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Contrary to the misconception that Islamic and conventional banking operate in isolated silos, we see banking as a holistic system, where Islamic principles coexist with modern banking needs. However, implementing Islamic banking comes with unique challenges, that we continuously strive to overcome.
One of the biggest hurdles is the intricate regulatory landscape that governs Islamic banking. Unlike conventional banking, where processes are relatively streamlined, we face an additional layer of scrutiny. Every product or service must satisfy not only our internal Sharia governance team but also external authorities like central banks and global bodies like the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). These regulations, though necessary, often add more layers and make Islamic banking less agile compared to conventional models.
For instance, a central challenge is the documentation process. Islamic contracts are notably more complex and voluminous, which places an additional burden on both the bank and the customer. While we ensure that this doesn’t impact the customer’s experience and shariah governance, it’s a reality we must navigate.
Another growing trend shaping the industry is the integration of Environmental, Social, and Governance (ESG) criteria. Last year, the central bank introduced new ESG requirements, mandating Islamic banks to adhere to higher standards even before conventional institutions. While ESG is undeniably the future of finance, implementing these measures on top of existing Islamic principles adds another layer of complexity. We’re in active discussions with regulators to find a more balanced approach, allowing us the time to integrate these elements without stifling growth.
In a competitive market dominated by giants, Mashreq has found its competitive edge through digital innovation. The major players may have more capital, but they lag in digital agility. We’ve invested heavily in building a robust digital ecosystem, allowing us to offer seamless, frictionless experiences to our customers—especially in retail banking, where we’ve been recognized as the Best Digital Islamic Bank for two years running.
But the future is not just in retail. We are expanding our digital capabilities into corporate banking, where the traditionally relationship-driven model is undergoing a transformation. Through digital onboarding and enhanced trade and working capital services, we aim to lead in corporate Islamic banking as well.
Despite the rapid growth of fintech in Islamic finance, the focus has been narrowing, often limited to payment solutions. This misses a significant opportunity to digitize more complex banking services, such as mortgages, trade finance, and working capital management. Fintech companies willing to tackle these challenges will find eager partners in Islamic banks like Mashreq, as we seek to streamline processes and enhance customer experiences across the board.
At Mashreq, we’re embracing the challenges, from regulatory hurdles to ESG mandates, while focusing on digital innovation as our differentiator. The road ahead is complex, but by staying agile and forward-thinking, we are poised to redefine Islamic banking for the modern age.
Ibrahim Al Mheiri
Head of Islamic Banking, Mashreq
