulated in many jurisdictions, making it harder to enforce agreements or protect contributors from fraud.

But these aren’t reasons to dismiss the model. They’re reminders that the work ahead is real and necessary. Building ethical alternatives takes more than smart contracts. It requires community trust, governance education, and a willingness to prioritize long-term resilience over short-term returns.

The real question isn’t “Can it work?”
It’s whether we have the courage to build financial systems that reflect the values we say we believe in.

If blockchain is just another way to hoard, hide, or hustle then we’ve learned nothing. But if it becomes a tool to redistribute trust, decentralize power, and amplify shared responsibility, then we may be witnessing not a technological revolution, but a moral one.

So the question isn't whether blockchain can redeem global finance.

It’s whether we’re ready to redeem it by showing up, shaping it, and making sure it doesn’t leave our communities behind.

Because in the end, faith in finance won’t be restored through slogans. It’ll be rebuilt through systems people can see, trust, and shape together — one block, one voice, and one shared decision at a time.

Sharene Lee is chief operating officer & co-founder of Takadao

17 Jun 2025
Insight
Islamic Finance
Creating impact through future-first investments 

Impact investing is inherently forward-looking, offering a viable alternative to ESG investing

 

Criticism of pursuing ESG (environmental, social and governance) goals can be broadly condensed into two points. 

The first disapproval refers to the companies’ broader intent to generate profits without the distraction of ESG goals. 

Businesses are typically built to generate profits with little to no thought given to how low wages, overrun production lines, and subpar product quality often create negative social and environmental effects. On the flipside, recalibrating a company’s supply chain will yield higher costs, which prompts a debate on how much intent and effort must be reserved for ESG goals. 

The second challenge is the difficulty of calibrating the true impact of pursuing ESG goals. It is relatively easier to assess a firm’s performance through financial metrics, such as ROI, EBITDA, EPS, etc. Due to their qualitative nature, measuring the impact of ESG is difficult. 

The problems surrounding these two ESG challenges undermine a company’s resolve to pursue green goals. Shareholders can be convinced of fulfilling long-haul ESG goals, but they seek positive and preferably high returns in the short term. 

For all the odds, the ESG industry continues to grow. Nearly 9 out of 10 investors, who participated in a Bloomberg study, suggested that ESG leads to better returns, resilient portfolios and enhanced fundamental analysis. Ongoing pressure on companies to consider ESG initiatives is certainly leaving an impact on investors and corporations framing their commercial decisions. 

Yet there remains the risk of greenwashing, with companies feigning environmental consciousness to bolster credibility. Deutsche Bank’s asset manager DWS was fined €25 million earlier this year for “aggressive” advertising that “did not reflect reality”. 

This is not an isolated event, with several multi-national companies such as Nestle, Shell, Starbucks and Apple accused of similar transgressions. Often companies misrepresent their eco-friendly goals to generate demand. 

Indeed, most companies that embed ESG in their strategic decision-making were established on the pillars of profit maximization. This means that healthy bottom lines will be the touchstone of all commercial decisions.

For vocal thinkers such as Milton Friedman, the social responsibility of businesses is to increase profits, leaving ESG considerations to regulation. So long as companies are following the law of the land, claims Friedman, there is no need for them to consider this extraneous factor.  

Of course, the downside is that companies will look to circumvent laws to achieve what they wish to, not what they should. Intent, therefore, is key, which calls for an overhaul in a company’s approach. Environmental considerations must be embedded into a firm’s mission statement, diluting the notion of prioritizing financial returns as a core objective of ESG investing.

Viable alternative
Impact Investment represents a viable alternative to ESG, with the former aiming to achieve positive social good whilst generating financial returns. Rather than isolated activities such as planting a score of trees on abandoned land, impact investment conflates social good with the need to generate returns.

A good example would be investing in companies that manufacture smartphones but those that do not extract metals from conflict zones. Impact investment is inherently forward-looking. 

Impact Investment also maintains a strong focus on measurability, with enterprises measured on financial returns and the impact created. Unlike ESG where goals are subjugated to financial returns, impact investment looks to an initiative’s end goal.

It may be less attractive to investors as an asset class, but its focus on long-term outcomes does combat the short-termism of conventional capitalism, and falls in lockstep with holistic principles of Islamic finance. 

Rizwan Rahman is a UK trained lawyer based in Doha

16 Jun 2025
Insight
Islamic Finance
IsDB prize laureate on how his initiative will tackle Indonesia's waqf challenges

Medikids, a healthcare initative - co-founded by Afdhal Aliasar, an Islamic economy and finance practitioner - secured the 2025 Islamic Development Bank (IsDB) Prize for Impactful Achievement in Islamic Economics.

Medikids was awarded for its waqf initiative in Indonesia, which deploys dental clinics for families to yield sustainable funding for waqf assets and social welfare initiatives.

We speak with the IsDB prize laureate on his vision, the initiative's community engagement and scalability.  

What governance safeguards are in place to ensure Medikids' waqf assets are protected and professionally managed over the long term?

