Despite global economic and financial uncertainty over the course of 2022, underpinned by successive interest rate hikes by the US Federal Reserve and its global counterparts, the developments in terms of financial exchange and activity in the Islamic world can be regarded as positive.
Islamic economies around the world, especially in the GCC region, bounced back strongly, as the final expectation of the growth of non-finance economy sectors in the Islamic world in 2022 exceeded 9% on the output of the previous year, when total spending amounted to US$2 trillion across food, fashion, recreation, media, cosmetics and pharmaceutical sectors. The finance economy growth in 2022 is expected to have gained a 10–12% increase on its US$2.2 trillion capitalization from 2021.
Review of 2022
In the MENA region especially, there has been industry-level increases in the number of IPOs, the number of trading and brokerage firms and brokers providing retail customers and institutions access to multiple financial market asset classes, as well as the number of cryptocurrency and fintech firms and start-ups being launched with government and regulatory support.
The COVID-19 pandemic-induced trend of the online financial economy has also continued and flourished in both traditional and decentralized finance, with the UAE alone accounting for US$25 billion in total cryptocurrency trading volume annually.
In terms of IPOs, the Middle East stock market listings increased by more than 300% this year, reflecting sizeable economic development in the region. Fintech investment has also been significant, with Saudi Arabia and the UAE leading the way. Saudi Arabia has its eyes on its Vision 2030, and its fintech start-up ecosystem is expected to form a major pillar of its economic aspirations.
Over in the UAE, the Dubai Metaverse Strategy takes center stage after its summer announcement, as the government aims to turn Dubai into one of the world’s top metaverse economies, attracting over 1,000 companies in the blockchain and metaverse fields and contributing to more than 40,000 jobs in the space by 2030.
Additionally, we have seen strong government support for the cryptocurrency industry in the GCC, with the UAE and Bahrain leading the way in terms of establishing regulatory frameworks governing virtual asset markets, ensuring fair and orderly trading and protecting investor interests while guaranteeing asset security.
Major cryptocurrency firms and exchanges have flocked to the UAE in particular, and have begun expanding their operations in the country, now seen as a crypto and technology hub and a marketplace of ideas characterized by a strong human capital and knowledge base. E-commerce has also grown massively in the Islamic world, and especially in the GCC region.
Over the course of this year, the UAE’s e-commerce spend will exceed 22% on last year’s total, and is set to surpass the US$8 billion target in online sales by 2025, while it is expected to reach US$9.2 billion the following year.
Additionally, Saudi Arabia-based Noon, the Middle East’s leading digital e-commerce platform, which was launched in 2016, expanded its retail portfolio through its acquisition of online fashion platform Namshi from Emaar, in a deal worth US$335.2 million.
This reflects a rise in mainstream participation in the sector, with mobile devices in the country alone being used to enact US$2.6 billion of online purchases in 2021, with the expected growth rate from their retail transactions being 15.6% annually over the next four years.
With the number of young Arabs shopping online doubling over the past five years, their target purchases including gadgets, apparel, footwear, food and fashion items, business opportunities in fintech and payment systems are set to increase further in the present and future.
Preview of 2023
In the coming period, I see further economic progress and recovery in the Arab and Islamic world. We are currently in the midst of a deep global recession, and at some point over the coming year the international interest rate hikes would have to decrease in frequency, based on the market pricing in policy changes as well as a reduction in inflation numbers.
This will have a positive impact globally, leading to an increase in international trade figures and therefore enhanced economic activity and cooperation between the Islamic and non-Islamic countries, resulting in enhanced transaction volumes and liquidity entering Islamic economies.
This would further strengthen the Islamic finance industry overall, which would be further supported by government regulation for financial activity among different asset classes.
Additionally, economic engagement between the GCC and Indonesia has been growing over the past decade and is set to continue over the course of next year, cementing the historic commercial ties between both regions and further developing the Islamic finance industry.
Conclusion
In conclusion, it has been an eventful year in terms of financial, trading and brokerage activity in the Islamic world, despite major global uncertainties and concerns including interest rate hikes, inflation and the war in Ukraine. Arab and Islamic economies, aided by oil revenues in addition to the growth of numerous important sectors, have remained relatively robust, and are well-placed to weather potential challenges in the coming years.
The future is promising, as the financial health of Islamic countries is set to improve further due to more economic and financial cooperation and integration between their respective economies.
Arshad Khan is CEO of Venomex. He can be contacted at [email protected].