“The fault-line of the Coleridgean sublime-as a tremulous border region wherein the desire for transcendence is neither accomplished nor relinquished … but rather indefinitely revised in light of the implacable resistance of finitude.” Cristopher Stokes
This comment on Coleridge’s work has no bearing on the financials of today except for the indecisiveness of neither accomplishing nor giving up to the acceptance of the present being obsolete and future being different.
We have entered the much-glorified labyrinth of digitalization, and it is high time for us to realize that the Financial Technology (FinTech) and banking needs to be looked at as the new face of ‘banking’ across the length and breadth of its landscape.
The banking industry has to commit to optimizing Fin Tech /digitalization for ensuring maximum outreach for expedited progress in the next few years. New Digital banks have landed in the market, and it is now the responsibility of the larger banks to ensure that their digital approach is comprehensive enough to address the growing demand for tech savvy population.
Looking specifically at the Islamic finance market, it currently inhabits 80 countries and is predicted to reach USD 4.94 trillion in value by 2025.
The financial sector is continuously evolving towards sustainable practices, and this is where technology/digitalization is set to play a pivotal role.
We will need to invest into digitization as the new course of financial relationships, take over the digital model with the Digital Retail Bank’s (DRB) perspective, spin the Gen Z vision to define the way forward with the Alpha, and leverage intuitive experience of technology for customer centricity.
FinTech combines sustainable and inclusive financial future, a spirit that empowers Islamic banking (IB) too – a holistic philosophy of equitable wellbeing and development of the larger community. IB is built on the idea of “transparency” and “accountability, and is driven by values of Khidmat, Madad, Ilm, and Falah, as enforced in the Holy Quran . Additionally, Islam prioritizes Jiddat or Innovation, like ijtihad where relevance of action with time is reinforced. Islamic digital finance, in complete synchronization with Jiddat, is reshaping the financial industry as we had never seen before. The outreach via a smartphone is phenomenal and though Pakistan still needs its brick-and-mortar comfort of reaching out to an informed finance person, the conversion of online transactions has been remarkable and has become the strongest player in enhancing inclusivity.
Financial inclusion has made remarkable progress globally, with the number of unbanked adults declining from 2.5 billion in 2011 to 1.4 billion in 2021. Worldwide account ownership has reached 76 percent of the global population—and 71 percent of people in developing countries. The gender gap in account ownership across developing economies has fallen to 6% from 9%, where it hovered for many years.
The rise of digital financial services, particularly mobile money, has been a key driver of this progress. With over 1.35 billion registered mobile money accounts worldwide as of early 2021, millions of formerly excluded customers are transitioning from cash-based transactions to formal financial services using mobile phones and other digital technologies.
This shift demonstrates the transformative potential of digital solutions in expanding financial access, although challenges remain in reaching the most underserved populations in developing regions.
Pakistan’s internet penetration rate stood at 45.7 percent of the total population at the start of 2024. Digital Financial Inclusion in Pakistan, is however, recorded at 17.7% as compared to South Asia’s average of 29%.
We will need regulatory support to enhance digital penetration of finance for achieving the desired documented economy in the shortest span of time. Delving into the advantages that we have in digital, we must acknowledge, that Islamic digital finance has wonderfully merged the three outstanding demands of the time: inclusivity, documented economy, and sustainability.
Shariah-compliant principles have provided the ethical grounding which when combined with cutting-edge technology, has created an attractive verse for unbanked populations who avoided formal banking for the fear of becoming a victim of interest-laden debts. This fusion is creating innovative solutions that cater to the unique needs of consumers and businesses who wish to benefit from the well-being of Islamic financial laws.
A growing number of startups are requesting for Shariah-compliant financial technology solutions, from mobile banking apps to crowdfunding platforms. These have become accessible and ethical financial options to communities worldwide. Similarly, the digitization of Islamic bonds (Sukuk) is gaining traction, with blockchain technology enabling more efficient issuance, trading, and settlement processes, attracting more investors, and improving liquidity in the Islamic capital markets.
The strength of Islamic digital finance is to be seen now as an effective tool for crisis response and recovery, poverty reduction, private sector development, capacity-building, and knowledge-sharing. Whether in lending or one-way solutions like Zakat for the underserved, Islamic digital finance is impactful in addressing the Sustainable Development Goals (SDG).
While cryptocurrencies remain questionable in Islamic finance due to lack of asset backing, blockchain technology is gaining traction for enhancing transparency and reducing costs in financial transactions.
By leveraging smart contracts, blockchain ensures Shariah principle compliance, streamlines Sukuk management, enables decentralized digital identity verification, and transforms processes like KYC and AML, with institutions like the State Bank of Pakistan actively evaluating these innovative solutions to drive Islamic banking’s digital transformation.
The future of Islamic finance lies at the intersection of digital innovation and ethical values, where inclusivity, sustainability, and transparency are redefined through cutting-edge technology.
As the global financial landscape continues to evolve, Islamic digital finance offers a unique opportunity to bridge the gap between traditional banking practices and modern financial solutions, particularly in underserved communities. By embracing technological advancements such as blockchain, AI-driven advisory, and mobile platforms, Islamic finance is not only enhancing accessibility but also fostering a more equitable and inclusive financial ecosystem.
The fusion of Shariah-compliant principles with digitalization is poised to reshape the way we engage with finance, ensuring that both individual and collective progress are aligned with the greater good.
The article does not necessarily reflect the opinion of Business Recorder or its owners
The writer is a seasoned educationist, communication specialist, and storyteller. She tweets at @shahajamshed
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