Dr Farrukh Habib ,Co-Founder of HalalChain, was invited to be a member/participant of the Organization of Islamic Cooperation (OIC) Working Group which has been created for Financial inclusion with a special focus on Islamic Finance. The Central Bank of Turkey organized and hosted a meeting for the working group on 9-10 April 2018, in Istanbul, Turkey. Many representatives of Central Banks and Monetary Authorities of the OIC Member Countries, such as, Saudi Arabia, Qatar, Indonesia, Pakistan, Bangladesh, Sudan, Iran, Turkey, West and Central African countries, participated in the meeting.
During the two-days meeting, many areas, like access to financial services, fintech/digital finance, consumer protection, financial literacy, global economic, monetary and financial outlook and effects of globalization, were extensively deliberated by the working group. Beside actively discussing the above-mentioned areas with the members of the working group, Dr Farrukh Habib particularly contributed as the lead speaker for the session of fintech/digital finance with special focus on Islamic Finance. In his presentation, he elucidated various areas of fintech, including blockchain, cryptocurrencies, RegTech, InsurTech, smart contracts, artificial intelligence, machine learning, Bit Data and predictive analytics among others.
The total investments in fintech sector has become more than double in less than 5 years. According to the IMF report published in 2017 the “total global investment in Fintech companies reportedly increased from US$9 billion in 2010 to over US$25 billion in 2016.” These investments reflect the increased expectations of the players from the technological changes. Fintech advancements are being deployed quicker than the expected pace of adoption, given that new products based on technological advancements have greater impact on financial institutions. Fintech area has been rapidly evolving from cryptography to artificial intelligence and big data, which is potentially bringing about major transformation in financial services. This has produced new opportunities and challenges for regulators, consumers and service providers. Notably, fintech startups are already facing a probable resistance from the traditional financial institutions as they compete for some of their market niches.
The Bank for International Settlements (BIS) divided financial innovations into four categories:
(1) credit, deposit and capital raising services sector;
(2) payments and settlement services sector;
(3) investment management services sector; and finally;
(4) market support services.
The first three categories are entirely related to banking, while the last category is associated with innovations and technological advancements that are relevant to all financial services, but not to any exclusive sector. Moreover, fintech is deemed to catalyze the efficiency gains in the financial sector because it has reduced contract and transaction costs for the services offered. Moreover, the trade barriers tend to be reduced as well for a more personal and a wider experience, which might eventually deepen financial inclusion in developing economies. Other Fintech advantages include an improved transparency and security of the financial transactions.
He also pointed out potential proof-of-concepts for financial inclusion with a special focus on Islamic finance that can be implemented in the OIC member countries. Lastly, he exchanged views on the future road-map of the working group, and recommended OIC member countries to form global consortium, business incubators, regulatory sandboxes, educational and awareness programs for a robust fintech infrastructure. That infrastructure would immensely contribute in exploring and adopting the technological advancements for Islamic financial industry in general, and to realize greater financial inclusion within the OIC member countries in particular.