Each clinic that is designated as a waqf asset is a distinct legal entity that is administered in compliance with the government's applicable business regulations and overseen by The Waqf Agency of Indonesia. The capital of this business entity is comprised of waqf funds.

The "waqf operator" function is a professional business actor who has demonstrated their trustworthiness and ability to manage the operations of a dental clinic, which is of paramount importance in the operation of this clinic.

Image: Supplied

MHDC Group, the appointed operator waqf, has a wealth of experience administering the operations of over 30 clinics throughout Indonesia, spanning over 15 years.

Can you describe your approach to community engagement - both in sourcing waqf donations and in reaching underserved patients?

Initially, the waqf fund was primarily sourced from the founders, as well as the doctors who work in all of our clinic networks and other community members who support this program.

The funds are continuing to increase in tandem with the accelerated rise in net profit from the existing clinics. The waqf foundation has collaboration programs with numerous parties, particularly health campuses throughout Indonesia, to conduct social service activities in a variety of locations in order to distribute to the dhuafa patients in need.

We also offer dental treatment to individuals in need at our clinic locations and encourage children to visit the clinic for educational and enjoyable field excursions to learn about dental health.

Have digital tools (e-dentistry, fintech platforms, blockchain-based waqf registries etc.) played a role in scaling or de-risking your model?

The dissemination of clinical information and news has become a prevalent practice through the use of social media on the internet. We deployed digital tools in the initial stages of incorporating social crowdfunding platforms to broaden the pool of donors who wish to partake in this initiative.

We intend to issue Wakaf Sukuk with a social health theme through the Indonesia Stock Exchange in the future.

We are of the opinion that the role of digital platforms will be more significant when we offer social investments through trusted channels that are indeed based on the performance of social activities that have been running well and continue to develop.

Of course, we place a high value on the trust of the waqf, which is motivated by the desire to achieve results that have a positive and sustainable impact on society and the community.

In what ways could your model be replicated or franchised in other Muslim-majority contexts with varying healthcare infrastructures?

It is highly probable that this program will be further developed in numerous locations worldwide, particularly in other Muslim countries, in accordance with the concept of waqf. The demand for high-quality healthcare services is significantly increased in accordance with the economic development of society.

The key to success will be the concept of a productive and independent waqf that can finance the operations of the waqf assets themselves.

We are highly amenable to the prospect of forming partnerships with other organizations in order to establish a sustainable and productive social movement.

 

01 Jun 2025
Insight
Islamic Finance
How AI is powering the future of the Islamic economy

Artificial intelligence (AI) is rapidly emerging as a transformative force within the Islamic economy, driving innovation across sectors from finance and food to tourism and education. 

By enhancing Shariah compliance, improving accessibility, and enabling personalized services, the technology is reshaping how the Islamic economy operates, while preserving its ethical foundations.

More broadly, the technology’s potential economic impact is substantial - AI could contribute up to $320 billion to the Middle East's economy by 2030, according to PwC.  

“The synergy between AI and the Islamic economy is immense,” says Badr Saidi, quality manager and technical auditor at Halal Consulting S.L., a Spain-based halal certification body.  

“By leveraging AI in areas like Shariah compliance, ethical finance, halal supply chains, smart cities, tourism, and education, we can drive sustainable growth while staying true to Islamic ethical principles.”

To succeed, Saidi emphasizes the need for collaboration between AI developers, Islamic scholars, and industry leaders to ensure technological advances align with religious values.

Transforming Islamic finance

AI’s most visible impact is unfolding in Islamic finance, where it is streamlining compliance processes, improving fraud detection, and fostering financial inclusion.

“With AI, Islamic banks and financial companies can better understand their customers - how they invest, what they need, and even their risk tolerance,” says Sara Husain Hammad, innovation and technology project manager at Bahrain-based General Council for Islamic Banks and Financial Institutions (CIBAFI). 

“This helps create personalized financial products that comply with Islamic guidelines while still being innovative,” she says.

AI-powered tools are already transforming traditional processes. According to Saidi, machine learning algorithms are now automating the verification of financial transactions to ensure they adhere to Shariah law, avoiding elements such as Riba (interest), Gharar (excessive uncertainty), and prohibited investments.

He adds that AI-driven robo-advisors are also curating tailored halal investment portfolios, while predictive analytics are optimizing Sukuk (Islamic bonds) issuance and improving fraud detection in Takaful (Islamic insurance).

Banks across the Muslim world are already deploying AI. Dubai Islamic Bank (DIB) is using AI tools to assess the Shariah compliance of companies and financial instruments. Bahrain Islamic Bank has launched a digital platform offering access to more than 1,800 Shariah rulings to help simplify complex regulations and encourage industry collaboration. 

Outside of the GCC, Bank Muamalat Malaysia has partnered with Google Cloud to to deploy generative AI and advanced data analytics to help it evolve into a fully digital Islamic institution. Egypt’s Faisal Islamic Bank has embraced AI to modernize and expand its services.

