The role of Islamic banking in digital economy

According to EY report on Islamic banking, the total Islamic finance assets of commercial banks increased 17% between 2009 and 2013 reaching to $778 billion. The world economic forum predicts a further increase for Islamic financial services in the coming years as a vehicle to boost sustainable economic development, the Sharia compliant financial services is already reaching a $2 trillion and most global banks are participating in this niche market. Dubai and Malaysia has taken progressive steps towards the development of comprehensive framework for Islamic digital services where MDEC (Malaysian Digital Economy Corp) is working on a framework for standardizing the Islamic financial services and DIEC (Dubai Islamic Economy Centre) is also working on different initiatives to drive the adoption of Islamic standards in different sectors. The digital economy is relatively new concept emerged from economic and social activities enabled by information technologies such as internet, mobile and sensor networks. However, with the rapid development and change in technologies, media and telecommunication Digital Islamic services is still largely untapped which shows greater demand for these services between the young Muslims. The middle east and sub-Saharan Africa is emerging and changing in many ways being demographical or political, with that in mind the adoption of new technologies and trends remain unclear with these dynamic changes, and variables where such adoption will be influenced by the factors dictated by the key players being investors, mainstream businesses, non-governmental organizations or government policies. A recent example was to ban circulation of Bitcoin in many of the markets in absence of Digital regulations to standardize the consumer services. The Middle East and Africa is home of more than 600 million Muslims which represents 36% of the overall Muslim’s as well the prospects within the Digital Services are noteworthy, yet the widespread Islamic digital services are still humble and neglected when compared with other markets, a good example is there is no venture capital funds in the Middle East specifically targeting the Islamic needs which leaves a gap between demand and supply that usually filled with non-Islamic services. Banks should focus on the impact on Digital Islamic financial services and the role they play in building a cohesive digital economy based on Sharia regulations. Islamic banking growth will be driven by the strong need for Islamic financial products, some banks have offered complex structured services to their clients either for return enhancing or for hedging needs, these banks are mainly focusing on affluent and net-worthy segments; other offered wider services to their clients such as loans, savings and mortgages which are mostly offered as an alternative for conventional banking. So what about Digital services, youth, women and the role that banks should be playing in the overall picture of driving economic development and the well-being? In spite of the noteworthy and growing need for Islamic banking, yet the empirical evidence regarding the effect of Islamic banking transactions on economic growth has yet to be analysed further.