Moody’s: Islamic fintechs are gaining a foothold after a slow start

LONDON 27 September 2023

Moody’s said in a new report published today that the Islamic fintech sector remains a very small part of the global fintech industry but it is building momentum.

‘’Regulators in countries where Islamic finance is firmly ingrained are increasingly focused on developing their Islamic fintech industries. Fintechs following Shari’ah principles represented just USD 79 billion in transaction volume at the end of 2021, around 0.8% of the global fintech industry, according to the Global Islamic Fintech Report 20225. But the sector’s growth was strong, up 61% in 2021 from a year earlier,’’ said Berke Batman, Analyst at Moody’s

• The Islamic fintech sector is growing fast from a low base. The global Islamic fintech sector grew by 61% in 2021 but comprises just 0.8% of the global fintech sector for conventional finance.
• Moody’s expects the sector to continue to grow as predominantly Islamic banking systems in the Middle East and parts of Asia increasingly lean towards “open” banking rules that facilitate innovations in digital finance.
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• Moody’s expects Islamic fintech assets to exceed 1% of the global fintech industry by 2025 from the current level of 0.8%.
• Islamic fintech innovation has the potential to increase the efficiency of the Islamic finance sector and promote financial inclusion in some predominantly Muslim countries like Indonesia and Bangladesh given the two country’s considerably established Islamic finance sectors.
• Countries with the greatest numbers of Islamic fintechs are Indonesia, U.K., U.A.E. Saudi Arabia and Malaysia. These countries host 59% of Islamic fintechs currently in operation globally.
• The U.K. is the largest non-Muslim country with the highest Islamic banking penetration rate. There are 45 Islamic fintechs operating in the U.K.
• Islamic fintechs provide micro-credit to the unbanked, low-cost peer-to-peer remittance transfers, as well as crowdfunding platforms allowing retail customers to invest in sukuk and other Shari’ah-compliant instruments.
• Moody’s also expects Islamic banks to forge partnerships with Islamic fintechs so extending their reach and strengthening customer acquisition.
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