AI is also helping extend financial services to underserved communities. By analyzing alternative data - such as mobile payment history and social behaviour - AI can help individuals with limited credit histories, including those in rural areas or small business owners, to qualify for financing. This supports Islamic finance’s mission of ethical and inclusive banking.

“Combined with Islamic finance’s focus on ethical and community-centered banking, AI can open doors for more people to access financial services in a way that respects their beliefs,” says CIBAFI ‘s Hammad.

Securing the halal supply chain

Beyond finance, AI is shoring up the halal economy by ensuring product traceability, authenticity, and safety. One of the biggest challenges in halal certification is verifying that ingredients and production processes comply with Islamic dietary laws. 

“AI can assist in several ways, including in ingredient label analysis. AI-powered Natural Language Processing (NLP) can scan product ingredient lists and detect potential non-halal components like gelatin, alcohol, or animal-based enzymes,” says Saidi.

AI-powered blockchain platforms now provide end-to-end tracking of halal products, from source to shelf, while computer vision systems monitor production lines for contamination, he adds. Image recognition tools are detecting fraudulent halal logos, and IoT sensors help safeguard halal-certified goods during transportation and storage.

AI is also playing a crucial role in laboratory testing. Advanced spectroscopy and chemical analysis, supported by AI, can identify traces of non-halal substances in food, cosmetics, and pharmaceuticals with high accuracy. Meanwhile, AI-driven analytics are helping businesses forecast demand for halal products, ensuring better inventory management and reduced waste.

However, standardization remains a challenge. According to Saidi, differing certification criteria across countries make it difficult to create a universal AI model, and smaller enterprises may struggle with the costs of adopting these technologies.

Enhancing Muslim-friendly travel

The Muslim-friendly travel market is another area where AI is making strides. According to the State of the Global Islamic Economy Report 2023/24, AI is enabling personalized travel experiences and improving customer service with virtual assistants and predictive analytics.

“Platforms can now generate customized itineraries for Muslim travelers, factoring in prayer times, halal food, nearby mosques, and Muslim-friendly accommodations,” says Saidi.

The Saudi Tourism Authority is pioneering AI-powered services, having recently launched "Sara," a virtual tour guide offering real-time travel advice. The authority has also partnered with Visa to create a Tourism Data Lab to analyze visitor behaviour and spending trends.

Facilitating Islamic education

AI’s role in Islamic education is growing rapidly. NLP models can help scholars and students in deepening their understanding of Quranic and Hadith texts, while AI-based edtech solutions can offer personalized Islamic education and smart learning platforms for different age groups, according to Saidi.

Innovators are developing AI-powered Islamic chatbots, voice assistants, and digital Da’wah tools to facilitate knowledge sharing.

Startups are already making an impact. Pakistan’s Xeven Solutions recently launched Shahada GPT, offering Quranic translations, Hadith explanations, and halal guidance. Similarly, India-based QuranGPT answers religious queries. 

“The primary motivation behind developing QuranGPT was to bridge the gap between religion and modern individuals,” says Raihan Khan, an AI applications engineer and creator of QuranGPT. 

“Nowadays, people don’t want to spend hours flipping through books to find an answer or determine if something aligns with the teachings of the Holy Quran. QuranGPT simplifies this process by providing instant responses in natural language.”

However, combining AI with religious guidance carries significant risks. Without human oversight, AI can easily misinterpret Islamic teachings, spread misinformation, and inadvertently cause harm.

“While AI has the potential to enhance various aspects of the Islamic economy, its intersection with religion must be approached with extreme caution,” Khan warns.

“The biggest concerns lie in the inherent biases of AI models, the risk of misinformation, and the challenge of ensuring religious authenticity. Without strict monitoring, AI could do more harm than good in this space,” he adds.

Limited adoption

Despite AI's promise, adoption in the Islamic economy remains in its early stages. Most Islamic tech startups have yet to fully embrace AI, focusing instead on basic automation rather than sophisticated, AI-driven innovation.

“As of now, AI’s role in fostering innovation in the Islamic economy - particularly in tech startups or digital finance - is minimal,” says Khan. “While AI has the potential to enhance areas like Islamic banking, halal certification, and ethical investment screening, most Islamic tech startups have yet to fully explore or implement AI-driven solutions.”

30 Apr 2025
Insight
Islamic Finance
Pakistan’s push for interest-free banking faces challenges

Pakistan is aiming to implement an interest-free Shariah-compliant banking system by January 2028. While the ambition reflects a momentous shift toward an Islamic values-based financial system, practitioners caution that unresolved challenges could undermine the transition.

Renewed political will
In April 2022, the Federal Shariat Court (FSC), the country’s constitutional Islamic religious court, ruled that the entire banking system must be completely free of riba – more commonly known as interest - by the end of 2027. The court instructed federal and provincial governments to amend relevant banking laws to comply with the Shariah legislation. 

The directive, however, wasn’t the FSC’s first attempt to push for a fully Islamic banking system. The religious court made an initial declaration in 1999, notes Dr Sanaullah Ansari, CEO of Al-Iqtisad Consulting, only for it to be delayed by later governments through appeals and legal reviews. 

