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This timely book addresses the effects and implications of rapid technological changes within the financial services industry on Islamic finance and Islamic banks. Exploring current challenges, opportunities and threats, the authors provide an overview of how FinTech can operate within an Islamic context, under the Shari’ah principles or the Halal framework, for example. Examining the potential opportunities of Islamic FinTech from a socio-economic perspective, this edited collection will be of use to anyone researching FinTech or Islamic Finance as well as practitioners and policy-makers involved in banking and financial services.

Inhaltsverzeichnis

Frontmatter

Emergence of Islamic FinTech

Frontmatter

Chapter 1. Emergence of i-FinTech in the Contemporary Socio-Economic Reality

Abstract
The objectives of the study are to describe the emergence of FinTech and its implications for Islamic finance industries both in Pakistan and also on the global scenario. It includes FinTech’s emergence and adaptation by different countries around the globe. It refers to the useof modern and advanced technological applications in financial services and activities. FinTech is a newly emerging innovative tool of operations and financial activities for organizations, firms, and companies. The Islamic financial services industry adopts FinTech in their business operations and activities to gain easy access to their different products, services, and other contracts and activities for customers and stakeholders. FinTech in the Islamic financial service industry is practiced by different countries around the globe. Prominent countries like, Malaysia, UAE, the UK, Indonesia, and the USA have adopted Islamic FinTech in their regions and use it to promote Islamic financial services to stakeholders in their regions. The study is qualitative in nature and uses conducted interviews from financial experts in the Islamic financial industry, bankers, and also with scholars of Shari’ah and jurisprudence. In Pakistan, the concept is new and still in its infancy. There is a lack of the necessary awareness about Islamic FinTech. Awareness campaigns such as seminars, conferences, workshops, road shows, and other types of activity are required for introducing an awareness of Islamic FinTech into countries. The Islamic financial industry needs to adopt joint ventures and alliances with highly technological companies around the globe, such as Samsung, Apple, and other dominant companies, for making and developing new Shari’ah-compliant products and services for customers. For the target segments of Islamic FinTech, Pakistan firms, companies, and organizations are focused on the young generation as their population is increasing along with their use of technology like mobile or smart phones, the Internet, and other advanced technologies. Similarly, FinTech also targets the female population and provides different financial services, products, and other related activities to them. Islamic FinTech has a great future in Pakistan, once the proper marketing and awareness campaign is launched and circulated throughout the country. The role of the State Bank of Pakistan cannot be ignored in introducing and boosting FinTech to different Islamic financial services organizations and institutions in the country. The study is original in nature and has not previously been published.
Mohd Ma’Sum Billah, Suhail Ahmad, Sahibzada Ghisaul Haq

Chapter 2. Fintech Versus I-Fintech: A Dichotomy

Abstract
As conventional financial institutions and conventional start-ups are capitalising on innovative technologies, Islamic financial institutions are yet to take advantage of such technologies. Data shows that more than $50 billion has been invested in Fintech globally since 2010; just 1% of this was channelled to the MENA region, which has a quarter of the global Muslim population (Smith, M. (2017). A Tale of Two Cities, Global Investor, viewed 13 July 2019. [online] Available at. https://fowgiliveblobstorage.blob.core.windows.net/files/GISep2017binder%20(2).pdf). The top ten global Fintech deals in 2018 were all in the US, Europe and China (Fintech Global. (2018). 2018 Is Already a Record Year for Global FinTech Investment—FinTech Global. [online] Available at: https://fintech.global/2018-is-already-a-record-year-for-global-fintech-investment/). Interest in Fintech from the Middle East has grown exponentially in the past couple of years. Fintech sandboxes and government-driven initiatives have been accelerating demand for Fintech. With the MENA region being a major Islamic finance hub, it is of no surprise that Islamic financial institutions are looking to benefit from Fintech. Practitioners believe that Fintech will offer Islamic financial institutions opportunities to thrive and develop further services to a broader market to help the industry grow further. This has given rise to a sector called ‘Islamic Fintech’. Does such a term have any substance to it? and what does it mean? How is it different from Fintech? These questions need deliberation and answers. This chapter begins with a brief introduction to Fintech and after that addresses the notion of ‘Islamic Fintech’. Thereafter, the landscape of the Islamic Fintech sector is viewed, citing some real use cases of the disruptive technology. Consequently, to demonstrate the dichotomy between Fintech in the conventional finance sector and the Islamic finance sector, six case studies are presented. Three cases are of conventional platforms, while the other three are of Shariah-compliant platforms. Subsequently, the question of dichotomy is answered. The chapter ends with some of the challenges Islamic Fintech is facing and will need to address to excel.
Faraz Adam

