 | “Muslims comprise approximately a quarter of the global population, and yet Islamic-based financial assets comprise only less than one percent of total global financial assets,” a finance expert observes. Digital investing could be an additional way to allow muslim investors around the world to invest in a Shariah compliant way. |
Islamic finance or banking was developed in the second half of the 20th century and it is based based on the principles enshrined in Islamic law, or Shariah. In practice, that means lenders cannot collect interest of any kind, nor are they allowed to invest in businesses considered to be unlawful) under Shariah law — casinos or bars, for example. Non muslim investors are allowed to invest.
Online investing is still a market of very limited dimensions in the few Muslim countries where it has established - especially compared to the Western ones - and it is almost nonexistent in many others. However, after Malaysia regulated the sector last year (we reported details about the legal framework in this article), a couple of platforms operating in a Shariah compliant way have launched and are currently gaining traction. Indeed the potential of online investing combined with islamic finance is great in the south east Asian region, with 87,2% of Indonesians being Muslims.
When looking to the Arabic countries, online investing has a less bright scenario there. Although a few platforms, operating according to Islamic finance, have launched, the road to go before digital investing becomes mainstream is still quite long. In fact, many countries lack a sparkling startup environment, but also the usage of online payments is still relatively low and in general a strong entrepreneurial and early stage finance ecosystem is missing.
Despite this, it is evident that there is space for more online investing portals operating according to Islamic finance. In fact, the Shariah compliant financial sector is growing faster than banking assets as a whole, growing at an annual rate of 17.6% between 2009 and 2013, and is projected to grow by an average of 19.7% a year to 2018. We therefore expect to see more digital investing conducted under Islamic finance principles in the next few years.
References
Liau, Y. (2015).Islamic Crowdfunding Takes Root in Asia in Boon to Entrepreneurs. Bloomberg.com
Root, A (2013). Shekra Blends Crowdfunding with Islamic Finance. Crowdsourcing.org
Islamic banking and finance. Wikipedia.com
Photo credit to: edward musiak
Online investing is still a market of very limited dimensions in the few Muslim countries where it has established - especially compared to the Western ones - and it is almost nonexistent in many others. However, after Malaysia regulated the sector last year (we reported details about the legal framework in this article), a couple of platforms operating in a Shariah compliant way have launched and are currently gaining traction. Indeed the potential of online investing combined with islamic finance is great in the south east Asian region, with 87,2% of Indonesians being Muslims.
When looking to the Arabic countries, online investing has a less bright scenario there. Although a few platforms, operating according to Islamic finance, have launched, the road to go before digital investing becomes mainstream is still quite long. In fact, many countries lack a sparkling startup environment, but also the usage of online payments is still relatively low and in general a strong entrepreneurial and early stage finance ecosystem is missing.
Despite this, it is evident that there is space for more online investing portals operating according to Islamic finance. In fact, the Shariah compliant financial sector is growing faster than banking assets as a whole, growing at an annual rate of 17.6% between 2009 and 2013, and is projected to grow by an average of 19.7% a year to 2018. We therefore expect to see more digital investing conducted under Islamic finance principles in the next few years.
References
Liau, Y. (2015).Islamic Crowdfunding Takes Root in Asia in Boon to Entrepreneurs. Bloomberg.com
Root, A (2013). Shekra Blends Crowdfunding with Islamic Finance. Crowdsourcing.org
Islamic banking and finance. Wikipedia.com
Photo credit to: edward musiak
 | About the author - Irene Tordera Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives. During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem and she works also for the European Crowdfunding Network. |
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