The biggest Islamic finance market in the Middle East, Saudi Arabia is now on the path of leading the sector to a global level and to bring economic benefits and social prosperity to contribute to the country’s ambitious strategic framework Vision 2030.
In line with the G20 Summit held in Saudi Arabia the Islamic Research and Training Institute (IRTI) of the Islamic Development Bank (IsDB) Group has published the Islamic Finance Country Report of the Kingdom. The first comprehensive analysis of the sector in the country was made under the theme “Islamic Finance in Saudi Arabia: Leading the Way to Vision 2030.”
The new report by IRTI states by the end of 2018, Saudi Arabia’s Islamic finance assets reached $879.2 billion, making the country a leading player of the market in the world among economics which manages dual financial systems that encompasses both conventional as well as Islamic financial sectors.
“Saudi Arabia is unquestionably a major hub of the Islamic financial industry not only in the Middle East but also worldwide. With Vision 2030 and with an energetic and innovative youth population, Saudi Arabia has a great potential to lead the industry in the 21st century. Islamic finance is one of the key pillars of the Financial Sector Development Program set out by the Government of Saudi Arabia.”
The report suggests that, for Saudi Arabia to secure its position as global leaders in the Islamic financial sector, capitalization of its uniqueness in Awqaf and SMEs is needed.
Awqaf is the charitable endowment under Islamic law. Being a spiritual hub for Muslims, Saudi Arabia brings favorable conditions to benefit from sizable opportunities in terms of investment and spending. Awqaf can be turned into an ideal channel for investment as it requires sustainable income generation.
Deploying resources for the Small and Medium Enterprises (SMEs) through sukuk, equity, crowdfunding and venture capital is another possible way for the Kingdom to reach global leadership in the Islamic finance industry. Since SMEs are the engine of job creation, investing in the SME sector is essential for sustainable economic growth.
Further, the report highlights the efforts of Saudi Arabia for bringing digital transformation by developing “Fintech Saudi” to stimulate the digital ecosystem alongside the vibrant regulatory sandbox set out by the kingdom’s monetary authority.
The regulatory sandbox by Saudi Arabian Monetary Authority (SAMA) aims to aid both local and international companies that are interested in testing innovative digital solutions in a real environment to deploy such solutions in Saudi Arabia in the future.
SAMA plays an important role in improving the contribution of the Islamic finance segment to sustainable economic development and job creation.
The monetary authority has been constantly working to turn to create a cashless society by promoting electronic transactions. MADA cards for enabling contactless payments and Esal platform for B2B e-invoicing and payments are some of SAMA’s major initiatives in this regard.
“The impact of these new technologies in the Saudi financial service market will be observed and assessed, through the sandbox, which encourages the transformation of the Saudi market into a smart financial center,” says Ahmed Al Kholifey, Governor of SAMA.