Chapter 3. Fintech and Maqāsid Dichotomy under the Prism of the Non-Neutrality of Techniques

Abstract
‘Fintech’ and ‘Maqāṣid al-Sharī’ah’ remain rare apart from some vague expressions conveyed, for instance, in the HBKU Workshop Fintech and Islamic Finance held at the London School of Economics in London, on 23 February (Djafri, Fares. (2017). Summary Report of the ‘LSE—HBKU Workshop on Fintech and Islamic Finance’, hosted by the Center for Islamic Economics and Finance (CIEF), College of Islamic Studies, Hamad Bin Khalifa University at the London School of Economics on February 23, 2017: 4-5; 7) and a chapter ‘Fintech and Shariah Principles in Smart Contracts’ (Rahim, N. F., Bakri, M. H., & Yahaya, S. N. (2019). Fintech and Shariah Principles in Smart Contractsm. In A. Rafay (Ed.), FinTech as a Disruptive Technology for Financial Institutions (pp. 207–220). Hershey P.A.: IGI Global: 210; 214) published in a recent book FinTech as a Disruptive Technology for Financial Institutions. The only writing devoted entirely to the subject Fintech in the light of Maqāṣid al-Sharī’ah (Mohammed, M. O., & El Amri, M. C. (2019). Fintech in the Light of Maqāsid al-Sharī‘ah. In U. A. Oseni & S. N. Ali (Eds.), Fintech in Islamic Finance: Theory and Practice (pp. 93–112). London: Routledge) was recently published in a collective book on ‘Fintech in Islamic Finance’. In spite of its interest, this writing remains very brief and has difficulties overcoming the dominant discourse on the maqāṣid in Islamic finance often associated with the five imperative necessities (al-dharūriyāt al-khams), in this case: the preservation of religion (dīn), being (nafs), understanding (‘aql), offspring (nasl), and what is beneficial to human beings (māl). The word ‘māl’, generally translated as ‘wealth’ or ‘property’, corresponds in its broadest sense to the idea of what is beneficial to human beings, as demonstrated by a recent critical study (Belabes, A. (2019). Book Review of ‘Islamic social finance’ edited by Valentino Cattelan. Journal of King Abdulaziz University: Islamic Economics, 33(2), 98–106; 184).
This discourse does not distinguish between the general purposes (al-Maqāṣid al-’āmah), the specific purposes (al-Maqāṣid al-khāṣah) and the auxiliary purposes (al-Maqāṣid al-juziyah), knowing that this field of knowledge requires a finesse of mind and a rigor of understanding (Al-Dihlawī, S. W.-A. (1992). ḤujjatAllāh al-Bālighah [The Conclusive Argument from God]. Beirut, Lebanon: Dar Ihya al-Ulum, 1; 21) in the field of jurisprudence methodology (uṣūl al-fiqh). To refer to classical authors in the domain, such as al-Juwaynī, his best student al-Ghazālī, or al-Shātibī, is a necessary but not sufficient exercise. Yet one must read their respective writings carefully with the language of Sībawayh, rather than that of Shakespeare or Molière, and seize the real epistemological spans far from any essentialism under the effect of a constant desire for generalization, as some linguists rightly point out (Wittgenstein, [1933-1934]1965: 68).
Abderrazak Belabes

Regulatory Frameworks of Islamic FinTech

Frontmatter

Chapter 4. Central Banks and Financial Authorities: Towards the Advancement of I-Fintech

Abstract
In the year 2007 British banks witnessed the first run on to their very own banks due to various scandals that tarnished the trust and reputations of the banks and the banking industry. Simultaneously, the sub-prime crisis was happening to major banks in the US, France and some other countries that were sharing a high systemic risk. When a systemic risk is high and at the same time if banks don’t keep enough reserved capital to compensate their clients during a crisis period, this situation could lead to a recession, high unemployment, and eventually economic collapse. Since then, stakeholders lost their trust in the banking system globally and were demanding for a more socially responsible, ethical, and systemic stable form of banking. True enough, in the wake of the 2008 global financial crisis (GFC), Islamic finance banking and the Fintech industry were proliferating to fill the existing void in the finance industry by their innovation and a different approach to business transactions. At that time, the faith inspired in the form of ethical banking was enjoying steady growth. Advancement in technology was also facilitating the rapid growth of revolution in Islamic-Fintech (i-Fintech) industry.
Nafis Alam, Abdolhossein (Pejman) Zameni

