The ASEAN corridor is emerging as a breeding ground for innovation in the halal or Sharia-compliant financial industry, with the global Islamic Finance industry expanding to $3.8 trillion by 2022.
The Philippines is positioning itself to become a crucial hub for Islamic fintech regionally and worldwide.
“There is a huge opportunity for the Philippines in the halal economy and Islamic finance,” said Dr. Dalal Aassouli, Asst. Professor of Islamic Finance at the Hamad Bin Khalifa University.
She made this statement during the “Islamic Fintech and Philippine Halal Economy” discussion organized by Digital Pilipinas in collaboration with the Department of Trade and Industry through the Philippine Trade and Training Center (DTI-PTTC).
She cited the Department of Trade and Industry (DTI), which forecasted the halal economy to be a significant growth driver after the Covid-19 pandemic, and “the growing need for digitalization presents opportunities for fintech to prosper in the growing halal economy.”
“For the Philippines to promote halal economy, it must support the development of a strong fintech sector. Developing fintech is critical fortunately the Philippines rank high in the Fintech Market Index. The country is one of the fastest-growing fintech destinations as per the Global FinTech Index 2020,” Aassouli added.
Malik Kotadia, Co-founder and Global Brand Chairman at Global Impact Fintech (GIFT) noted the consistent initiatives of the public and private sectors in promoting the halal economy and the Islamic finance space.
However, Kotadia hoped the development would happen in a more structured and consistent manner. He said, “There is a greater need for private and public collaboration and a consistent, collaborative approach.”
He explained the benefits of a continuing effort to explore opportunities through education and sustainability.
Kotadia also praised the initiatives of Digital Pilipinas led by Amor Maclang that aims to raise awareness and educate a broader spectrum to allow even non-Muslims to join in the halal economy and Islamic finance ecosystems.
In her keynote, Maclang vouched for the growth potential in Muslim Mindanao and the continued support of Digital Pilipinas and GeiserMaclang to the Investment House Association of the Philippines (IHAP) which promotes halal businesses and how to expand the sector further.
“Back in 2017, when the crypto and blockchain industries boomed in the Philippines, I told my mentor Dr. [Justo] Ortiz (former Union Bank of the Philippines’ board chairman, that blockchain could allow for the inclusion of our brothers and sisters in the Muslim community,” Maclang said.
Manifested in 2019 and pushed back in 2020 due to Covid-19, some of GeiserMaclang initiatives for the Muslim ecosystem took a back seat. And in an effort to reignite the advocacy, the company initiated to produce a Marawi Siege-related documentary that discussed how our Islam brothers and sisters recovered from battle.
Islamic finance follows the principles of Islam’s religious laws spelled out in Sharia, making its financing scheme differ from traditional institutions in many ways. Halal financing forbids charging or payment of interest, but there can be arrangements to allow parties to earn profits.
Sharia also forbids investing in haram (prohibited) substances or activities, such as alcoholic drinks and gambling, deemed harmful. Sharia-compliant finance will not lend funding to tobacco-related investments, gambling, or casino bonds and frowns on deceptive, hazardous investments.
But the law strongly encourages investing and giving for the good of the community, and projects that help the poor and needy are esteemed. Permissible (halal) investments include tourism, particularly alcohol and pork-free destinations, and Sharia-compliant food businesses.
“It is a part of their (Islam) religious obligations,” stated Dhim Radia of the DTI-PTTC when asked if Islamic finance is more customer relations-centric. “It is part of doing business, a source of forgiveness and good practices.”
An independent research by Thomson Reuters showed that Sharia-compliant financial services are currently pegged at $2.4 trillion—up from a mere $200 billion in 2003, fueled by the estimated 1.9 billion Muslims globally.
In the Philippines, Muslims number seven million, representing a little over eight percent of the population. But most of them are underserved, providing massive potential for financial services.
“Fintech has the potential to scale up Islamic finance by promoting innovation and impact, improving customer service by providing them fast and reliable service,” Aassouli continued.
According to her, fintech has the potential to scale up Islamic finance through digital solutions. Using nascent technologies, Islamic finance has the potential to enhance how processes are connected and achieve global operations.
“Our purpose is not just to raise awareness but to unlock the potential of digital technologies, address country-specific barriers, align financial flows with Halal Economy segments, and enhance accountability and good governance. The ultimate objective, of course, is to attract more investors, not just Muslims,” Aassouli added.
Kotadia added to the conversation, “Sustainability is a big focus of financial institutions. At the fundamental level, the idea of Islamic finance is fair trade. The biggest challenge in terms of halal certification is to meet the standards.”