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In a recent report titled “Faith and Finance: The Changing Face of Islamic Banking”, cloud banking platform Mambu reveals a significant shift in the preferences of young Islamic finance customers. The survey of 2,000 millennial and Gen Z consumers worldwide highlights that more than half (53%) would enthusiastically embrace Islamic banking if accessibility barriers were eliminated.
This growing inclination towards Islam-ic finance services underscores a broad- er trend in the aftermath of COVID-19, where consumers, particularly the younger demographic, are increasingly drawn to ethical banking choices post-pandemic. Mambu’s research indicates that 74% of young Muslims desire banks to align their investments with religious beliefs, and 75% advocate for investments that contribute positive- ly to the world. The report also sheds light on specific preferences, with 62% opposing their bank’s lending to tobacco companies and 69% expressing a preference for banks not lending to gambling institu- tions. The demand for ethical banking practices extends beyond Islamic finance, reflecting a global desire for socially conscious financial services. While the Islamic finance market is expanding rapidly, reaching over $2 trillion in total assets and projected to hit $3.8 trillion by 2023, a critical hurdle lies in the digital realm.
Mambu’s research reveals that 76% of young Muslims consider the availability of online banking options a dealbreaker. A technologically savvy and globally mobile generation, they emphasize the importance of making investments without in-person meetings (70%), accessing bank services via mobile apps (74%), and having the flexibility to use banking services anytime, anywhere (80%). With the Islamic banking industry being relatively young at around 40 years old, it has already demonstrated tremendous success as a model for ethical banking. However, as younger generations are poised to contribute three-quarters of Islamic banking revenue by 2023, it is imperative for the industry to heed thepreferences of these digital natives, not only in the Middle East but globally. Interestingly, Islamic fintechs have witnessed significant growth world- wide, with the market projected to be worth $125 billion by 2025. The United Kingdom leads with 27 Islamic fintech companies, followed by Malaysia with 19, and the United Arab Emirates with at least 15. This expansion showcases the global appeal of Islamic finance beyond its traditional Middle Eastern strong-hold. At its core, the Islamic finance industry operates on the principles of Shariahlaw, emphasizing ethical and moral standards that promote the public good.
As the industry adapts to the demands of a changing demographic and embraces digital transformation, it positions itself not only as a financial alternative but as a beacon for ethical banking practices in a rapidly evolving financial landscape. In conclusion, the evolving landscape of Islamic banking is undeniably shaped by the digital revolution, seamlessly aligning with the preferences of the millennial generation. As financial institutions embrace technological advancements, they not only cater to the increasing demands for convenience and efficiency but also foster financial inclusion in adherence to Islamic princi- ples. The future of Islamic banking lies in its ability to harness digital innova- tions, offering a diverse array of services that resonate with the values and preferences of millennials. Through this harmonious integration of tradition and technology, Islamic banking is poised to not only adapt to the changing times but also thrive in an era where digitalization plays a pivotal role in shaping the finan-cial services industry.
The author is the Managing Director & CEO of National Bank Limited. He is a fellow member of the Institute of Cost & Management Accountants of Bangladesh (ICMAB) and the first Certified Sustainability Reporting Assurer (CSRA) in Bangladesh. He is also a post-graduate diploma from the Institute of Islamic Banking & Insurance (IIBI), United Kingdom.
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