Chapter 5. Analysis of Fatwas on FinTech

Abstract
By the end of the twentieth century, the global financial system began experiencing a rapid financial technological development, which culminated in the first decade of the twenty-first century, with extraordinary increase in innovations of financial instruments (mostly technological). Today, a new wave of technological innovations often called “Fintech” is gradually dominating the financial sector. According to KPMG (2017), “the total global investment in Fintech companies increased from US$9 billion in 2010 to over US$25 billion in 2016. Venture capital investment has also risen steadily, from US$0.8 billion in 2010 to US$ 13.6 billion in 2016”. According to consultancy Accenture, more than US$50 billion has been invested in Fintech globally since 2010.
Mohamed Cherif El Amri, Mustafa Omar Mohammed

Chapter 6. An Evaluation of Smart Contracts: Practices, Legality, and Sharī‘ah

Abstract
The increasing usage of blockchain technology in digital investment, cryptocurrency, and financial technology (FinTech) has led the global financial market to a new innovation of concluded contract. Instead of depending on legally drafted documents, smart contract is concluded through the computerized algorithm. Based on the smart contract, the legal relationship between the involved parties is completed online without being limited to time and space. Thus, the application of smart contract needs to be explored from both Common Law and Sharī‘ah perspectives. By adopting qualitative research design and doctrinal legal analysis, this research evaluates the best practices of the selected Commonwealth countries in accepting the application of smart contract. While evaluating the practices on smart contracts from the majority of Commonwealth countries, Malaysia is selected to represent the Commonwealth country with a majority Muslim. Additionally, the practices on smart contracts as applied in Australia and United Kingdom are also appreciated. The evaluation of smart contract from Sharī‘ah perspective is done by investigating the views of the four main Islamic schools of legal thought, which are, Mālikī’s, Ḥanafī’s, Shāfiʿī’s, and Ḥanbalī’s. A comparative legal approach is considered in analysing similarities and differences between the perspectives of Common Law and Sharī‘ah relating to the smart contract. These approaches are necessary to be carried out in ensuring the workability of smart contracts in blockchain for Sharī‘ah-compliant start-ups. This is essential especially to those Muslim countries that stand with Common Law background. As a part of the findings, the researchers found that as long as the smart contract fulfils the required legal elements as required under Common Law and the principles of Sharī‘ah, it can be used and referred to by the concluding parties.
Nor Razinah Mohd. Zain, Khairul Azmi Mohamad

Chapter 7. Digital Smart Contracts: Legal and Shari’ah Issues

Abstract
This chapter seeks to examine recent issues that pervade digital contracts also known as smart contracts. Discussions and analysis will be made to understand smart contracts, its key features and applicability in modern commerce as well as its application in Islamic finance. Examples and reference will be made to contemporary smart contract and its symbiosis with blockchain technology and how smart contract has revolutionized the traditional concept of contract. Finally, the author will juxtapose the key legal characteristics of smart contract against the cardinal principles of Islamic finance governing Islamic commerce and the relevant Malaysian legislations and discuss the issues surrounding them.
Ainul Azam bin Ahmad Khamal

Chapter 8. Judicial Procedures in I-Fintech: The Malaysian Experience

Abstract
This chapter seeks to examine and discuss the vagaries of prevailing procedures relevant and available to e-commerce and/or I-fintech disputes. This brief would invariably entail discussions and analyses on dispute resolution mechanisms under the prevailing judicial—civil courts and other alternative dispute resolution (‘ADR’) legal—framework.
The chapter will also navigate, highlight and analyse models of ADR framework that offer fintech or I-fintech dispute resolutions and juxtapose them with ADR models and procedures available or potentially made available under the Shari’ah–Islamic financial system.
Finally, the author will highlight and argue that broader context of institutionalized Shari’ah–Islamic I-fintech judicial framework would not only be consistent and comparable with the rigours of existing modern dispute resolution legal framework demands but also underscore a viable case of an alternative judicial legal framework that not only is effective but also, more importantly, represents vibrant alternative judicial procedures to serve the needs and demands of any present and future I-fintech disputes.
Ainul Azam bin Ahmad Khamal

