Recommendations to unleash the potential of Islamic Fintech
First, to unleash the potential of the Fintech and the Islamic Fintech in particular, it is recommended to have a suitable ecosystem and an innovation ecology. According to Stefik and Stefik (2004, p. 7), ‘an innovation ecology includeseducation, research organizations, government funding agencies, technology companies, investors, and consumers’. Regulators, start-ups, Islamic Fintech firms, IFIs, venture capitalists (‘VCs’), public organizations, consultancy firms, media and academia are the primary stakeholders of this required innovation ecosystem. They make up the digital ecosystem’s demand and supply sides.
Developing alliances in the digital Islamic ecosystem with a range of stakeholders including governments, public and private sectors would empower societies and would be a strategic way for organizations to add value to current initiatives or support their regions.
Regulators are recommended to afford innovation-friendly policies and an ecosystem offering incentives to Islamic Fintech to test and refine their innovative ideas, and where established IFIs can deliver financial services or access to their internal sources and their financial expertise.
Second, finance is one of the most regulated industries. Supporting laws and policies are of paramount significance to promote innovation and entrepreneurship. Moreover, as digital partners and suppliers are changing, and clients are evolving, the capacity to adapt to new circumstances will be a driving factor in preserving the digital ecosystem. In fact, the regulatory environment is continuously evolving and regulatory constraints and issues could hamper IFIs' capacity to innovate and develop impactful products and services.
Regulatory frameworks offer an ecology to support entrepreneurs and other IFIs in testing their creative business models. There is then a pressing need to develop an adaptive set of regulations to foster and regulate the growth of the Islamic Fintech industry, which helps to develop a consensus on a set of prudential regulations that can be applied globally. This work will not be achievable without the cooperation of firms and the regulators. For instance, regulating a public and decentralized blockchain would be considered eccentric and risky without finding a roadmap with market players until regulators are satisfied with the concept of a decentralized digital economic system.
Finally, it is highly recommended to realign organizations and their required resources to support the development of Fintech impactful and sustainable products. Human resources required in the industry include finance experts, Sharia scholars and information technology (‘IT’) professionals (data scientists, cryptographers, programmers, etc.). There is then a panoply of skills that would be aligned towards SDG-oriented products. IFIs will need to be attractive to top innovative talent but should not lose focus on the objective (Maqasid), which is the impact. ‘Innovation is the path, impact is the destination’ (Chang 2019).
Future research directions
At the end of the chapter, different research directions can be suggested as a continuity of the current work. First, the Islamic Fintech and more precisely the sustainable and social digital finance would need to form blockchain consortia respecting the specificities of Islamic Finance and social finance (waqf, zakat and Islamic microfinance, etc.). Research work on the technicalities of these consortia
Role of Fintech to achieve the SDGs 11 would help the industry to move on technically and helps start-ups and the established firms to benefit from this work.
A second research direction would be to tackle the financial challenges that Islamic Fintech are facing. In fact, unlike conventional Fintech, Islamic Fintech firms are facing financial challenges whereby funding possibilities are not abundant (Mohamed & Ali 2018).
Third, we suggest studying and evaluating the role of the regulators in the development of Islamic Fintech in particular. A non-regulated environment would be propitious for the expansion and the development of new sustainable Islamic digital finance products. In that case, what would be the proxies that can be utilized to evaluate and benchmark both environments (regulated and non-regulated).
Finally, with the development of libra, the recent permissioned blockchain digital currency proposed by Facebook, a future research direction to have an Islamic social version of libra that can be utilized for SDG-oriented projects would be of great importance. A similar idea was suggested previously (Bedoui & Robbana 2019) but now with the development of libra, the issuance of a cryptocurrency (i.e. an Islamic version of libra) can be materialized to mobilize resources to SDGs.
