In a world reeling from all sorts of crises the global Islamic finance industry is growing. Growth is knocking at the door of Islamic finance. Start-ups and entrepreneurial businesses in the Islamic economy industry verticals are increasingly demanding for innovative financing. Emerging country economies are showing a growing interest in the Islamic finance framework primarily for its’ socio-economic benefits.
But growth cannot occur in isolation to the economic landscape surrounding the industry. The recently released Global Report on Islamic Finance titled Islamic Finance A Catalyst for Shared Prosperity, by The World Bank and The Islamic Development Bank Group, depicts the issue of the widening disparity of global wealth that has led to severe inequalities which in turn is adversely affecting economic growth. The report focuses on how Islamic finance can actively contribute towards global economic growth.
What Now Islamic Finance
Digital disruption is coming straight at the Islamic finance industry. It is coming through people, in the form of an increasingly young workforce and entrepreneurs, who are digital natives with high preference towards technology for all their interactions and it is coming through technology that is being adapted faster than ever before. The impact is on the significant behaviour changes with regards to expectations on service and products from companies. Historical business models and marketing channels are now becoming redundant resulting in companies having to look at how they can re-invent themselves. The financial sector is feeling this pain currently and Islamic finance cannot escape this in-coming change.
FinTech, in its various avatars, has already created new types of business models. Utilising technology and talent effectively and efficiently, in fulfilling perceived need-gaps of customers, these companies are gaining the volume required. As a result of which regulatory changes are now being evaluated and it is a matter of time before the same are implemented. Potentially this is a high-risk scenario for Industry stalwarts as the playing field is changing. Not acting on this now would impact heavily on business continuity and sustainability. In order to capitalise on the growth opportunities and build business sustainability the industry has to invest in technology & talent at a faster pace than it is currently doing.
Technology & Talent in Islamic finance
Technology and Talent make or break any organization. For most commercial companies profitability is the end objective of all activities. Sustainable profit occurs when companies ensure positive social impact, of their business activities, on the eco-system they operate in by ensuring economic growth and self-development of their employees and stakeholders. Yet both are often lost in the daily rush of what needs to get done. It’s no different in the Islamic finance industry.
The public domain has a lot of stories on start-ups and established corporates who have brought about beneficial change, in their business model, based on the investments they have made in technology and their talent. These provide significant learnings that the Islamic finance industry can use in disrupting itself positively as preparation for the changing landscape.
Technology states The Economist, in its report titled Asia-Pacific Digital Disruption- The next set of wave, – in the form of ‘Internet of Things’ (IoT), Virtual Reality (VR), Augmented Reality (AR), Artificial Intelligence (AI), Consumer Robotics and Smart Assistants is sweeping in and Asia is at the forefront of adoption, with its high population, urbanization and growing consumer economic power. As other industries adapt to the consumer behaviour change that these technologies will bring about, its impact on Islamic finance cannot be under estimated. Customer experience, from need to fulfilment, will change massively. In this scenario companies will have to re- configure their business model and re-think their market approach. To do this they would have to invest in talent that understands the benefit of the technology and can utilise it effectively and efficiently.
Talent that can understand the end-benefit of technology and has the necessary leadership and analytical skills coupled with working in a positive-thinking work culture environment, is critical in creating a strong competitive advantage.
Whilst the Islamic finance industry does undertake a significant amount of training for its talent, there are a couple of gaps. First from a critical analysis skill perspective, there is a gap in knowledge learning of technology benefits in business sustainability and marrying the same with functional competency skills that an Islamic finance professional needs in a daily role. Second is creative thinking skill which allows the professional to undertake lateral thinking and connect the dots between technology and market need to come up with products and services that enable a company to be competitive.
Obtaining knowledge learning is very different from attending seminars, talks, short programs and forums to hear about the subject. Such learning needs high degree of collaborative partnership between the industry and academia where the learning content enables experimentation, creativity of thought and practical simulation. For the Islamic finance industry this may seem to be new. But it is not. In the world of engineering, pharma and banking to name a few sectors such creative collaborations have, historically, given innovations resulting in significant benefits for the companies, the academic institutions and the industry as a whole.
To create such output the Islamic finance industry, both academia and industry, needs to change its current approach to business. To benefit from technology and talent new thinking and new approaches have to be undertaken. A learning culture, where emphasis is on technology utilisation and talent development, has to be given priority in order to be able to develop new business models and new service deliverables that will enable the industry to capitalise on the growth opportunities.
Time for a paradigm shift
For any industry sector today profit can no longer come at the expense of the social community within which the industry operates. The Islamic finance industry does not operate in isolation to its environment and it simply will be unable to create growth and profitability without articulating and tangibly delivering social benefit first and foremost.
Whilst asset growth, increase in Islamic social responsible investment and convergence of ESG and Islamic finance are occurring the industry is yet to be pro-active or future-looking. As a global industry, that impacts society significantly, the Islamic finance industry needs to demonstrate its efficacy and economic growth value-proposition clearly and efficiently through tackling key social issues and building social capital for sustainability.
This article was first published in Wahed Online Islamic Finance Journal on March 27, 2017.
 World Bank and Islamic Development Bank Group. 2016.Global Report on Islamic Finance: Islamic Finance:
A Catalyst for Shared Prosperity.
Washington, DC:World Bank. doi:10.1596/978-1-4648-0926-2. License: Creative Commons Attribution CC BY 3.0 IGO
 Asia Pacific’s Digital Disruption: The next set of waves is an Economist Corporate Network (ECN) report, sponsored by Dentsu Aegis Network November 2016