Islamic FinTech: Its Mechanisms and Applications

Frontmatter

Chapter 9. The Forms and Effects of Cryptocurrencies in a Dual Banking System

Abstract
This chapter examines the effects of private cryptocurrencies in dual system (conventional and Islamic), an area which has not been critically addressed in the literature. Despite the benefits of private cryptocurrencies, we highlight some challenges that private cryptocurrencies pose for financial stability. We show that the widespread use of private currencies causes a compromised payment system notably with the absence of guarantee mechanisms. Moreover, the impacts of cryptocurrencies on commercial bank activities may exacerbate financial stability risks. The loss of control over monetary policy and the lack of lender of last resort of Central Bank lead to higher exposition to systemic risk. Nevertheless, the cryptocurrency compatible with sharia can avoid many concerns and ensure better financial stability and social cohesion in a dual system.
Khoutem Ben Jedidia, Hichem Hamza

Chapter 10. Islamic FinTech and Financial Inclusion

Abstract
The modern Islamic finance as an offshoot of financial engineering is the product of permissible innovation as a manifestation of the dynamism of Islam which allows for permanence and continued relevance of Islam in any age to come. Using technology or any permissible means to bring about financial solutions in society that ease human life is an integral part of the overall objectives of Shariah. Speaking in economic terms, Sharia strives at individual prosperity as much as of the society on the ideal that prosperity of individuals that make up a society underlies the prosperity of the society. In this modern age and time, financial inclusion constitutes a fundamental component of most governmental policies and action plans aimed at ensuring prosperity of society via improved social welfare to eradicate poverty and enhance living standard. Financial inclusion constitutes a fundamental component of such policies and action plans. Accordingly, Islamic finance is said to be committed to the ideal of financial inclusion having regard to its ideal of bringing prosperity to individuals and society in such a way that will translate to and help economies grow. This is to be pursued through every permissible means now available or to be invented in future, within the confines of Islamic values of financing.
Aishath Muneeza, Zakariya Mustapha

Chapter 11. Enhancing Financial Inclusion Using FinTech-Based Payment System

Abstract
Financial inclusion has gained a lot of attention in the recent years. In its simplest form, financial inclusion refers to a person having an account at an established financial institution (Zins, A., & Weill, L. (2016). The Determinants of Financial Inclusion in Africa. Review of Development Finance, 6(1), 46–57. https://doi.org/10.1016/j.rdf.2016.05.001). Demirguc-Kunt et al. (2018). The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution. Washington DC: The World Bank. https://doi.org/10.1596/978-1-4648-1259-0, define it as “access to and use of formal financial services.” It is estimated that 1.7 billion adults do not have financial accounts around the world, where almost half of them are concentrated in seven developing economies, namely China, India, Pakistan, Indonesia, Nigeria, Bangladesh, and Mexico. Whereas the vast majority of adults in developed economies pay their utility bills through accounts, only about one in four adults in developing countries do so using accounts (Demirguc-Kunt et al., 2018: 50). The patterns of the unbanked vary with the different economies. In economies where half or more of the adults are unbanked, the unbanked from poor households have the same likelihood as those coming from rich households (Demirguc-Kunt et al., 2018: 4). While in economies where 20–30 per cent of the adults are unbanked, the majority of the unbanked are most probably from poor (Demirguc-Kunt et al., 2018: 4). An analysis of these numbers shows that most of the unbanked in developed countries come from poor households.
Mohamed Cherif El Amri, Mustafa Omar Mohammed, Ayman Mohamad Bakr

Chapter 12. Islamic FinTech and Financial Inclusion

Abstract
PurposeFinTech revolutionized financial services and created efficient solutions to target underserved people. This chapter aims at understanding the way Islamic FinTech can improve the Islamic finance industry in order to achieve economic inclusion.
Design/methodology/approachThe chapter presents a conceptual framework based on case studies and literature review describing the way Islamic FinTech can serve to upgrade economic inclusion efforts.
FindingsThe chapter shows that Islamic FinTech can revolutionize the way Islamic financial services are provided and to ensure an integration between the Islamic social finance and the Islamic financial institutions.
Research limitations/implicationsThe chapter focused only on the implemented solutions without giving an insight about how new technologies such as blockchain can enhance the efforts and the results.
Practical implicationsThe chapter demonstrates that Islamic FinTech should be seen as a fundamental pillar of any financial inclusion policy. The latter should target economic inclusion.
Social implicationsIn general, any financial inclusion policy drafted by Islamic financial institutions shall target economic inclusion and adopt Islamic FinTech.
Originality/valueFinancial inclusion literature focuses mainly on the access to financial services. This chapter upgrades the initiatives and efforts to achieve economic inclusion.
Ahmed Tahiri Jouti

