Growing the Shari'ah Ecosystem Through Technology

[Music] assalamu alaykum good afternoon to everybody thank you for joining this really important topic today um it's a privilege to welcome you to this discussion on growing the Sharia ecosystem through technology the world is rapidly evolving and like we just heard from adanal one uh if you don't innovate you're going to be written off very soon um there are so many new technologies like AI blockchain um data analytics and so there exist these tools which can help Drive the Islamic industry which will then be steadfast with Sharia principles at the core of Islamic Finance is the need for transparency but it also requires effic efficiency and broader accessibility for it to flourish today we'll talk about these fintech Technologies and these Innovations and how it can make Islamic Finance more accessible more transparent and more efficient while staying true to the core values of sharia principles I have with me today two esteemed gentlemen we've got Kevin Kanda he's the CTO and CPO of uzum It's A Digital Services ecosystem in usbekistan usum is a national champion in the country's fintech and e-commerce sectors previously Kevin Co founded and served as the CTO at cousin Express and e-commerce platform renowned for its one-day delivery service and congratulations it was recently just acquired by magnet a Russian large one of Russia's largest retailers I've also got Parvin Jane the CEO of Vision Bank category one Islamic financial institution and the only cat one Sharia Bank in the adgm perin is a seasoned Banker with more than 28 years of experience during which he's held senior roles in Banks like standard charted American Express and indis in bank across India UAE and Africa thank you so much for joining us today thank you so let's get into it um traditionally banking has been a sort of brick and mortar type business you go into a bank you get things done but today people don't want that anymore we don't want to step into Branch anymore we want everything to be seamless now a lot of banking processes are still quite manual it means there's higher operational costs and longer lead times for approvals moving into an Islamic Bank you've got the added layer of then having um the Sharia compliance and the transparency that you need to add on top of that how in your view and I'll ask the question to both of you can technology bridge the gap between a traditional and a modern Sharia compliant banking system sure okay I'll take that um so I think you did introduce the bank pretty well uh you should have entered digitally enabled yeah so we are first category one Islamic digital uh bank so uh you're absolutely right I think we found a big gap as such from the digital point of view for the Islamic Banking and that's why we are the digital first everything is so if you ask me right now now the the biggest challenge the banking has seen in last from from technology every sector has been affected but technology has actually impacted retail banking in a big manner but not in corporate banking corporate banking is still into that phase that and obviously because of the complexity of the shareholder structure then there's a directorship then there is a authorized sign there are many stakeholders unlike a retail with a single person in our case we have digitized every part of it uh so if a person is able to give me and a corporate is able to give me all the documents uh in a single shot I can open the account in 24 hours so that's the part of digital first second is uh I think as Adan said that you know it has to evolve and that's what we are trying to do I think um normally uh Islamic banking has been seen as a very complex uh complexity there everything has to be backed by a contract be it a muraba be it a mudar be musara uh what we have done first time there's a straightway API so if I do a deposit book a deposit or I book I do a financing there's a straightway API backed contract gets generated so you don't have to sign any kind of uh and second we are the uh we being in adgm which is so um regul very friendly for the tech part of it we do the docu science so there's no wet wet ink part of it so that's another part of it what we are doing right now so these are two large angle what we are trying to do but obviously we can have more zakat can be from the fintech point of view zakat can be big part of it I leave it to him about the part of it thank you so I think that I would like also to mention the important part in terms of Education because uh you need to educate not only your customers but also your business customers in order to comply with Sharia laws and and uh also the technology and easy access to technology could be used uh for this purpose uh so this is like the third part of the equation that you were talking about and I think that in usbekistan uh we have a good example of uh AI applications in order to uh understand the transactions of different businesses and different customers in order to also do the validation of sharia complains rules so this is like only this is partially what you said in the first part by bringing automation but also you can use the AI Technologies or like the basic ml models in order to do the validation of the uh law applications yeah I just add another thing uh is a smart contract the blockchain based right there lot of contracts as such and blockchain ensures that Integrity of everything so that smart contract can be very very handy