Fintech Research

Digital Islamic Bank (Structure & Mechanism)

Kemal Payza, Vice Manager – Business Excellence and Innovation Department, Project Leader of insha Albaraka Turk Participation Bank.

Changing and developing technology changes the way we do business. The digital world, which has been developing rapidly since the 2000s, continues to change and shape the needs of the generation who born or grew in these years. With the development of the Internet, we are moving towards a world where digital needs are formed with technological developments such as social media, while meeting our existing needs through different digital methods. All these developments have affected the evolution and transformation of Islamic Finance, which was founded in 1970s. While Islamic Finance is reaching customers with more traditional channels, changing technology products must be transformed into new business models to meet changing needs. At this point, we see that the existing Islamic banks have begun to change and transform the channels that they reach the customer. There is a rising digitalization trend in the world as well as emergence of the examples of fully digital banks in Islamic Banking. In this research paper, we will explore the digitalization of Islamic banking and the new business models that this digitalization reveals.

Legal Requirements for Digital Islamic Banks

Dr. Umar A. Oseni,  CEO and Executive Director – International Islamic Liquidity Management Corporation.

The aftermath of the 2008 global financial crisis led to the emergence of various technological-driven financial intermediation solutions. One of such fintech solutions disrupted the banking industry, and it is now commonly known as digital banking. This study examines the legal and regulatory requirements for digital Islamic banks, which are considered unique when compared to the traditional digital banks. While analysing the legal and regulatory framework with particular reference to licensing of digital banks in Europe and Bahrain, this study identifies areas where digital Islamic banks may require additional regulatory requirements. This study argues that there is a need for a uniquely different legal and regulatory framework for digital Islamic banks to enhance their efficiency in an increasingly competitive industry where well-established big players have the unquestionable potential to overshadow them. Though non-exhaustive, some of the key aspects identified, which may be implemented through legal and regulatory provisions include: determining the nature of digital banking license; Sharī‘ah advisory requirements and the limited potentials of Sharī‘ah robo advisory services; bionic digital banking; mandatory requirement for online dispute resolution; and prudential standards for cross-border transactions. The study concludes that from the regulatory perspective, the bionic banking model may best suit the inherent nature of digital Islamic banking.

Role of Digital Economy in Realization of Inclusive Growth

Professor Dr. Habib Ahmed, Professor and Sharjah Chair in Islamic Law & Finance – Durham University Business School.

The world has witnessed remarkable economic growth during the 20th century which continues into the 21st century. A key factor that led to the growth was technological development. With the dawn of the 4th Industrial Revolution (4IR) in the latter half of the last century, digital technology has taken a centre stage. The revolution represents a dramatic shift from the past and is characterized by the blending of the digital with the physical and biological domains (Schwab 2016). While the overall global per-capita has risen during the past century and extreme poverty has decreased, the income inequality has also grown. Not only has the income levels of developed economies grown faster than those of many developing economies, within economies the income of the rich has increased at a higher rates compared to that of the poorer households (IMF 2000). The inequality of income has become severe recently with bulk of the benefits of growth going to the wealthier sections of the population. The dominance of digital technology in the 4IR has the potential to further expand economic growth on the one hand, but also introduces the risk of creating more inequality on the other hand. Given the above, this paper examines the role that digital economy can play in promoting inclusive growth. The paper is organized as follows. The next section presents the features of digital economy followed by a section that discussion the notion of inclusive growth. Section 4 examines ways in which the digital economy can contribute to inclusive growth followed by a section that briefly examines the Islamic perspective on digital economy. The last section concludes the paper.

Human Development in a Digital Economy Setup

Admir Jahic – Manager, Digital, Online and HDR Production, Human Development Report Office (HDRO), UNDP. 

Dr. Selim Jahan – Director, HDRO, UNDP.

The digital economy and 4th Industrial Revolution bring the most apparent changes in our current lives. With applications in almost all sectors and in all regions, new interconnected and interoperable technologies have accelerated the process of globalization, transformed industries, changed transportation, communication and social interactions, led to advances in health and education, expanded access to information and participation, created new business models and security tools.

Digital revolution has also created disruption and displacement and brought a new set of challenges to human development including job losses due to automation, rising inequalities within and between countries, data privacy, security and potential human rights issues, and economic instability. Many people and groups, usually the most vulnerable, could be at the risk of being left further behind.

