Islamic Fintech Industry is growing very fast in Pakistan as Pakistan provides a huge untapped market, which was previously excluded from the financial circle. It is a way of Shariah-compliant, transparent, digital, easy, and quick banking facilities that are cost-effective and completely automated and standardized. Many new companies are coming to fulfill this need in Pakistan. Pakistan is home to many Islamic countries with a population of over 180 million people. The country has only 1 bank owned by the government and with a total population of 18 million people and 80% of them are illiterate most of the population does not have any idea about banking or financial transactions. This huge market opportunity for Islamic Fintech is driving the growth of Fintech Companies in Pakistan.
The population of Pakistan is mostly Muslims who follow the guidelines of their religions i.e sharia law (Islamic law). The main aim of Islamic Fintech is to provide a solution to the basic issues faced by Muslims in the current banking system and provide them with a solution in line with the teaching of their religion. There are many challenges associated with the traditional banking system such as long waiting times, high charges, poor service, etc. These are major drawbacks of the traditional banking system that many Muslim users don’t want to use the service of traditional banking. In addition, many Islamic banks are also facing problems related to documentation process due to lack of knowledge and skill to operate these systems.
Some of the key areas where the Islamic finance model can be used today are as follows:
Education – To make education easier for children and adults alike. Health Care – To make health care more accessible for patients. Business – To facilitate business transactions. Finance – To enable access to credit for individuals and businesses specially SMEs. Insurance – To allow insured customers to pay less for insurance premiums. Real Estate – To allow real estate owners to sell faster, at higher prices and to reduce costs associated with buying and selling property. Trade – To allow traders to buy and sell goods without delay. Social Services – To allow social workers to offer services to needy clients without being limited by the traditional banking rules. Micro-Finance – To help micro-finance institutions (MFIs) expand into underserved markets. Islamic Banking – To provide an alternative to conventional banking services. Islamic Credit Cards – To provide better protection and security to cardholders and merchants. Islamic Investment Funds – To enable investors to invest in asset classes that are currently unavailable. Islamic Brokerage – To provide investment opportunities to small investors. Islamic Hedge Funds – To create risk management tools to protect against volatility. Islamic FinTech Startups – To create innovative technologies and products to serve the needs of Muslim consumers. Islamic Financial Products – To create products that adhere to Islamic principles. Islamic Capital Markets (ICM) – To create a capital markets infrastructure that is compliant with Islamic principles. Islamic Real Estate – To create a marketplace that facilitates the purchase and sale of real estate. Digital Islamic Finance – To develop digital protocols that address the unique requirements of Islamic finance. Islamic Asset Management – To manage assets according to Islamic principles. Islamic Technology – To provide technology platforms that support Islamic finance transactions and products. Islamic Accounting & Reporting Standards – To improve accounting standards and reporting practices. Islamic Taxation – To develop tax policies and procedures that ensure compliance with Islamic principles and values. Islamic Banking & Insurance – To provide financial products and services that comply with Islamic principles. Islamic Insurance – To create insurance products that adhere to Islamic principles. Islamic Equity Crowdfunding – To increase access to equity crowdfunding for Muslims. Islamic Wealth Management – To develop wealth management strategies that integrate Islamic principles. Islamic FinTech Industry – To create an ecosystem of FinTech startups that leverage the power of Islamic finance.
Growth of Islamic fintech:
The Islamic Fintech sector is growing rapidly in Pakistan as well as in the rest of the world. As per the report published by United States Department of Treasury, the Islamic FinTech industry is expected to grow at a rate of 12% annually through 2020. According to PWC, the size of the global Islamic capital market will reach $1 trillion by 2025. The main focus of Islamic Fintech is to provide a simple and easy to understand Sharia compliant products and services. They are working on different levels like; To help people who are not financially literate. Educate people about the different types of finance available and how to choose the best one for you. To understand the importance of saving money, and giving back to the community. To provide solutions to those who are short of funds. Bring down the cost of borrowing money to provide low-cost loans to those who need them. It also helps to build trust between borrowers and lenders. To give priority to the development of the local economy. To encourage Islamic investments and savings. To help people save money and use them wisely. To help people to build a strong relationship with their lender. To help people to achieve their financial goals.
