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MEFTECH PREVIEW The well is far from dry


As delegates prepare to descend on Abu Dhabi for MEFTECH 2017, IBS Journal takes an indepth look at Islamic banking


Senior Reporter Alex Hamilton


event for financial technology in the Middle East and Africa. Last year’s watchword was “digital”, as Middle Eastern and African companies faced up to a future of FinTech, innovation, blockchain and mobile banking. The appetite for change was palpable at the Abu Dhabi Exhibition Centre in 2016. Whether that is still the case, due to geopolitical factors affecting the region, remains to be seen.


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It is becoming a global force, having grown from a business worth $200 billion in 2000 to close to $3 trillion by the end of 2016. That figure is expected to hit $4 trillion by 2020, with the 300 Islamic banks and 250 mutual funds growing their services every day. Technology as an enabler is therefore a key part of strategies. It is not also necessarily the case that their customers are driven by religious needs. According to IBS Journal research, even in established markets, between 20-30% of Islamic banking customers are non-Muslims. The market is also not only driven by the pureplay Islamic banks but by traditional firms offering an Islamic window.


Though Islamic banking counts for only 5-6% of the global financial economy, its steady growth has been fuelled by careful investment, rising Islamic devotion and the prosperity of Muslim countries benefitting from rising oil prices. Wael Malkawi, Executive Director of Business Development at Jordan-based core banking vendor ICSFS, describes 2016 as a “slow” year for banks and vendors in the Middle East, especially in the GCC


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EFTECH describes itself as the leading


region. Political instability around the gulf and the drop in oil prices left many companies on unsteady footing, not just financially. Joe Faddoul, CEO at Beirut-based BML Istisharat, agrees. The reduction adversely affected budgets, including IT, making financial efficiency and the stopping of profit leakage the main goal of most institutions.


Regulatory pressure is being exerted ever more tightly, too, with governments in the Middle East and Africa clamping down on money laundering, performance, capital adequacy and ensuring that banks are up to scratch.


That’s not to say the year was a complete dud. Bright sparks, like the granting of Islamic licences in Iraq, meant that new business lines could be opened. The country is attempting to move itself away from a cash-based economy, which brings with it a host of opportunities for banks and vendors willing to implement digital services for customers.


To both Malkawi and Faddoul, the pressures that existed in 2016 are still prevalent for banks and vendors in the Middle East today. The dwindling oil prices have had a combination of effects on how companies plan to operate over the next few months, says Faddoul. There’ll be fewer imports and letters of credit, as well as a reduction in Forex options for banks. Loans may have to be paid back, “not to mention government delays in paying public works contractors in some Gulf countries”.


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