for Islamic banking also that's how technology can help a big void so we agree no that that's that's excellent and I think following into my next question because a lot of what we've seen is traditionally Islamic Banks Banks have not been able to scale globally um now with the introduction of Technology um how do you see that technology can overcome the barriers of being able to serve as customers whove previously not been served as we know a lot of the Muslim population is either underbanked or underserved and maybe in rural areas how do you see technology playing a role in scaling Islamic Banks globally see the way I said that basically it is perceived as very uh operationally heavy and uh complex product but if through technology if you can do uh the moment I do a uh deposit placement or I give a finance there is no use of uh manually getting a contract we signed there's a API based contract can be generated which we have already integrated with our system one is that second is I think uh uh very very important part is you know another part what we see is it's a very diverse across so you know it's being perceived as um so in UA is a very different interpretation of Islamic law versus say Malaysia and their regulatory angle is really helping the Gap we are Bridging the Gap uh we have our own Sharia supervisory board which is across from the from the scholars and that's what we are trying to do from the technology part of it third was obviously there can be Robo advisory also from the Islamic angle and zakat already said so these are the thing which we can as a digital we are not going to do anything on the physical side of it and we will be truly Islamic for sure okay touching on the um fintech and The Innovation side of it I mean we know that the UAE has been quite a proud supporter of innovation um we've got the ad GM's regulatory sandbox we've got the fintech hive in the DFC when you look at Cross industry collaboration how do you see the role between financial institutions and fintech companies playing a role in shaping that ecosystem yeah so I think that I would like to add this here on this place so first of all uh maybe I should start with the governments yes because the governments mostly understand that they have a big part of the population which is a Muslim population that is underserved because of the Sharia laws that they do not want to violate and uh according to all of the market analysis and especially in usbekistan this is like a great part of the population and um well where the population if it receives the access to the finances uh the following is an economic growth and this is what every government want to achieve and also in our case of usbekistan the government is a strong supporter with u help of the Central Bank in order to uh help us build the ecosystem for Islamic finances that we want to see in order to operate in the most efficient way and uh we are as a part Zoom as a part of this uh whole collaboration are doing our own business and uh work in order to help the government establish the smoother experience for the digital finances customers I think I I completely agree with him on onto the financial institution as well uh so uh the the asset back smart contracts also will be will go a long way in uh having the so just to give an example uh onto the smart contract blockchain based uh which will remove the any kind of uh Integrity part of it that can really help to go us a long way integrating with the ftech part of it yeah but you need to spend a lot of time in order to explain how the blockchain works and so on especially to The Regulators absolutely and in your in your experience perin how have you perceived that with The Regulators in terms of getting that type of Technology with asset back smart contracts yeah so I think it's a the fact that you know the biggest problem in any kind of a we are a corporate bank completely so the biggest problem in corporate onboarding is your different stakeholders and different part of geography right so I I how do I get their vet ink signature and with the docu sign we can now it is acceptable in adgm COD so that shows you the inclination of the regulator and I'm sure we we are in touch with them about the blockchain there is a proper obviously you know it has to be properly executed there has to be proper governance in place and I don't foresee any problem over there and you know it's an accepted technology at least for the trade Finance world we saw and contract is very prevalent in the Islamic Banking and this gives a lot of uh uh what do you call it there's no foolproof kind of a pro issue on this in addition maybe to usbekistan again and the toas process uh 100 population of usbekistan is Biomet so all of them have the face ID in the government system and we as a financial institution can use the service which our government provides to us in order to do the digital signatures and verifications of the customers absolutely that's excellent I'd like to move into e-commerce Now Kevin um I mean we've seen the likes of China and Kenya who've really excelled at driving cashless economies with platforms like alipe and Essa um and it's a clear integration of financial services with social media and e-commerce Platforms in your view how do finance and fintech companies connect with e-commerce and what role do they play in improving the overall Financial education in the market and also what do you think the key drivers of that e-commerce growth