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How Islamic banks & financial institutions are responding to COVID-19
The Council for Islamic Banks and Financial Institutions (CIBAFI) has been focusing on professional development and exploring Fintech integration for the past month, but how has the Islamic Banking and Finance space fared overall since the beginning of the pandemic? CNBC Africa spoke to the Secretary General of CIBAFI, Abdelilah Belatik for more.
Thu, 16 Jul 2020 10:10:47 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Islamic banks leverage unique business model focused on tangible projects and ethical contracts
- Government interventions support financial stability and provide relief to customers
- Digitalization accelerates, enabling Islamic banks to adapt and innovate in the face of crisis
In the wake of the COVID-19 pandemic, the Islamic banking and finance sector has faced unique challenges that have tested its resilience and adaptability. The Council for Islamic Banks and Financial Institutions (CIBAFI) has been at the forefront of addressing these issues, focusing on professional development and exploring fintech integration. CNBC Africa recently spoke to the Secretary General of CIBAFI, Abdelilah Belatik, to gain insights into how Islamic banks have fared since the onset of the global health crisis.
Islamic banks operate under a distinct business model that emphasizes financial intermediation through tangible projects and ethical contracts, rather than simply lending money for profit. This has positioned them differently from conventional banks and has influenced their response to the pandemic. While the sector was performing well until the beginning of the year, the sudden onset of the crisis disrupted its growth trajectory. Despite facing challenges such as loss of revenues, Islamic banks have managed to navigate the situation with resilience and adaptability.
One key aspect that has helped Islamic banks weather the storm is the support and interventions provided by governments in various countries. Many governments have encouraged banks to offer payment deferrals to customers, providing temporary relief during these challenging times. This approach has not only helped customers but also supported the overall economy by ensuring financial stability and continuity.
In response to the revenue losses and client issues caused by the pandemic, Islamic financial institutions have taken proactive measures to mitigate the impact. Collaborating closely with regulators and central banks, these institutions have implemented strategies to support the economy and provide financial relief to affected sectors. The focus has been on fostering direct dialogue between banks and sectors such as hospitality, airlines, and SMEs, with an emphasis on understanding their needs and offering tailored solutions.
Moreover, the shift towards digitalization and online services has played a crucial role in enabling Islamic banks to adapt to the new normal. Many institutions had already begun investing in digital solutions prior to the pandemic, but the current circumstances have accelerated this transformation. The adoption of financial technologies and mobile payments has not only streamlined operations but also highlighted the potential for growth and innovation in the sector.
Abdelilah Belatik underscored the importance of learning from Africa's advancements in financial technologies, particularly in mobile payments and transactions. The continent's progress in this area serves as a valuable example for Islamic finance institutions seeking to enhance their digital capabilities. The pandemic has underscored the urgency of embracing digital solutions, and CIBAFI's ongoing efforts to promote collaboration and innovation in this space are poised to drive further growth and development.
As the Islamic banking and finance sector continues to navigate the uncertainties brought about by the pandemic, proactive measures, innovation, and collaboration will be key to ensuring its resilience and future success. By leveraging lessons learned and embracing digital transformation, Islamic banks can emerge stronger and more resilient in the post-pandemic era.
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