“This process continued and finally, in April 2022, FSC ordered the government to convert the current conventional banking system by December 31, 2027,” he says. 

However, this time there is adequate political will to introduce Islamic banking, complemented by a clear roadmap accorded by the State Bank of Pakistan (SBP), the country’s central bank. Following the FSC’s decision, the SBP released its five-year plan (2023–2028), setting ambitious goals to transform the conventional banking sector. 

There are currently 22 banks operating in Pakistan, including six fully-fledged Islamic lenders. Many of the remaining conventional banks either operate Islamic windows or have started planning for a full conversion. United Bank Limited (UBL) and Faysal Bank have transitioned, while Bank of Khyber and National Bank of Pakistan are en route. Others like Bank of Punjab are also exploring the shift.

In parallel, the Securities and Exchange Commission of Pakistan (SECP) - the country’s financial regulatory agency - introduced the Shariah governance guidelines in January 2023.

These apply to non-banking financial companies, Takaful operators, and private pension funds, with the aim of deepening Islamic capital markets.

Sovereign debt, coordination mar outlook 
Pakistan is the second-largest Muslim-majority country in the world. However, despite strong numbers, financial inclusivity across the country is fairly tepid. The country’s sovereign debt profile is another critical factor; the IMF notes that government debt stands at 71.4% of the Southeast Asian nation’s GDP, much of which is denominated in conventional, interest-bearing instruments.

“Most of the government’s liabilities are in conventional form,” says Mohamed Damak, head of Islamic Finance at S&P Global Ratings. “The government could choose to issue only sukuks going forward to refinance all commercial debt and net new borrowings, assuming that the market appetite for these instruments will be there.”

Damak adds that a significant portion of the debt is in the form of multilateral loans, bilateral loans, and central bank swap lines, with some of the multilateral loans having very long-term tenors. “It remains to be seen if and how these can be converted or structured in a Shariah-compliant format,” he adds.

Farrukh Raza, CEO of Islamic Finance Advisory & Assurance Services (IFAAS), believes that renegotiation is likely to take time due to legal and risk concerns from creditors, as well as the complexity of restructuring existing debt. “Stakeholders need to stay focused and resolve these matters as soon as possible.” 

Despite steps taken by the SBP and SECP, several market practitioners highlight a lack of coordination between key institutions and an absence of clear, realistic timelines.

“There needs to be a more well-thought-out process with a realistic plan and determined goals,” says Raza. “There needs to be better coordination with policies and implementation among the different entities in the country.”

He outlines three critical requirements for a successful transition.

“There needs to be a political will to genuinely support this transition and all stakeholders to be aligned on making it happen,” he says. 

“Secondly, you need a well-structured roadmap with clear targets and timelines for everyone to understand and work towards. Thirdly, you need to create a national champion among state institutions to own, lead and deliver this transition.”

This lack of coordination is closely tied to insufficient communication. Public engagement has been limited, with few workshops, conferences, or awareness campaigns to educate stakeholders about what this transition entails, according to Ansari.

“While the SBP and SECP have done valuable work, the broader market is still unclear about how this transition will play out,” he says. “Without consistent messaging and cooperation between players, implementation by 2027 will be difficult.”

Changing perceptions
A significant challenge lies in public perception. Many consumers raise doubts on the veracity of the Islamic banking system, considering it a repackaged version of the conventional banking system. This lack of trust dents its uptake as well as its credibility. 

Ansari notes that many banking customers question whether there is a meaningful distinction between Islamic and conventional products. “Whilst a lot of work has been done to facilitate Islamic banking, there is still a perception that it is merely a replication of conventional banking,” he says.

Sceptics also point to challenges in countries that have adopted Islamic financial systems, including Iran, Sudan and Afghanistan, though Raza believes comparisons with those countries to be unfair. 

“It’s not fair to compare Pakistan’s transition with these countries because all of them remain challenged on the international stage,” he says. “The issues they face are political in nature and not due to their financial systems being Shariah-compliant.”

Creating goodwill through education and awareness in addition to a clear timeline and roadmap to assimilate these changes thus remains key. 

22 Apr 2025
Insight
Islamic Finance
Reimagining Zakat management for greater impact 

Each year, Muslims around the world donate tens of billions of dollars in Zakat, the obligatory almsgiving that is one of the five pillars of Islam. 

While the generosity of these donations remains undisputed, the challenge lies in how to effectively organize and manage a massive flow of funds to ensure they reach those in need.

A particularly significant spike in donations occurs during the month of Ramadan. Though Zakat can be given at any time of the year, many Muslims choose to disburse it during the holy month, believing the spiritual rewards are multiplied. 

According to a survey by the Muslim Philanthropy Initiative, nearly 70% of US-based Muslims prefer giving Zakat during Ramadan, often through community events like fundraiser Iftars or group prayers. The same pattern is observed across the globe. Islamic Relief Canada, for instance, sees a 500-700% increase in Zakat donations during Ramadan. 

