From imitation to integrity: Why trust, not technology, will shape Islamic banking's next chapter

Growth is not the only measure of success

The IFSB put global Islamic finance assets at $3.88 trillion at the end of 2024, up almost 15% in a year. For Moataz Khalil, Chief Wholesale Banking Officer at Al Masraf, that figure tells only part of the story. “The growth of Islamic finance has been impressive, but growth alone should not be the ultimate measure of success,” he said. “While a significant portion of industry activity is concentrated in a limited number of widely accepted structures, including Wakala-based transactions and sukuk, the next stage of the industry’s evolution should focus on greater product diversity and innovation. Standardization has supported scale and market acceptance, but long-term sustainability will also depend on expanding the range of Sharia-compliant solutions available to clients. Variations in Sharia interpretation across jurisdictions naturally encourage preference for established structures, making industry-wide collaboration and innovation even more important.”

Ahmad Abu Eideh, CEO of Jordan Ahli Bank, highlighted the importance of meeting customer needs within the boundaries of Sharia. “We need to give proper Sharia-compliant products,” he said. “If it’s possible to give it to them, good. If it’s not, and it’s not within the domain of Sharia-compliant, we don’t.”

The same test surfaced on digital assets. Moataz argued that crypto returns depend on speculation over value itself, which sits uneasily with Islamic principles, while stablecoins backed by real value are easier to reconcile. Ahmad raised the question of what gives digital currencies their underlying value. Zubair Ahmed of Qorus, who moderated the discussion, cautioned that early innovative ideas or intentions can sometimes look misguided or flawed before they mature through further iterations.

Zubair Ahmed cited Kuwait Finance House, which placed Sharia guidance inside its agile product squads so products are designed compliant rather than reviewed afterwards. Ali Allawala, who leads Islamic banking in the UAE and global Islamic wealth and retail at Standard Chartered, stressed a strong in-house Sharia team working with business leaders who understand the regulation. “Shariah and Business must collaborate and not work in silos. The business leaders should have a good understanding of regulations to decide what matters need to go to the Shariah Committee”.

Asked what to prioritize (liquidity and hedging, digitized asset trails, or a machine-readable Sharia library), participants split by market maturity. Pamela Chan King Yeun of Mauritius Commercial Bank and Halil Ozcan, Head of Digital Business for Al-Futtaim's financial services, chose asset trails, with Halil citing the difficulty of tracking collateral in asset-backed finance. Stewart chose the library for Afghanistan but liquidity tools if he were in the UAE. David Horton, Qatar General Manager at Hexaware, argued that the library unlocks everything else, because the unglamorous groundwork has to come before the exciting use cases. Zubair’s view was that all three needs to be addressed in parallel, as there are intrinsic interdependencies among them all.

Halil said fragmented customer data slows everything, and that the bottleneck often sits outside the bank, where government digital-identity infrastructure lags the banks. David warned that loading unvetted documents into a model produces an ambiguous Sharia knowledge base rather than a reliable one. Omar Haddad, Managing Director & CEO at Al-Futtaim, argued for partnership: "If you want to go compete with banks instead of collaborating with banks, it's not the right approach." Younger customers, he added, show little brand loyalty and choose on convenience and benefit. Yet when something goes wrong, participants noted, customers complain to the bank, which carries the Sharia accountability whatever its partners do.