Chapter 13. Utilization of Digital Technology for Zakat Development

Abstract
The nature of digital technology, which can induce efficiency, transparency, and access widening, is basically in line with the objective of zakat in enlarging the impact of zakat for poverty alleviation and public welfare. However, lack of advancement on the use of digital technology may lead to a failure in addressing poverty and equality problems. This emphasizes the importance of digital technology which is able to tackle the entire process of zakat management in terms of operation, collection, and distribution. This study analyzes the endeavor of the National Board of Zakat of Indonesia (BAZNAS) in applying digital technology to create muzakki and mustahik identification number in order to establish a structured database. On the fundraising side, BAZNAS collects zakat fund through website, mobile application, artificial intelligence, e-pay, as well as e-wallet to ease muzakki in paying zakat. In the case of zakat distribution, BAZNAS utilizes the technology to create ATM Beras (Rice Automatic Telling Machine) that is designed for the poor to get easy access to rice using their identification card on the machine.
Irfan Syauqi Beik, Randi Swandaru, Priyesta Rizkiningsih

Chapter 14. I-FinTech and Its Value Proposition for Islamic Asset and Wealth Management

Abstract
Artificial Intelligence (AI) is a highly evolved area of computer science that strives to create intelligent machines that can replicate certain human behaviour without its irrationalities for better predictability and consistency. Advanced AI that utilizes machine learning makes it possible for machines to learn from previous data (experience), adjust to new inputs (instructions) and perform tasks through updated algorithms. Through sophisticated algorithms, modern AI systems can be trained to accomplish specific tasks by processing large amounts of data, obtaining insights and recognizable patterns in the data to act upon. As such AI has become a hot topic, with much interest on its advantages to the highly regulated financial services industry.
Similarly, blockchain technology also has the potential to both enrich and improve financial processes and asset management systems, and progressive corporations have invested and devoted resources to utilize and incorporate blockchain into their businesses. The use of distributed ledgers or blockchain has been explored in areas such as compliance and securities settlement, and these technologies could also be used to improve efficiencies in asset management.
In this chapter, we provide a short discussion of AI and blockchain applications in asset management and understand the benefits and the shift in processes, as well as the challenges that need to be overcome for practical applications for AI and blockchain and how to approach such innovations.
Hazik Mohamed

Chapter 15. The Opportunities of Digital Wallets from an Islamic Perspective

Abstract
Digital wallets are gaining popularity in recent years. Besides convenience, the promotional offers provided by these wallets are among the primary reasons for people to be attracted to use the wallets. This chapter explores Shariah permissibility of these promotional offers. The chapter finds that the money kept in digital wallets can be looked at from two different perspectives, and the Shariah opinion on the permissibility of promotional offers will vary according to the perspective. The chapter argues that if the money kept in digital wallets is considered as a loan-based deposit (qard), then the promotional offers or additional benefits provided by the wallets are not permissible, unless the benefits are fully discretionary. However, the chapter also argues that the money does not hold its original form as soon as it is credited to digital wallets, that is, money transforms into a new form of digital currency. In this case there may not be any Shariah issue on the additional benefits received. The paper also identifies several issues related to digital wallets that require further research.
Mezbah Uddin Ahmed, Kazi Md Tarique

Chapter 16. The Optimization of Blockchain for Greater Transparency in Zakat Management

Abstract
Technology has developed rapidly in the last decade. Many business sectors have been affected by technological changes. They are required to adapt their business process to the latest technology. The digitalization of financial services became proof that technological changes have shifted the traditional services in financial institutions. One of the innovations developed in digital services today is blockchain technology, which was first developed in 2008 by someone with a pseudonym Satoshi Nakamoto. The uniqueness and advancement of the blockchain technology may be utilized and adopted by any institution, including zakat institution in managing zakat funds more accountable, effective, efficient, and transparent. Hence, the blockchain technology could assist zakat institution in improving its sound amil governance. Thus, the paper aims to elaborate further on the possibility, challenges, and opportunities for zakat institutions in adopting blockchain technology in their zakat administration.
Irfan Syauqi Beik, Muhammad Hasbi Zaenal, Abdul Aziz Yahya Saoqi