“This surge is driven by the spiritual significance of giving in Ramadan, religious obligations, and the trust donors place in organizations to distribute funds effectively to those in need,” says Mashaal Saeed, media and campaigns lead at Islamic Relief Canada.

Similarly, the National Zakat Foundation Australia experiences a surge of up to 90% in Zakat contributions during Ramadan, according to Ismail David, CEO of the National Zakat Foundation Australia. 

But the question arises: How can stakeholders harness this increased generosity to benefit the worthiest recipients? By leveraging digital platforms, technologies such as AI and blockchain, and offline community-based efforts, charities can ensure that Zakat not only reaches the right people but also makes a lasting impact on communities in need.

Partnerships, offline strategies for efficient disbursal 

Zakat serves as a powerful tool for social support, providing Muslims with an organized methodology to assist the needy with essential resources like food, shelter, and healthcare. 

Saeed emphasizes the importance of pre-planned distribution systems that can handle the influx of donations quickly and efficiently. Many donors earmark their Zakat for urgent humanitarian aid, so rapid-response mechanisms are key to ensuring that funds reach those in crisis.

Building partnerships with local NGOs, mosques, and community organizations can also ensure that Zakat funds are distributed to vulnerable populations without delay. 

Ardiansyah Ihsan, an associate at the Indonesia-based Zakat Foundation Institute highlights the importance of traditional strategies, such as mosque-to-mosque campaigns and public talks by religious scholars, which remain effective. 

“Despite the dominance of digital channels, offline strategies still account for 40-50% of the overall campaign efforts during Ramadan,” notes Ihsan.

In addition to addressing immediate needs, many charities are focusing on long-term empowerment, combining direct aid with sustainable development programs. This includes offering skills training, microfinance initiatives, and other services aimed at improving the financial independence of recipients. 

By adopting a holistic approach to charity, Zakat can not only provide immediate relief but also help break the cycle of poverty for the long term, according to Ihsan.

Digital solutions re-envisioning Zakat collection

The rise of digital platforms has revolutionized the way Zakat is collected and managed. 

According to Saeed, online payment gateways, mobile apps, and automated recurring donations make it easier for people to contribute, while data-driven tools help identify and prioritize communities in most need. 

To raise funds this Ramadan, Islamic Relief Canada is organizing more than 10 community Iftars across the country in support of Palestine and Sudan, with the NGO selling tickets through its website.

David notes that digital platforms offer a more efficient and scalable way to collect donations, especially among the digital-savvy generation.

The National Zakat Foundation Australia is launching an online campaign - Z Connect - in Ramadan aimed at educating the community about the power of Zakat and the importance of collaboration. Moreover, the foundation is enabling users to customize and automate their daily giving for Ramadan via its app. 

Social media has also emerged as a crucial tool in Zakat campaigns. Platforms like Instagram, Facebook, and Twitter allow non-profits to engage with a global donor base, raising awareness through educational content and beneficiary stories.

“Social media is instrumental not only in raising public awareness through educational content on Zakat, storytelling of beneficiaries, and promoting organizational transparency but also in facilitating direct donations,” says Saeed.

Ihsan builds on it: “The presence of influencers and religious figures strengthens donors' decision-making processes. These figures help build trust and direct their audiences toward contributing to credible organizations.” 

Leveraging advanced technology

Beyond traditional digital solutions, advanced technologies such as artificial intelligence (AI) and blockchain are beginning to transform Zakat collection and distribution.  

AI helps charities assess and prioritize aid more efficiently by processing demographic, economic, and environmental data, pinpointing regions where assistance is most urgently required. 

“At National Zakat Foundation Australia, we use AI to help with Zakat distribution to improve and speed up the assessment process of applications,” says David.

According to Nicolas Merle, cofounder of On The Shoulders, a France-based design studio specializing in guiding investors in sustainable finance, AI can also predict future needs and proactively deploy resources to prevent crises.

Blockchain, with its transparent and immutable ledger, offers a new level of accountability, allowing donors to track the journey of their contributions from donation to disbursement. 

Hubert Knapp, managing partner at Chavanette Advisors, believes that smart contracts on blockchain platforms could automate the entire Zakat process, from calculation to distribution, reducing the need for human intervention and ensuring timely assistance to recipients. 

However, regulatory challenges remain, especially regarding cryptocurrency and blockchain technologies. 

Islamic scholars are divided on the use of digital currencies for Zakat, which has slowed adoption in the sector. Ihsan believes that in the medium term, there is hope for further integration.

“It is essential for stakeholders, scholars, and policymakers to engage in discussions to establish regulatory frameworks that maximizes the potential of these technologies in Zakat management,” he says.

10 Mar 2025
Insight
Opinion
Ethical giving: Shariah-compliant digital wallets for donations

In today’s digital age, the way we give and receive charity is evolving.

Shariah-compliant digital wallets are emerging as powerful tools to facilitate donations in a manner that aligns with Islamic finance principles.

