When we spoke a year ago, you expressed your concerns about the adverse impact of COVID-19 on the Islamic financial markets. Considering how the situation has evolved with the emergence of new variants but also the rollout of vaccines globally, where do you stand now?
The economic impact is difficult to capture in its entirety, but we can safely say that no economy has escaped the wrath of COVID-19, which the IMF describes as “a crisis like no other”.
A year ago, I feared that COVID-19 would affect the Islamic financial markets deeply but, at that time it was too early in the pandemic to get a true sense of what that impact might be. Since then, governments across the world have spent an enormous amount of money to protect lives and help prop up their stagnating economies as their working populations were forced to remain at home and follow government COVID- 19-related restrictions.
The combination of a large increase in financial resource availability and COVID-19 gave impetus to the Islamic digital landscape and has proven a boon, albeit not evenly across jurisdictions. Over the near and medium terms, I feel that my previous view was a little conservative. I now see a boost to the Islamic financial marketplace as the landscape changes.
The big question will come over the next 12 months when lockdowns and restrictions are eased further, and we take stock of the true aftermath of this pandemic.
Digitization has been a key theme in the growth journey of Islamic financial institutions across the world, the urgency of which has been exacerbated by the pandemic. In your opinion, and based on your experience with global clients, has the Islamic finance industry been able to cope with the digital revolution?
Absolutely. The demand for totally integrated financial services has accelerated and the response is keeping pace with that growth. The end user is experiencing a vast array of digital offerings from legacy and new, innovative institutions. In addition to the new players, banks are being forced to upgrade their offerings to keep pace. Central banks and regulators are also reacting positively and encouraging these changes, especially through the use of sandboxes and national vision projects, particularly in the GCC.
What are some of the biggest digital trends of the past year? What trends do you think would be key for the year ahead? What is your market outlook?
From our perspective, we have seen the biggest growth in alternative microfinance, SME financing platforms and new Islamic ‘digital banks’. These have the potential to be game changers and are forcing legacy institutions to re-evaluate their products and services.
Within the low-interest rate environment, coupled with the demand from individuals and business for funding to help emerge from under the cloud of COVID-19 restrictions, we have also seen a significant rise in alternative funding platforms such as peer-to-peer and crowdfunding platforms.
Islamic-focused and Shariah compliant digital banks have been launched at speed over the past six months with the aim of offering a fully digital proposition to their customers through mobile-only or online platforms without the burden of traditional bricks-and-mortar branches.
In the commodity Murabahah space, the implementation of AAOIFI Shariah Standard 59 is a major development. How does the new ruling impact the business of trade facilitation? What other key factors of change should the market take notice of for the commodity Murabahah market?
The adoption of the AAOIFI Standard 59 by a number of jurisdictions has required financial institutions to rethink how they transact certain products. This has had no direct effect on the way that we undertake our business.
Turning our focus to Eiger, what has been the most significant developments for Eiger during such tumultuous times? How has the business coped and what are some of the top achievements for the company over the past year?
Working practice has had to change to reflect the realities of the COVID-19 pandemic and it is a positive reflection on the attitude of the staff that, despite the major disruption to our staff rotas, there has been no reduction in the level of service that our clients received.
Additionally, disruption to business travel caused by COVID-19 has stalled face-to-face contact with our clients which is a key feature of our client interaction. We cannot underestimate the value of human interaction with clients and potential clients. Although staff have begun to travel, it is going to be some time until we will be able to visit all our jurisdictions.
Regardless, I am very happy with the current level of business, which reflects the increased level of business being seen within the Islamic finance industry. Eiger has established three new strategic partnerships with ConnectIf, Instimatch and Refinitiv, all of whom provide automated solutions for our clients. These solutions allow our banking clients to take advantage of emerging platforms that help streamline the post-trade process of Islamic deals, as well as the often-
cumbersome KYC [know-your-customer] requirements between counterparties.
We welcomed the new appointment of Steve Moulder to the Eiger Board of Directors as a non-executive director. With a career spanning 41 years in banking and financial markets across the UK and the Middle East, Steve will bring a new perspective to business growth and risk mitigation and help strengthen our platform for growth in the future.
We continue to be recognized as a leader in our peer group as specialists in commodity Murabahah trade facilitation and execution services. Eiger received an award from GIFA for ‘Best Shari’a Compliant Commodity Broker 2020’ and we hope to be recognized again before the end of the year.
What can we expect from Eiger over the next 12–18 months? What are some of the projects you are working on or strategic priorities?
Our key focus is to maintain excellent relationships with our customers and stakeholders. We believe we have the strength and vision to take advantage of current market conditions and digitalization will be key for the next 18 months. I am sure that during this time frame we will also see further key initiatives and strategic moves in the marketplace.