will come from yeah so first of all let me once again mention that uzoom is an ecosystem where Ecommerce and Finch are begining combined and U can you imagine that uh three years ago when we were doing the launching stage of our product 50% of the population didn't even have a bank account at all so that was in usbekistan like three years ago and now what we are doing is we are helping the citizens and the population to do the Lea frog from the cash economy directly to digital payments and digital economy excluding the uh traditional brick and morar banking stage and uh e-commerce is the main driver for this leap frogging approach in our case because because e-commerce drives the customers base and we launched e-commerce in 2022 like two years ago uh and we have seen the great potential of all this customer base to be integrated into fintech by introducing customers with buy now Pat Solutions uh we also have an uzum nasia inside our company uh as one of the product which uh gives customer the Sharia complate installment uh product and uh it in terms of combination with eCommerce gives a great effect on the overall fch uh evolvement of the country and U right now on our uh e-commerce platform uzum Market we have as more than 50% of all the payments based on this uzum nasia product and uh I think that like this is the main part that e-commerce plays in terms of the development of finances and the digital payments by bringing you the seamless experience without any kind of physical uh interaction with the seller or the product itself and are you finding that this is being taken up by not just the younger generation but also the older generation yes so uh by again by investing into education we were able to focus not only on the young uh generation because the penetration of uh smartphones and internet in usbekistan is very high and our like main goal is to educate customers to use it to use it not only for calls or messaging but also for uh e-commerce purchases for integration the finances and so on okay we're almost out of time so I think my last question would be is what is the future of technology enabled Sharia compliance Services look like in the next 3 to 5 years okay let me put it this way I think uh if you look at it sustainability is a has become a fad in last three four years right but Islamic banking by Nature itself is pretty uh sustainable I tell you why uh sustainability has largely three themes one is the ethical uh second is socially Equitable and third is environmental friendly ethical is obviously we do not Finance any of the um interest based activities or any gambling or any um liquor so that's the ethical part of it socially obviously a zakat you know you mandat donate something to make the society equal so these are the two large concept third one which is environmental obviously there we are moving so for example now green sukuk has been issued offet it is pretty much strongly advocated by last most of the countries so I think given the fact that sustainability is no longer uh uh a luxury is a necessity that will drive the whole thing and as somebody said in the stting in 2025 itself we are looking at 21% cagr as against the conventional banking so I think it's a very bright future plus the adoption amongst other countries also very very high I'll tell you my example uh I'm large I came from the conventional banking uh so everybody has reservation you know everybody said the adoption is low for the Islamic banking but if my product is good my client can be conventional client also right so I have a full market for me but for a for a non for a conventional Cent Bank he can't off his product will not be taken by a faith-based guy if somebody has to do the Islamic banking for he will never go to Conventional bank with a conventional Bank a conventional client is is neutral so for me the market is much more in that sense that's what I believe yeah Kevin and I think that uh the next step is also to focus on bringing the digital database of the the Sharia complete businesses and operations in order to uh give it an access to the banks and to the customers to easily comply with charia complaint laws so because in current state all of the banks and I think you're not an exception should do your own uh due diligence in order to uh understand which companies are sh complaint which are not uh which operations are again complaint or not not and so on and so on I think that blockchain might may be used here in order to establish such kind of a database in order to do the validation of different businesses and to serve it globally to any kind of Islamic Bank uh in the world which want to connect to it so while on boarding our case any client my RM has to give that declaration that is a Sharia compliant and then I only start the process yeah but you need still to understand and to validate it in time that this particular compan is still complain ah okay understood thank you very much I think just to wrap up we can see that you know success in Islamic fintech ecosystems is going to be reliant on regulatory support Innovation education in the market and the ability to meet the needs of the population um I know there's a it's a long way to go but I think with like you said the way you've made strides in the last two years in usbekistan just with e-commerce I think it's exponentially growing and hopefully next year this time we'll see a lot more in this space thank you very much yes thank you very much [Music]