Whether it’s Zakat, Sadaqah, or Waqf, these digital solutions offer a seamless, transparent, and accountable method for Muslims worldwide to fulfill their charitable obligations.

The role of Shariah-compliant digital wallets in donations
A Shariah-compliant digital wallet operates as an electronic repository for halal financial transactions.

These wallets are designed to avoid interest (riba), ensure ethical investment of stored funds, and provide secure payment options. When used for donations, they offer several benefits:

1. Ease of giving – With a few taps on a smartphone, donors can contribute instantly, eliminating the logistical challenges of handling cash or setting up manual bank transfers. Recent studies indicate that digital donations have increased by over 40% globally due to the accessibility of digital wallets.

2. Transparency and accountability – Blockchain and digital ledger technologies can ensure that donations reach their intended recipients without unnecessary intermediaries taking excessive fees. According to the World Bank, digital transactions reduce corruption and mismanagement by 30% in charitable giving. 

3. Automated Zakat and Sadaqah payments – Digital wallets can be programmed to calculate Zakat obligations and automate payments, ensuring that donors never miss their contributions. Reports indicate that automated Zakat contributions have grown by 25% annually in several Islamic countries. 

4. Global reach – Donations can be made across borders in real-time, helping those in need without delays associated with traditional banking systems. Islamic Relief Worldwide has reported a 50% increase in international donations via digital wallets.

5. Integration with Waqf management – Long-term charitable endowments (Waqf) can be efficiently managed and distributed via digital wallets, ensuring sustainability and ongoing impact. Data from Islamic financial institutions show that digitized Waqf management has improved fund utilization efficiency by 35%.

However, as with any financial innovation, there are key challenges that must be addressed to ensure compliance, trust, and long-term sustainability.

Challenges facing Shariah-compliant digital wallets for donations
Despite the many advantages, several hurdles must be addressed before digital wallets can fully revolutionize charitable giving within Islamic finance.

1. Shariah compliance and certification
Not all digital wallets that claim to be Shariah-compliant undergo rigorous scrutiny. Donors need confidence that their funds are being stored, processed, and invested in a way that fully adheres to Islamic financial principles.

Obtaining certification from reputable Shariah boards and ensuring compliance audits will be essential to gaining trust. A study by the Islamic Financial Services Board found that only 60% of digital financial platforms meet full Shariah compliance standards. 
 

2. Regulatory and legal constraints
Financial regulations vary by country, and some governments impose restrictions on digital payments and cross-border donations. Compliance with local financial laws while maintaining adherence to Islamic principles presents an ongoing challenge for wallet providers. Research from the Global Islamic Finance Report indicates that regulatory barriers prevent 40% of potential digital transactions from being processed efficiently. 
 

3. Fraud prevention and fund misuse
Ensuring that donated funds reach the right beneficiaries requires robust tracking mechanisms. While blockchain can improve transparency, full adoption remains a challenge due to regulatory uncertainty and technical limitations.

Fraud-related losses in digital transactions are estimated to be over $4 billion annually, highlighting the need for enhanced security measures in donation platforms. 
 

4. Digital accessibility and financial literacy
In many regions where donations are most needed, digital literacy remains a significant barrier. Many individuals either lack access to smartphones or do not fully understand how to use digital wallets securely.

Investment in education and simpler user interfaces will be necessary to bridge this gap. The Financial Inclusion Report by the Islamic Development Bank states that only 55% of Muslims in developing countries have access to digital financial tools.

5. Integration with Islamic Banking and financial ecosystem

Digital wallets should be seamlessly integrated with Islamic banks and other Shariah-compliant financial services to ensure that funds remain within the halal financial ecosystem. This will prevent the risk of funds being stored in interest-bearing accounts or invested in non-halal activities.

According to industry experts, 70% of Islamic financial institutions are looking to develop digital solutions that integrate with fintech platforms to improve accessibility. 

Faysal A. Ghauri is a doctorate student in cybersecurity leadership and founder/CEO of Halal Payments Network in Canada

01 Mar 2025
Insight
Islamic Finance
Islamic ETFs find favour among investors, though growth challenges persist

Exchange-traded funds (ETFs) have become a cornerstone of the global investing landscape, offering investors a flexible, cost-effective way to diversify their portfolios. 

These instruments often track major indices like the S&P 500 or the MSCI Index, offering liquidity and exposure to various asset classes. For Sharia-compliant investors, Islamic ETFs combine portfolio diversity with the ethical principles of Islamic finance.

An exchange-traded fund is a basket of securities, such as stocks, commodities or bonds, that is listed and traded on an exchange. Sharia-compliant ETFs are screened to ensure compliance with Islamic law, excluding companies involved in prohibited activities.     

Accordingly, Islamic ETFs have experienced steady growth, particularly in regions like the Middle East, North Africa, and Southeast Asia. Assets under management of ETFs linked to Islamic Indices have risen from $326 million in 2018 to $2.33 billion by end of September 2023, according to an S&P report. 

Hadeel AbuShoumar, product head at Dubai-based Alkhair Capital, believes Islamic ETFs are well-positioned thanks to their appeal to a broad range of investors.

