There is a tremendous opportunity for #africanstartup entrepreneurs to serve the growing population of African Islamic communities. #innovation #fintech #islamicfinance #islamicbanking

1. The time is ripe to deploy Islamic fintech across Africa
The Islamic finance industry is forecast to grow to $3.8 trillion in assets by 2022,
according to a 2017 ICD-Reuters report. And yet the Muslim investor is prohibited from
keeping their excess savings in bank accounts. This excess liquidity represents a
tremendous opportunity for African innovators to develop Fintech products that can tap
into these funds to spread Islamic Microfinance opportunities to the African continent.
The global fintech adoption rate has moved steadily upward, from 16% in 2015 to 33%
in 2017, and 64% in 2019. Only a small portion of this is related to Islamic microfinance.
However, it does not have to be like this and Islamic Fintech does not only have to
appeal to Muslim users. Furthermore, there is tremendous funding available as the case
of Insha shows.
Case study: Insha

2. “Ethical business is better for our society,” says the founder of Insha, one of the largest
Fintech agencies in the world. Indeed, this strategy of seeking out customers from
beyond the Islamic community points to the possibilities for Islamic finance adoption in
Africa.
“In July, Insha will release a new app allowing customers to transfer money to over 80
countries and featuring new products, including a revenue-generating premium version,”
said Sezer. Right now, Insha offers customer transfers from and to any of the 28
countries in the Single Euro Payments Area (SEPA). After ten fee-free transactions per
month, a transfer costs 0.25 euros ($0.28).
In collaboration with Albaraka Türk, Insha will launch a special participation account that
offers a return rate twice as high as a regular time-deposit account. Its customers will
also be able to buy and sell gold and other precious metals and participate in a loyalty
program that provides cashback and retail discounts. An open banking marketplace will
offer insurance, tax, and investment, and lifestyle products. These will be presented in
collaboration with other fintech companies.
Insha is Shariah-compliant and seeks no monthly or annual maintenance fee paid on a
regular account. It provides clients with functions like a zakat calculator and the nearest
mosque, and a qibla finder and customer support is offered in German, Turkish, and
English. Insha customers are also covered by the same national deposit protection
scheme extended to banks, that guarantees up to 100,000 euros ($113,000) of a client's
money. Insha serves over 10 million clients and is valued at 5.5 billion US dollars.
Meanwhile, another Fintech called Wahed, which is based in New York and is Shariah-
compliant, has raised $25 million in a venture funding round led by multinational oil
company Saudi Aramco’s venture fund, Wa’ed Ventures. Wahed allows users to invest
their money into a diversified portfolio made up of stocks, commodities, real estate, and
Sukuk (sharia-compliant bonds).
Wahed has also received backing from its existing investors BECO and Cue Ball
Capital. It also obtained funding from Dubai Cultiv8 and Rasameel Investment
Company, which only goes to show the tremendous potential of Fintech.

3. What is going on in Africa?
Nearly 70 percent of the population in Sub Saharan Africa falls below the $2 a day
poverty line, and only 24 percent of the adult population have bank accounts at a formal
financial institution. Banks utilize deposits to lend money for interest which is proven to
increase inequality and cause an unfair advantage to the wealthier borrower, whilst
charging a high-interest fee for lower-income consumers. This is why Islamic
Microfinance is so needed because it specifically prohibits this and works hard to lower
inequality.
Unfortunately, the interest-free microfinance market penetration in Sub Saharan Africa
has been slow. Less than 20 of the 255 financial service providers offering Shari’ah-
compliant microfinance products are in Africa. However, technology can change this.
In Ethiopia, the Somali Microfinance Institution (SMI) is using the mobile money app
known as Hello Cash as a tool to provide inclusive financial services to the active poor
who have no access to conventional banks both in the rural and urban areas. Overall,
HelloCash is able to reach 150,000 customers who previously would have been left out
of the financial system. I do not doubt that many Somali Islamic FinTech’s are working
hard on several Islamic innovative and customized products and services for the African
Islamic communities. Stay tuned for that.
Kenya is a leader in the adoption of Fintech and as a result, it has dominated financial
inclusion in Africa for well over a decade. According to the 2019 FinAccess Household
Survey, 82.9% of the adult population has access to at least one financial product.
Unfortunately, the finance sector is dominated by non-sharia compliant lenders (mostly
from Silicon Valley) who have exploited poor borrowers and driven them into debt.
The Kenyan and Ethiopian examples show two things: First, that Africa is ready to
embrace microfinance if only it can be made accessible at the grassroots. Second,
Africans' huge demand for finance leaves the continent vulnerable to exploitation by
unethical lenders.

4. These two problems can be solved by Fintech and Islamic microfinance. Fintech will
take microfinance to the grassroots. Meanwhile, Islamic Microfinance, which observes
the rules of Sharia, will save Africa from being exploited and re-colonized by
international financial forces.
There is a need to have a homegrown African Islamic Fintechs to come up with new
Sharia-based products that service the African Islamic Population. Africans must not
wait for western-based fintechs to enter the continent and dominate the Shariah-
compliant finance sector dominated by foreign Shariah boards.
There is a tremendous opportunity for African Fintech entrepreneurs to serve the
growing population of African Islamic communities.