Global Islamic fintech market set to hit $179bn in 2026

Creative Commons

• GCC countries and UK play lead role in growth
• Next step for UK is to grow across borders
• 30% of Muslims globally live in South and South-East Asia

The global Islamic fintech market recorded $79 billion in transaction volumes in 2021.

And it is expected to grow by around 18 percent annually to reach $179 billion by 2026, according to the Global Islamic Fintech (GIFT) Report 2022 launched on Thursday.

“Covid and the subsequent digitisation push has helped to accelerate the pace at which fintech adoption is taking place,” Abdul Haseeb Basit, co-founder and principal at leading ethical digital finance advisory and investment firm Elipses, and co-author of the GIFT 2022 report, told AGBI. 

• How London became the Islamic finance capital of the West

• UK Islamic fintech wants to take on the world
• The pros (and cons) of big stars backing your business

“These factors motivated more new players to enter the market. In the dominant markets, progressive policy making and a diligent approach to fostering competition through regulation has enabled market growth beyond our previous estimates.”

The report reinforces the strong role being played by both GCC countries and the UK in advancing the growth of the global Islamic fintech market, which today comprises 375 such companies around the world. 

The findings show that the top six Organisation of Islamic Cooperation (OIC) markets for Islamic fintech, by transaction volume, are Saudi Arabia, Iran, Malaysia, the UAE, Turkey and Indonesia.

These six markets account for 81 percent of the OIC Islamic fintech market size. 

Qatar has become the latest country to achieve an Islamic fintech market size of more than $1 billion. 

The GIFT Index 2022 lists Malaysia, Saudi Arabia, Indonesia, the UAE and the UK as the top five conducive ecosystems to Islamic fintech in the world. 

The GIFT Index is a composite index of 19 key indicators covering five categories: Islamic fintech market & ecosystem, talent, regulation, infrastructure, and capital. 

It assesses a total of 64 OIC and non-OIC countries on their conduciveness to Islamic fintech activity.

UK at forefront of Islamic fintech

The UK is the second largest producer of Islamic fintechs in the world, ranking only behind Indonesia. Britain is now home to 45 such firms.

Industry analysts say this is due to its strong underlying fundamentals that support the sector’s growth. 

“The UK was instrumental in catalysing the growth of the Islamic finance industry in the early 2000s,” Harris Irfan, chairman of UK Islamic fintech panel, CFO of Gateway Global, and CEO of Cordoba Capital, told AGBI. 

“Today it is contributing to growth and innovation in the Islamic fintech sector. The UK is a pioneer in conventional digital financial services and fintech – the technology for which is readily transferable into Islamic fintech. 

“It played a key role in the development of new product innovations in Islamic finance 20 years ago, exporting top financial talent to hubs like Dubai, and this financial talent continues to be world-class. 

Irfan added: “The UK regulatory environment encourages competition and innovation and setting up a company here is inexpensive and simple.”

Global collaboration

The next step in the UK Islamic fintech industry’s evolution is to grow across borders, by joining forces with established Islamic hubs.

Irfan foresees the possibility of greater collaboration between UK Islamic fintechs and other hubs across the world. 

“Product innovation is taking place on the ground in the UK. Companies developing these products see a global market, with key target demographics in the Middle East and South/Southeast Asia,” he said. 

“We are already seeing UK companies opening offices in hubs like the Dubai International Financial Centre with a view to getting access to these key markets. 

“In addition, we are seeing collaboration in the opposite direction, with companies established in the GCC or Malaysia seeking partnerships or acquisitions in the UK.” 

Other industry experts share the view that the UK looks set to strengthen its ties and collaboration with other Islamic hubs. 

Basit said: “The UK has already been a model for other hubs to replicate, especially with progressive regulatory measures that helped UK fintechs thrive.” 

“For the Islamic fintechs founded in the UK, scaling to OIC markets is a natural evolution once they have proven their market fit. 

“The UK Islamic fintech panel, an independent forum which convenes UK Islamic fintech firms already has links to ecosystem partners in Bahrain, Qatar, Malaysia, Pakistan and the UAE. 

“A number of firms from the UK have leveraged these links and have begun operations in other markets in the last few years.” 

Scaling up

Other notable findings from the report are that almost 30 percent of the global Muslim population is concentrated in just four countries – Indonesia, Pakistan, India, and Bangladesh – across South and South-East Asia.

However, the number of Islamic fintechs serving them still account for less than seven percent of such companies worldwide. 

This presents a sizeable opportunity for both Islamic fintechs, and indeed other institutions as well. 

“The acid test for such firms in previous years has been to demonstrate scale,” said Basit. 

“This is now starting at the top end of the market with firms gaining traction and raising larger funding rounds. 

“The next tests will be to demonstrate that firms can scale internationally and that more developed firms can achieve exits for their investors.

“With the current macro environment, fundraising has become more of a challenge for startups. 

“However, should circumstances improve soon, we would hope to see a first Islamic fintech firm with a sizeable valuation emerge in the next three to five years.”

The GIFT report gathered inputs from the industry in the form of a global survey of 100 Islamic fintechs.

The businesses surveyed highlighted five key challenges to its future growth: customer education, access to capital, regulation, finding top talent and the cost of customer acquisition. 

Meanwhile, the respondents considered payments, deposits and lending, and raising funds as the top growth segments in 2022.