An exciting collaboration between the UK and Turkey is seeking to use financial technology to increase access to finance in the Islamic world.
By cooperating in the burgeoning Islamic FinTech market and sharing mutual expertise, firms in the UK and Turkey hope to open up financial services to the unbanked population.
A new report from the UK-Turkey Islamic Finance working group, supported by TheCityUK and Borsa İstanbul, sets out the extent of the opportunity to bring more Muslims and non-Muslims into the global financial system, while staying true to their values. World Bank figures show that 6% of the world’s population opt out of the financial system for religious reasons, with significantly higher percentages in Islamic countries. This figure could be up to 19% in Turkey, despite the fact that it’s a secular democracy.
In total, 43% of Turkish adults do not hold a bank account (for religious or other reasons), yet two thirds of the world’s unbanked population have access to a smartphone, creating the possibility for sharia-complaint FinTech products to fill this gap. Turkey’s participation banks are investing in FinTech to reach new customers, drawing on London’s expertise as the world’s leading FinTech centre to develop new products, services and markets.
Wayne Evans, Advisor, International Strategy, TheCityUK, said,
Islamic, or Participation, finance has the potential to transform the world of finance, not only for the 1.8 billion Muslims globally, but for anyone who is attracted to its equity-based, risk-sharing, and socially responsible model. Many people who, for religious reasons or otherwise, do not currently access the banking system, can now access Sharia-compliant FinTech products. The cooperation between the UK and Turkey in this area will help to further the development of Islamic finance FinTech solutions as well as deepen the trade and investment relationship between the two nations.”
Dr Recep Bildik, Director at Borsa Istanbul, said,
Participation finance helps reduce poverty, expand access to finance, develop the financial sector, and build stability and resilience with its interest-free, asset-based/backed, risk-sharing and sustainable features. Indeed, it has much in common with Environmental, Social and Governance (ESG) investing and has an appeal far beyond Islamic audiences. By leveraging financial technologies it is possible to expand financial inclusion in Islamic capital markets.”
The UK is the leading western centre for Islamic finance and after Malaysia, is the second largest market globally, home to 16 of the 103 FinTech companies offering Islamic finance products in 2017. Turkey also has an important growth potential in Islamic finance through its dynamic, innovative and rapidly-evolving FinTech startups and young population.
In the report, TheCityUK and Borsa İstanbul offer a series of recommendations, practical case studies and insights into FinTech for Islamic finance, each written by a member of the UK-Turkey FinTech for Islamic Finance Working Group. Together they underline how Islamic FinTech is rapidly becoming a global business that is altering – and in some cases disrupting – financial services and market structures around the world.
Lord Janvrin, Prime Minister’s Trade Envoy to Turkey, said,
Cooperation in financial services is a priority for both the UK and Turkey. In recent years, FinTech has added a new dimension to this partnership and it has created new opportunities for the financial services industry to do what it does best: provide capital and expertise to support businesses and individuals, and to enable growth throughout the whole economy.”