Islamic Fintech: What You Need to Know About It

Islamic Fintech: What You Need to Know About It

Integration of Fintech-based solutions with Islamic finance has attracted the attention of a variety of stakeholders, including academia, professionals, investors, and customers. Musaffa is also one of the brightest representatives of the developed Islamic Fintech world. In today’s article, we will discuss what Islamic Fintech is and its differences with conventional counterpart.

What is Fintech?

Fintech is a mix of the words “finance” and “technology”. Fintech refers to any company that integrates technology to improve or automate financial services and operations. The term refers to a rapidly growing industry that serves both customers and companies via various methods. Fintech provides a limitless number of benefits, from mobile banking, cryptocurrency and investing apps.

Fintech is not a completely new industry; It has just grown at a rapid pace. Whether it was the advent of credit cards in the 1950s or ATMs, and/ or personal finance applications, technology has always been a part of the financial industry.

Islamic vs Conventional Fintech

Islamic fintech focuses on utilizing technology to create Shariah-compliant financial solutions, goods, services, and investments. It has slowly gained traction in recent years. As of March 2021, there are 161 Islamic Fintech organizations throughout the world. The information is according to the IFN. Shariah-compliant fintech is founded on Shariah principles, which promote human welfare while incorporating ethics and justice into fintech solutions.

Fintech and Islamic Fintech have similar definitions, but the primary difference is that the latter has Shariah requirements. Islamic fintech is a branch of financial technology that adheres to shariah principles, which forbids benefiting from debt, interest payments, and investing in businesses associated with alcohol, tobacco, and gambling.

Fintech, for example, is acceptable in Islam and only becomes unlawful if there is strong proof that it violates Shariah’s essential rules. It’s worth noting that, from an Islamic standpoint, any economic activity, including fintech, is lawful or halal unless there’s a specific text prohibiting it.

Islamic Fintech Services

The main type of services that Islamic Fintechs offer is halal stock screeners, trading platforms, mobile money transfers, peer-to-peer (P2P) lending, and crowdfunding. Besides, fintech also can be integrated with insurance (takaful) and wealth management services.

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