العدد الحالي: ايلول/ سبتمبر 2018       اختر عدد :
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كلمة المجلس العام

Abdelilah BELATIK

Secretary General of CIBAFI

Welcome to the 47th edition of the Global Islamic Economics Magazine (GIEM). As always, it is our pleasure to keep you updated with the latest developments, and the current challenges and opportunities in the global Islamic finance industry. The GIEM also serves as the platform for CIBAFI to keep its stakeholders informed about its activities and key initiatives, and inform about development areas in the finance and banking industry.

As part of the CIBAFI’s first Strategic Objective of Policy and Regulatory Advocacy, CIBAFI is engaged in the consultation to provide comments on the Basel Committee on Banking Supervision (BCBS )’s recently issued revisions to the operational risk capital framework. The proposed revisions to the operational risk capital framework are part of BCBS’s broad objective of balancing simplicity, comparability and risk sensitivity. This new Standardised Measurement Approach (SMA) for operational risk builds on BCBS’s earlier consultation paper issued in October 2014.

As part of uncovering newer paradigms of the financial industry, CIBAFI will explore the potential of ‘Fintech’ at a Special session on Fintech and Digital Financial Services at the CIBAFI Global Forum held in Manama on 3-4 May 2016.

In today’s dynamic business world the prevalence of mobile phones has brought numerous possible services on the fingertips of the consumers. This includes services that the banking and financial services industry provides, which not only has brought convenience and improved user experience to a next level, but also has redefined the traditional ways and means of providing and availing financial services. This has undermined the banks’ advantage and ability of physical distribution of services that banks previously enjoyed. A new age of FinTech companies and startups have started to make an impact on the traditional banking and finance industry. Riding on the globally available transparent data, coupled with a significant decrease in the cost of computing power, Fintechs are on the rise.

While Fintech companies do not claim to replace all or most of the services that banks currently provide, these companies have been smart enough to pick areas that can drastically change the way banks manage their affairs. For example, smarter payment systems, personalized customer services, financial management information tools, such as automated softwares instead of bank advisers etc. Moreover, Fintechs that focus on the retail market are expected to provide a paradigm shift and build sustainable businesses, and are likely to reshape many areas of financial services industry.

TheFintechs will also play an important role in the reduction in the cost to serve the customers and is poised to begin a new ecosystem in payment and related areas, and discover new products and services, that are delivered in new ways.

The Fintech companies have also found innovative ways to engage with the existing ecosystem of the banks, aiding and collaborating with them in their major functions. For example, Fintech company Lending Club’s credit supplier is Web Bank with agreements on loan receivables, sale and marketing agreement in place between them. Some other Fintechs also provide enhanced digital-wallet customer experience in partnership with banks.

One of the anticipated challenges with Fintech would be that, presently barring a few, most jurisdictions do not have well formulated regulations to control their activities. For example, monitoring crucial issues such as compliance, anti-money laundering, KYC, various risk-related requirements etc. might pose a major challenge moving forward. Once Fintechs begin to make a significant impact to the financial services industry, and they will be however be expected to be under the financial regulatory purview. As a result, the speed of growth of Fintechs may rely on regulations that will govern them, but it is unlikely that it will change the universal course of its growth.

Growth in Fintechs is also a wake up call not only for conventional banks and financial institutions but also for the Islamic ones, which have not yet considered upgrading their technologies, to streamline their internal processes and secure and manage customers’ data, and leverage from their existing relationships with them.

Some of the existing breakthroughs in Fintechs have demonstrated how small businesses can grow and flourish. Tools for better merchant intelligence and stronger customer connection, delivered with unique style and standing, help these companies to stand out in gaining the competitive edge in providing cross-channel and cross-product experiences. Fintechs have shown their presence in some of the major retail-banking businesses, including consumer finance, mortgages, lending to small and medium-size enterprises, retail payments, and wealth management.

Islamic banks may take a cue for developing their SME sector in identifying opportunities for innovation in this area. For example a group of six Malaysian Islamic banks recently launched a sharia-compliant investment platform that could shift the role of Islamic lenders to investment intermediaries from credit providers. More recently, the Islamic Fintech Alliance (IFT Alliance), based in Singapore, a global collaboration spanning from Southeast Asia to France and Qatar, was launched in Kuala Lumpur with a goal to “facilitate the adoption of finance technology among Muslims”.

All said, these digital disruptions are here to stay, with or without regulations, and banks, including the Shariah compliant ones need to move in sync with these changing business scenarios and catapult from their existing positions to leverage from this Fintech wave.

CIBAFI will continue to focus on its role as an important link between the various stakeholders of the Islamic financial industry in achieving its strategic goals, and bring to you the latest updates on things that matter, both from inside and outside the Islamic finance industry. Stay tuned!