Chapter 17. Zakat Digital Management Techniques

Abstract
Today, poverty is one of the biggest challenges that exist in the world [Kuzudisli, Fight Against Poverty From the Islamic Point of View: The Wealth Distribution and Share. 5(1), 9–15 (2017). https://​doi.​org/​10.​17265/​2328-7144/​2017.​01.​002]; it is regarded as the most crucial and the most significant social problem of the modern age [Saifee, Islamic Strategies for the Elimination of Poverty from the Society (June 2012), 2018. https://​doi.​org/​10.​13140/​RG.​2.​2.​28281.​16486], a danger to belief, to morality, to safety, to family, to society, a plague and a misfortune [Qaradawi, Fekeh Al Zakat, 1123 (1973)], a destructive force from all aspects [Salleh, Contemporary Vision of Poverty and Islamic Strategy for Poverty Alleviation (2017). https://​doi.​org/​10.​1177/​2158244017697153​], a curse at individual as well as at a community level and a threat to humanity [Mian Akram and Afza. Dynamic Role of Zakat in Alleviating Poverty: A Case Study of Pakistan (56013), 2014]. According to UNDP, more than 3 billion people representing approximately half of the world’s population, live on less than $2.50 a day. Moreover, more than 1.3 billion people live with less than $1.25 a day. Half of the global poverty is located in the Muslim majority countries. Definitions of poverty are varied. However, the UNDP adopted a few years ago in the Human Development Report the Multidimensional Poverty Index (MPI). The MPI tries to capture some human deprivations at the household level across the same three dimensions as the HDI (health, education, and living standards). MPI covers ten deprivation indicators, including school attainment and attendance, nutrition, child mortality, assets, and access to some essential services. Currently, 26.5% of adults who are employed are part of the working poor representing less than $3.10 a day in purchasing power parity terms. If poverty is not controlled soon then it will be alarming.
Mustafa Omar Mohammed, Aroua Robbana, Houssemeddine Bedoui

Chapter 18. Zakat Calculation Software for Corporate Entities

Abstract
Ensuring socio-economic justice, eradication of poverty and equitable distribution of wealth are among the primary objectives of Islam. Even so, a significant number of Muslims around the world are deprived of their basic needs. The scenario only worsens in times of financial and political turbulence. There is a desperate need to find sources of funding to rescue people from their miseries and offer sustainable solutions. Zakat has great potential to meet the funding needs. This chapter argues that zakat contributions will be amplified if corporate entities pay zakat as legal persons or on behalf of their Muslim shareholders. This chapter proposes development of a zakat calculation software to facilitate corporate entities and Islamic financial institutions calculating their zakat obligations reliably. Development of such software requires Islamic finance research entities to team up with information technology experts. Prominent Shariah scholars will play the essential role of validating and endorsing the Shariah compliance of the software.
Mezbah Uddin Ahmed, Noor Suhaida binti Kasri

Chapter 19. Fintech in the MENA Region: Current State and Prospects

Abstract
Applying descriptive, inductive and analytical methodologies this chapter explores the current state and prospects of Fintech in the Middle East and North Africa (MENA) region—a predominant Muslim area whose financial systems are not deepening yet. The chapter is divided into three sections. Section 1 examines the premises, promises and risks of Fintech. Current state and prospects of Fintech in MENA region is the focus of Section 2. Finally, Section 3 provides a summary and concludes with a few remarks and recommendations.
Ahmed Belouafi

Chapter 20. The Risks of Islamic Fintech

Abstract
The article explores the risk factors that trail the introduction of technology into Islamic finance in Nigeria. While Islamic finance is relatively nascent in the Nigerian financial sector, it would not be out of place to underscore the impact it has made. Borrowing from its conventional counterpart, Islamic finance has largely followed the trend and development to structure and market its offerings to the Nigerian public. Typically, Islamic finance is faced by similar risk exposures as documented for its conventional counterpart which include strategic, financial, regulatory, operational, technological and political risks. The additional peculiar risk exposures are Shari’ah compliance and business partnership risks. By and large, the practical experience in Nigeria suggests herculean hurdles for Islamic finance to cross to give birth to financial Eldorado.
Tajudeen Olalekan Yusuf

