BusinessMirror May 14, 2022

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BusinessMirror ISLAMIC FINTECH, HALAL ECONOMY

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Saturday, May 14, 2022 Vol. 17 No. 218

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The Philippines is emerging as an Islamic fintech hub in a region projected to be a center of innovation in the halal or Shariacompliant monetary sector. By Roderick L. Abad

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“There is a huge opportunity for the Philippines in the halal economy and Islamic finance,” Dr. Dalal Aassouli, assistant professor of Islamic finance at the Hamad Bin Khalifa University, said in a recent webinar. Citing the Department of Trade and Industry’s (DTI) forecast on the halal economy being a main growth driver post-pandemic, she emphasized that “the growing need for digitalization presents opportunities for fintech to prosper” in this growing field. “For the Philippines to promote halal economy, it must support the development of a strong fintech sector. Developing fintech is critical,” she noted. This is the right time considering that the nation ranks high internationally—market sharewise. “The country is one of the fastest-growing fintech destinations as per the Global FinTech Index 2020,” Aassouli bared.

What is Islamic finance?

added Global Impact Fintech (GIFT) cofounder and Global Brand chairman Malik Kotadia.

Contributor

ETTING its sights on the global Islamic finance industry’s growth to $3.8 trillion by 2022, the Philippines—as Southeast Asia gears up to be a breeding ground for innovation in the halal or Sharia-compliant monetary sector—is positioning itself as a vital hub of financial technology (fintech) catering to the Muslim markets regionally and internationally.

UNLIKE traditional monetary institutions, Islamic finance is different in its scheme as it follows strictly the principles of Islam’s religious laws spelled out in Sharia. One of its features is that Ha-

DR. DALAL AASSOULI: “For the Philippines to promote a halal economy, it must support the development of a strong fintech sector. Developing fintech is critical.” FACEBOOK.COM/ DIGITALPILIPINAS2021

lal financing prohibits charging or payment of interest. However, there can be arrangements to allow parties to earn profits. Sharia, likewise, disallows investing in haram (prohibited) substances or activities, such as alcoholic drinks and gambling, deemed harmful. Sharia-adherent funding will not lend money to tobaccorelated investments, gambling or casino bonds, and frowns on deceptive, hazardous investments. The law, however, strongly encourages investing and giving for the good of the community, and projects that help the poor and needy are esteemed. Permissible

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A broader look at today’s business

Public, private sector cooperation

ASIA’S only Christian nation positions itself to become a crucial Islamic financial technology (fintech) center regionally and worldwide. In photo, industry experts and advocates discuss the country’s huge potential in the Sharia-compliant financial industry during the webinar, dubbed “Islamic Fintech and Philippine Halal Economy,” organized by Digital Pilipinas, in collaboration with the Global Impact Fintech and the Department of Trade and Industry through the Philippine Trade and Training Center. FACEBOOK.COM/DIGITALPILIPINAS2021

(halal) investments include tourism, particularly alcohol and porkfree sites, and Sharia-compliant food businesses. “It is a part of their [Islam] religious obligations,” stated Dhim Radia of the DTI-Philippine Trade and Training Center when asked if Islamic finance is more customer relations-centric. “It is part of doing business, a source of forgiveness and good practices.”

Mindanao’s potential

DRIVEN by the estimated 1.9-billion Muslim population worldwide, Sharia-compliant financial services now stands at $2.4 trillion—up from a mere $200 billion in 2003, based on independent research by Thomson Reuters. Filipino Muslims now count at 7 million, representing a little over 8 percent of the country’s population. Unfortunately, most of them are underserved. Hence, it opens a big potential for financial services. “Back in 2017, when the crypto and blockchain industries boomed in the Philippines, I told my mentor Dr. [Justo] Ortiz, [former board chairman at Union Bank of the Philippines], that blockchain could allow for the inclusion of our

brothers and sisters in the Muslim community,” Amor Maclang, Digital Pilipinas and World Fintech Festival convenor, Fintech Philippines Association executive director and trustee, and GeiserMaclang cofounder, said of the growth prospective in Mindanao.

“Sustainability is a big focus of financial institutions. At the fundamental level, the idea of Islamic finance is fair trade. The biggest challenge in terms of halal certification is to meet the standards,”

PUBLIC-PRIVATE partnerships nationwide are consistently being done to promote the halal economy and the Islamic finance space, he noted. Nevertheless, he hoped the development would happen in a way that is more structured and constant, saying, “There is a greater need for private and public collaboration and a consistent, collaborative approach.” For him, keeping the initiatives to explore opportunities via education and sustainability is highly beneficial for the Islamic fintech players. Kotadia lauded, for instance, the efforts of Digital Pilipinas aimed at raising awareness and educating a broader spectrum to allow participation of even nonMuslims in the halal economy and Islamic finance ecosystems.

Digitalization is key

NOW that the era of digitalization is a reality, solutions in this space can be a big help to achieve the growth of halal financing. “Fintech has the potential to scale up Islamic finance by promoting innovation and impact, improving customer service by providing them fast and reliable service,” Aassouli pointed out. Using nascent technologies, Sharia-compliant funding can enhance how processes are connected and achieve global operations. “Our purpose is not just to raise awareness but to unlock the potential of digital technologies, address country-specific barriers, align financial flows with halal economy segments, and enhance accountability and good governance. The ultimate objective, of course, is to attract more investors, not just Muslims,” she said.

n JAPAN 0.4079 n UK 63.9057 n HK 6.6735 n CHINA 7.7183 n SINGAPORE 37.5231 n AUSTRALIA 35.9001 n EU 54.3924 n SAUDI ARABIA 13.9663

Source: BSP (May 13, 2022)


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