Kuwait watershed

A new initiative allows Kuwaiti investors access to the banking sector in the UK in a way that is completely sharia-compliant.

It has been clear for several years that Islamic banks have lagged when it comes offering the kind of seamless customer experience many people have come to expect. Many digital and high street banks now allow customers to open accounts instantly, invest directly from their bank account and even open accounts in different currencies.

However, the sharia rules governing Islamic finance can sometimes hold back innovation, despite the fact there is no underlying reason why Islamic banks cannot offer a similar functionality to their secular competitors.

In July, Boubyan Bank, one of Kuwait's leading banks, took a step towards achieving a much-improved customer experience. The bank’s Nomo brand — under the umbrella of the Bank of London and the Middle East (BLME) — allows Kuwaiti investors access to the banking sector in the UK in a way that is sharia-compliant.

But what does establishment of Nomo mean for the growth of the wider Islamic banking sector?

Reaching new customers

In announcing Nomo, Adel Al-Majed, group CEO of Boubyan Bank and chairman of BLME, acknowledged that Islamic banks across the Gulf Co-operation Council (GCC) region have behind the global digital curve in terms of the digital products and services. “Nomo aims to propel Islamic digital banking towards a more innovative future where the priority is customer convenience on an international scale,” he stated in the press release.

The model for Nomo is a new breed of digital banking platforms that aim to make opening accounts and cash across currencies easier than before. As well as daily banking services, Nomo provides sharia-compliant investment opportunities by offering fixed-term deposits.

Boubyan provides Islamic digital banking services that are accessible from anywhere in the world, and it is hoping that the demand for UK-based accounts will drive rapid adoption in the GCC and wider Middle East.

However, products such as Nomo still face significant hurdles when it comes to reaching compliance with sharia banking rules. It can take years for authorities to decide whether a new financial concept or product is compliant. The past few years have seen some investment opportunities effectively banned for Islamic investors. For example, Egypt’s highest religious authority — grand mufti Shawki Allam — issued a fatwa on the use of cryptocurrencies in 2018.

Islamic finance growth

Despite these challenges, Islamic finance has grown rapidly, with Islamic fintechs targeting growth in sharia-compliant products outside the main global banking hubs.

This is driving a surge in the fintech market in Islamic countries, which is also expected to continue growing rapidly worldwide. Specifically, the global Islamic fintech market is estimated to reach $128bn by 2025, an increase of 161% compared to 2020.

Saudi Arabia currently dominates this market and its fintech scene is already worth almost $18bn. In line with Islamic fintech markets around the globe, this figure is expected to increase rapidly — potentially rising to nearly $50bn within the next four years. Kuwait has a much smaller market, but the launch of Nomo promises to bring the small Gulf country into this rapidly growing market.

Products such as Nomo are also representative of broader shifts. The Islamic finance industry is expected to receive much more support over the next two years in Saudi Arabia, while new investments in the Dubai Expo event later this year, as well as the 2022 Fifa World Cup in Qatar, are also expected to support growth.

These new investments come at a time of continued growth for the sector. Impressively, the Islamic finance industry grew throughout past year, despite the Covid-19 pandemic. Global Islamic assets expanded by 10.6% in 2020, against growth of 17.3% the previous year.

The bottom line

The success of Nomo may also be keenly watched by potential investors. Although it’s becoming clear that Islamic finance is set to grow strongly in the short and medium term, until now investors have been concerned that sharia authorities could undermine the stability of these products. Despite the Islamic finance sector growing rapidly across Muslim countries in Africa, the Middle East and south-east Asia, it remains a fragmented industry with uneven implementation of its rules.

If products such as Nomo can help to address that perception, they could boost investment in such products even further, to the point where they are looked on as genuinely mainstream targets for investors.

Francois Moreau is a financial data scientist based in Paris.


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