“They’re [Islamic ETFs] perfectly positioned to become a go-to option for retirement and pension funds in MENA and Southeast Asia,” she said. “These regions have huge expat populations and significant local wealth that could be funnelled into Sharia-compliant funds.”

Given that Islamic finance aligns with the broader environmental, social, and governance (ESG) principles, the growth of the Islamic ETF market has also been bolstered by a rising demand for ethical investing.

Access to halal assets
One of the key advantages of Islamic ETFs is their ability to provide access to halal assets that are otherwise difficult or costly for individual investors to purchase directly. 

For example, Sukuk, a Sharia-compliant instrument with similar characteristics to a bond, is becoming widely available. But high transaction costs and limited market options often make it challenging for retail investors to access it independently. 

Sefian Kasem, head of investment specialists, ETF Strategy at HSBC Asset Management, sees significant potential for growth in this area. 

“[As] Sukuk markets continue to grow at pace, we believe there is likely to be a richer range of funds and ETFs covering different segments of the Sukuk market, in turn broadening out the range of fixed income risk profiles available to Sharia-compliant investors globally,” he explained.

Islamic ETFs can also be structured to target specific sectors, giving investors more focused options. AbuShoumar says there is an opportunity to develop thematic ETFs.

“There’s room for innovation here - imagine thematic Islamic ETFs that focus on sectors like clean energy or tech,” she said. “[Plus], as more people see the overlap between Islamic finance and ESG principles, there’s an opportunity to attract socially conscious investors, Muslim and non-Muslim alike.”

Despite potential diversity for Islamic ETFs, the market remains heavily concentrated in a few asset classes, gold being the dominant one. Shariah-compliant gold-backed ETFs have become the most popular product in this space, owed to the bullion’s status as a ‘safe haven’ asset, particularly in precarious economic times. 

That could potentially hinder growth and innovation, say some market practitioners.

“The Islamic ETF universe market cap is dominated by a massive, physically-backed gold product,” said Akber Khan, acting chief executive officer of Al Rayan Investment. “Incumbent ETF issuers haven't really been bothered to offer a multi-asset Islamic product suite while most Islamic managers have been slow off the mark.”

But HSBC’s Kassem believes there is enormous scope to create a broader range of Sharia-compliant ETFs that can do a better job of spanning conventional asset classes, including public equities and fixed income. 

Barriers to growth
To create a gamut of Sharia-compliant ETFs, key challenges that erode asset growth must be addressed. 

Liquidity remains one of the most significant obstacles. While conventional ETFs benefit from deep pockets due to the size and maturity of the underlying markets, Islamic ETFs often struggle with smaller scales and limited funds. 

“For Islamic ETFs, there’s a lack of tradability and liquidity, and the market offering is still small when compared to conventional ETFs. This is because primarily in many OIC (Organisation of Islamic Cooperation) nations, ETF development has not received much attention as there are more pressing priorities like bankability, let alone availability of Sharia-compliant investment products,” said Bashar AlNatoor, head of Islamic finance at Fitch Ratings.  

The situation differs for Sukuk-focused ETFs. “With Sukuk markets, the liquidity profile is a little different and closer to emerging markets’ fixed income rather than developed markets’ fixed income,”  added Kassem.

Moreover, many Islamic ETFs are listed in emerging markets, where regulatory frameworks and financial infrastructure are still being developed. This impedes daily trading activity, bid-offer spreads, liquidity and ultimately, pricing, added Al Rayan Investment’s Khan.

Fitch Ratings’ AlNatoor added: “In many cases there is large room for development mainly due to a developing ETF ecosystem and legal infrastructure in general. In the long-term, there is a lot of potential for Islamic ETFs, however, short-to-medium term headwinds remain.”

The cost structure of Islamic ETFs also presents a huge barrier to their adoption. Regular Sharia screening and monitoring are essential to ensure fund compliance, which can often lead to higher operational costs compared to conventional ETFs.

“It can be difficult for retail investors to access halal ETFs. There are difficulties with regards to trading costs in different geographies,” explained Monem Salam, executive vice president at US-based Saturna Capital. “This is largely related to tax legislation and other related costs in different markets.”

However, to ensure that management, administrative, operational and other practices are Sharia-compliant is equally important, added Sefian Kasem. Additional processes require monitoring by a credible Sharia board and carry associated costs.

“They are essential to ensuring Sharia compliance, but having said that, we believe it is important for asset managers like us to ensure that these costs are correctly and fairly balanced versus additional requirements associated with Sharia-compliant investment funds,” he explained.

The general lack of awareness regarding these assets also chips away at their growth, given that relevant information on what separates an Islamic ETF from its conventional peer is largely absent. AbuShoumar believes that educating the public about Islamic ETFs will be key to increasing adoption.

“Financial institutions need to make it easier for people to understand what these funds are and why they matter,” she said. “Working with fintech platforms or even social media influencers could make a huge difference in reaching younger audiences.”

