As Syria emerges from a 14-year-long conflict that has decimated its economic and social structure, the country continues to face several challenges.

A precarious security situation, damaged infrastructure and institutions hollowed out by years of corruption and international sanctions have dealt a serious blow to its economic progress.  

Yet amid the devastation, there are modest signs of change. A new administration has emerged, signalling an interest in trade and investment, and with a population of around 25 million, of which Muslims form an overwhelming majority - Islamic finance could play a meaningful role in the country’s growth. 

“A phased and strategic approach is essential for the development of a functional Islamic finance sector in Syria, one that establishes a strong foundation while taking into account the country's challenges,” says Dr. Abdelilah Belatik, Secretary General at General Council for Islamic Banks and Financial Institutions (CIBAFI).

Top-tier push
Following the ouster of erstwhile premier Bashar Al Assad in December 2024, Syria’s new administration has pledged to support a liberalised, market-oriented economy and integrate Islamic finance into its recovery strategy.

Weeks into taking office, the President Ahmad Al Shara-led government announced that Islamic banking would form a core part of its financial sector.

“Islamic finance is clearly a priority for the new Syrian government,” says Najib Al Aswad, managing partner at Shariah Audit Group, a UK-based Islamic finance consultancy.

“One of the key reforms introduced recently was the approval of Islamic windows, allowing conventional banks to offer Shariah-compliant services.”

Of the fifteen privately licenced banks in Syria, four are Islamic (Cham Bank, Syria International Islamic Bank, Al Baraka Bank and mostly recently National Islamic Bank).

Meanwhile, Central Bank data suggest that private banking assets are close to $3.5 billion, the World Bank said in a July report. 

There is a stated desire within the government to develop a clear, overarching strategy, identifying priorities and gaps in the sector, adds Al Aswad. 

“As part of this, the authorities are revisiting the role and structure of Syria’s central Shariah board. While such a board previously existed, its mandate and scope are now under review to ensure it can support the sector more effectively.”

Other reforms include a flexible exchange rate system, permitting the use of foreign currencies (like the US dollar) as well as proposals for a new tax framework. 

Beth Morrissey, managing partner at Kleiman International Consultants, says the re-opening of the Damascus Securities Exchange, which hosts a Shariah index, is widely viewed as a major achievement.  The bourse signed a preliminary agreement with the Saudi Tadawul Group last month to enhance cooperation. 

“There is vast scope for both conventional and Islamic finance for the entire economy and I expect the use of Islamic financing tools will expand as the overall financial sector recovers and begins to develop,” adds Morrissey.

In August 2024, Syrian authorities finalised legislation on sovereign sukuk issuances, following an earlier directive to enable domestic Islamic lenders to issue them. In a post recovery situation, Belatik believes that regional collaboration and sukuk issuance for infrastructure projects should be pursued to attract foreign direct investment. 

“By creating enabling conditions for cross-border partnerships with established Islamic financial institutions, Syria can access much-needed capital for rebuilding public infrastructure,” he says.

Reintegration, personnel challenges stymie sector growth
The US, UK and EU removed long-standing sanctions on Syria in May, marking a watershed moment for global economic reintegration. No sooner had the sanctions been lifted than Syria conducted its first post-conflict international bank transfer via the SWIFT system. 

Despite the momentum, challenges continue to plague the system. Jihad Yazigi, a visiting fellow at the European Council on Foreign Relations, notes that despite the sanction ease, a key challenge is Syria’s presence on the Financial Action Task Force grey list, which relates to concerns around anti-money laundering and counter-terrorism financing standards. 

Morrissey echoes the concern. “Reintegration with the banking system requires upgrading rules and regulations as well as Central Bank oversight, which will not happen quickly. I believe they have started down the right path, but it will take time. The system will deepen more broadly when remittances are channelled through the formal system.”

In addition to security challenges, stakeholders highlight critical factors such as the lack of financial literacy and inadequate human capital as deterrents to sector progress. 

“Local expertise is limited and needs to be developed in all relevant areas. Certainly, regional support and partnerships are crucial to provide the expected levels of technical know-how,” says Mohammad Majd Bakir, director, Professional Standards Development at Bahrain-headquartered AAOIFI.

“The ordinary customer and stakeholders dealing with Islamic financial products and services lack proper familiarity. I do think that increasing awareness amongst these ranks would improve the levels of trust in and turn out to the various types of Islamic financial service offerings.”

The ‘Gulf’ factor 

Despite challenges, Syria can leverage Islamic finance in terms of trade and investment. 

“Syrian banks with ties to solid regional banking groups are best positioned to build on their groups’ operational capacity and financial resources to restore key banking services, starting with correspondent banking relationships,” the World Bank report said. 

Yazgi, adds that most Islamic banks in Syria are majorly owned by Gulf institutions, which offers them a vantage point as the country seeks to deepen economic and trade ties with the Gulf in coming years.  “Alongside Turkey, the Gulf is expected to be a primary source of capital and trade for Syria.”

Commercial Bank of Kuwait owns a 32% stake in Syria’s Cham Bank while leading shareholders of Syria Gulf Bank reportedly came from Gulf countries. Al Baraka Syria is also a unit of Bahrain-based Albaraka Banking Group.

“Syria’s membership in the Islamic Development Bank (IsDB) has been reinstated, and in light of improving regional political ties, countries such as Qatar, Saudi Arabia, and the UAE are reportedly exploring the use of Islamic finance as a way to re-engage with Syria,” says Al Aswad.

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.

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.

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.”

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. 

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.

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