Chapter 21. TakafulTech for Business Excellence and Customer Satisfaction

Abstract
Insurance vis-à-vis takaful represents a tool of prime importance in modern economies. It enables the insureds to reduce and better manage their risk exposures. The basic feature of an insurance contract is that the insured buys a future promise of payment contingent upon the occurrence of specified events. This means the insured pays his consideration from the very beginning of the contract. But before the insurer is called to “perform its part”, the security profile of the insurer may have changed with time. Therefore, the long-term reliability of an insurance/takaful company must be beyond doubt. This has led the regulatory authority to enact regulations aimed at securing the long-term reliability of insurers. The concern for consumer protection has expanded the scope of insurance supervisory body, and therefore, greater consideration may be given to insurance consumer protection measures. Supervisory body need to frame rules/regulations, guidelines to ensure customer protection measures. Strong commitment, integrity and honesty are essential qualities for all positions within the insurance industry. Further, to keep up with the times, on-going training and retraining of key personnel is a necessity. The government regulatory body need to ensure that the insurers and Takaful Operators (TO) adhere to the basic rules and ethics of business.
Kazi Mohammad Mortuza Ali

Islamic FinTech: Its Challenges and the Professional Way Forward

Frontmatter

Chapter 22. The Challenges of Cryptocurrencies and the Shariah Paradigm

Abstract
Overreliance on centralized system, that is, the ecosystem built on trust and thus there ought to be a trusted party for the mechanism to work, was seen as the crux that prevented the existence of an effective and true electronic payment system, that is, one that’s truly non-reversible. Bitcoin was introduced as an answer to that (Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System. bitcoin.org, 2008). It gave rise not only to a whole new system of electronic payment akin to the more original mode of trading, it also gave birth to the new world of cryptography. What’s interesting is that despite its wider global acceptance, such initial introduction of cryptocurrency raised many issues more than the issues its introduction sought to resolve. The questions raised and issues arise not only from the commercial but also regulatory point of view. As Islamic finance is growing and due to the borderless and nationless nature of cryptocurrencies, it becomes necessary that we also examine it from Shariah view point. Hence, in this chapter, after the general discussion of cryptocurrency and its characteristics, we take for case study the two celebrated cryptocurrencies before we will see how Shariah perceives cryptocurrencies and how cryptocurrencies are being regulated. Thereafter, we highlight issues and challenges, and we put forward our recommendations and the way forward for the issues and challenges surrounding the cryptocurrencies.
Hurriyah El Islamy

Chapter 23. Digital Technology and Its Impact on Islamic Social Finance Literacy

Abstract
Indonesia is one of five middle-income countries that remains trapped in the area where the richest 10 percent of their population continue to conquer a much greater share of the national income than 40 percent of the poorest. Fighting poverty and injustice are the main objectives of Islamic finance, and thus the society may live with good welfare and reach maqasid sharia. Within the Islamic finance sector, digital technology has emerged in the middle of this nascent industry. Financial sector has utilized the commencement of digital services to enhance its coverage, especially when government is promoting financial inclusion. This paper also elaborates Islamic social finance industrial solution to improve digitalized application as well as justifiable recommendations that followed it. Daily lifestyle of middle class population has switched the payment system, from manually transferring money through conventional banking services into employing e-banking facilitation for social funds-related transaction. A simple transaction leads to tremendous growing of the shifting social class penetration. This phenomenon has put BAZNAS to target 30 percent of zakat and charity transactions are done via digital platform in 2020. As a result, in 2020, the zakat literacy index survey showed that the surveyed Indonesia’s population has a moderate level of literacy, with a score of 66.78. Basic knowledge of zakat contributed the highest score among the dimensions. It seems that zakat institutions still have a homework to bring Islamic social finance literacy into society, particularly via digital frameworks.
Irfan Syauqi Beik, Laily Dwi Arsyianti

Chapter 24. The Direction of Future Research on i-FinTech

Abstract
The effect of the fourth industrial revolution, coupled with three core technological drivers, namely, automation, disintermediation and decentralization, has bought about an unprecedented change in the global financial industry. The global Fintech investment has reached $57.9 billion in the first half of 2018 (Islamic Fintech report-2018). Top-ranked financial institutions have accepted the need for change and they are now investing in data analytics, artificial intelligence (AI) and Big Data. Moreover, 77% of them have targeted to introduce blockchain in the system by 2020.
Kazi Md Tarique, Mezbah Uddin Ahmed

Backmatter

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