16 Jan 2025
Insight
Islamic Finance
Crypto to community: Shariah-compliant investing for the digital age

As markets swing wildly and ethical concerns grow around conventional finance, Muslims face a vital question: How can we build wealth while staying true to our faith?

Shariah-compliant investing isn’t just a niche concept - it’s a necessity for Muslims navigating the complexities of modern finance.

It’s a pathway that not only protects against haram practices like interest but also empowers us to contribute to an economy rooted in ethics, fairness, and social good. Let’s explore why finding Shariah-compliant investment opportunities is essential and how they can help us thrive both spiritually and financially.

The ethical imperative: Beyond profit
In conventional finance, success is often measured solely by returns. The higher the profit, the better the investment. But as Muslims, our approach must differ.

Wealth in Islam is a trust from Allah SWT, and how we earn, spend, and grow it reflects our accountability to him.

Shariah-compliant investments screen out companies and industries engaged in haram activities like alcohol production, gambling, and conventional banking. But it goes beyond avoidance. These investments prioritize industries that benefit society, such as renewable energy, healthcare, and education.

This ethical foundation ensures that your financial growth does not come at the expense of harming others or compromising Islamic values. It’s not just about securing your future; it’s about doing so in a way that serves the greater good and pays it forward for the next life.

The key question, of course, is how Muslims can invest in a way that aligns with their values. While the list of options is extensive, this article highlights a few investment ideas that are often overlooked.

It is important to note that this is not an exhaustive list, nor is it intended as investment advice.
 

Diversifying with crypto: A modern opportunity
One of the most exciting developments in recent years is the rise of cryptocurrency as a Shariah-compliant investment option. Digital assets like Bitcoin have reached new all-time highs earlier this month, crossing $103,000, which demonstrates the acceptance of blockchain technology and the potential for Muslims to participate in this transformative market.

Wondering how cryptocurrencies could be Shariah-compliant? To answer that, let's first take a closer look at the alternative: fiat.

Fiat currency, issued by governments, is not backed by physical commodities like gold or silver. Instead, its value comes from trust in the issuing authority. Central banks have the power to print fiat currency on demand, effectively creating money out of thin air. Those are a lot of red flags from a Shariah perspective.

In contrast, cryptocurrencies like Bitcoin are decentralized and operate on a fixed supply, ensuring scarcity and preventing arbitrary inflation. Unlike fiat, they rely on blockchain technology to provide transparency, immutability, and peer-to-peer transactions without intermediaries. This makes crypto an attractive alternative for those seeking a more stable and equitable financial system.

Cryptocurrencies, when approached thoughtfully, align with Islamic principles by emphasizing decentralization, transparency, and asset ownership. Unlike fiat or speculative trading, long-term investments in established cryptocurrencies or projects with clear utility can provide an good avenue for portfolio diversification.

However, there are big differences between different types of cryptocurrencies, so make sure to thoroughly research any crypto you consider investing in. 

The new halal economy: Building the future
Beyond cryptocurrencies, blockchain-based organizations offer another Shariah-compliant investment opportunity by solving real-world problems and emphasizing transparency.

For example, The LifeDAO is pioneering a Shariah-compliant, community-owned alternative to life insurance that allows Muslims to invest in the financial future of their families by covering burial costs and other short term expenses should a loved one pass away. Plus for a limited time, early adopters also get to participate in the platform’s revenue through exclusive revenue-share NFTs. 

At the same time, halal mutual funds, Islamic real estate investment trusts (REITs), and digital platforms are opening doors for Muslim investors.

Companies like Wahed and Ethis simplify access to Shariah-compliant opportunities, helping Muslims grow wealth ethically. Such innovations demonstrate how modern technology aligns with Islamic ethics, creating opportunities for Muslims to invest in the future while adhering to their faith.

Shielding wealth from volatility and risk
Modern economies are often destabilized by speculative practices and excessive leverage, both of which are prohibited in Islam. These behaviours contributed to major crises like the 2008 financial meltdown.

Shariah-compliant investing avoids these pitfalls by emphasizing tangible assets and real economic activities. This approach not only aligns with Islamic principles but also provides a more resilient foundation for building wealth.

The path forward
So, where do we start? The first step is education. Understand what makes an investment Shariah-compliant and seek out trustworthy advisors and resources. 

Second, take action. Start small if needed, but be intentional about aligning your portfolio with your values and make investing a regular habit. Look for halal options in your local market or explore global opportunities in Islamic finance.

Finally, remember that Shariah-compliant investing is not just about avoiding the haram; it’s about actively supporting what is halal and tayyib (pure and wholesome). By choosing investments that uplift communities, protect the environment, and promote ethical business practices, you become a part of an economy that reflects the principles of our deen.

In today’s economy, finding Shariah-compliant ways to invest is not just important; it’s transformative. It’s a means of preserving your wealth, protecting your values, and contributing to a better world.

And in doing so, it’s a step closer to living a life that truly embodies Islamic principles.

Sharene Lee is chief operating officer and Ameerah Langer is brand & communications head at Takadao

24 Dec 2024
Insight
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