As in any form of finance, technology has become essential for the provision of financial services to clients and management control systems. At the retail bank level, clients expect to have access to ATMs and online facilities, the most visible presence of technology. Management needs to have access to electronic records of all financial transactions and assets and liabilities.
For Islamic finance the challenge is how to deliver and adapt technology. The images and promotional material on websites, for example, should respect Muslim values and culture. For financial reporting, adjustments need to be made to ensure that the assets and liabilities are accurately designated.
The issue of reporting to investment Mudarabah account holders has yet to be properly addressed, but part of the answer lies in finding technological solutions.
I can’t speak for other sectors of Islamic banking (e.g., retail banking, corporate banking, investment banking, which all have their own technology requirements), but I can speak for Islamic wealth and asset management, where there is a large gap in information availability on Shariah compliant investment products.
Anyone who is responsible for managing the assets of someone else can only do that job with massive amounts of information on the investible universe. Imagine an asset manager who does not have Bloomberg, Reuters or Morningstar. That manager would be driving blind.
Managing assets without information is reckless and irresponsible. So, what happens if someone gets a mandate to manage assets, but only those that are Shariah compliant? We take for granted that the required technology exists in the conventional space, but few recognize that there is just nothing — zero — in the Islamic asset space.
In other words, because there is no information on Islamic assets there can be no Islamic asset management. A big leap can be achieved if and when someone (besides me) comes up with a fully responsible online database of all Shariah compliant assets in the world. Without this the Islamic asset management industry will never exist.
Anyone who claims to be doing Islamic asset management without such information is, to be exact, driving blind.
Technology will ultimately provide the solutions we need to create the Islamic asset management industry. For the time being there is unfortunately nothing.
JOHN A SANDWICK
Islamic Wealth & Asset Management
Technology can have a significant impact on the efficiency and effectiveness of processing of financial transactions.
However, any technological infrastructure needs to be analyzed carefully to ensure it is fit for purpose and staff will need to be trained appropriately to ensure the organization as a whole benefits from the investment. Implementing an ill-fitting solution will in the long-run be more damaging to the efficiency of the organization and eventually hurt profitability.
DR NATALIE SCHOON
Principal consultant, Formabb