Sukukchain: A decentralized, Digital Transformation Model of the Islamic Capital Market

Farhang Maghdeed – Senior Software Architect and Head of Technical Delivery Finterra Limited – Singapore.

The aim of this paper is to analyse the behaviour of Sukuk in comparison with the principle of Smart Contracts, deployed on blockchain. The research addresses issues concerning Islamic Finance Institutions as an issuer of Sukuk. The study also shows the interest of Muslims and Non-Muslims in adopting Sukuk as an instrument to share or invest in the Islamic capital market. Sukuk has been used widely by Muslim countries to represent the value of assets as an equity, bond, capital share, or commodity. This serves as a platform for investors to enter a shared capital market. In today’s era, Islamic finance institutions are in charge of issuing Sukuk, following some standards issued by AAOIFI, IFA, and IFRS, from different parts of the world. Despite of this, there are fundamental disagreements and difference in opinions towards structuring the Sukuk principles followed by Shariah resolutions. As a result, we introduce the concept of SukukChain – a platform to run a programmable security token or smart contract within the pool of network, run by Blockchain communities, such as Ethereum. The evolution of Smart Contracts has demonstrated a substantial improvement in this age of blockchain technology development. For example, Ethereum has introduced packs of standards, such as ETH20, ETH77, ETH1400, ETH1410. These standards are not only programmable but can also follow and adapt the dynamic rules and regulations from various jurisdictions.

Fintech In Islamic Finance and Its Shariah Parameter

PROF. DR. MOHAMAD AKRAM LALDIN – Executive Director, International Shari’ah Research Academy for Islamic Finance (ISRA).

DR. FARES DJAFRI – Researcher, International Shari’ah Research Academy for Islamic Finance (ISRA).

Islamic finance has grown considerably over the last four decades and has a global reach. It is considered one of the fastest-growing segments of the global financial industry. Indeed, the rapid growth of Islamic finance is expanding to western and other non-Muslim countries. It is now in the stage of global integration to be adopted as an international financial system.

One of the biggest challenges for Islamic finance in the next decade is on financial innovation and technology. In the digital world, traditional financial practice will be left behind. Costumers are expecting more innovations that would facilitate their needs and transactions at the most convenient way. Therefore, financial technology (Known as Fintech) is a new way of finance by providing innovative products that would improve existing practices and facilitate consumers’ experiences in transactions in an efficient and effective way. Fintech offers product innovation by structuring financial products that are new or significantly improved and enhanced with respect to their characteristics or intended uses. In other words, fintech is simply defined as the application of technology within the financial industry in a more friendly and efficient manner. Recently, the term fintech has been popularised in the financial industry and the widespread adoption of fintech in the industry covers a wide range of activities including financing, payments, operation and risk management, data security and monetisation, and customer interface as well as other related areas. The main types of fintech services are peer-to-peer (P2P) lending, smart contract, mobile payments, investments including crowdfunding and to some extent investment advices (e.g. robo-advisors) (Al-Mubarak, 2017).

Cyber security in Banking: Challenges, Solutions & Trends

Rachael Fernandez, Salma Shalaby, Noora Fetais – KINDI Center for Computing Research Qatar University.

The banking sector is becoming more smarter as cyber technology solutions are implemented for the sake of security of the banking services and the convenience of the customers. However, these solutions come at a price, as they expose the banking services to cyber threats and attacks. This paper provides a short review of the current trends and challenges faced by the banking industry with respect to cyber security. It also outlines the best practices and solutions to overcome these difficulties.

Motivational Analysis of Hacktivism Campaign Motivations

Mikko S. Niemelä – CEO Of Cyber Intelligence HOUSE.

A political, economic, socio-cultural, technological, environmental and legal (PESTEL) analysis is a framework or tool used to analyse and monitor the macro-environmental factors that impact an organisation. The results identify threats and weaknesses, which are used in a strengths, weaknesses, opportunities and threats analysis. In this paper, the PESTEL framework was utilised to categorise hacktivism motivations for attack campaigns against certain companies, governments or industries. Our study is based on empirical evidence of thirty-three hacktivism attack campaigns at the manifesto level. Then, the targets of these campaigns were analysed and studied accordingly. Our results have suggested that connecting cyberattacks to motivations permits organisations to determine their external cyberattack risks, allowing them to perform more accurate risk-modelling.

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