Islamic Finance and the New Technology Challenges

  • Miroslav Kamdzhalov University of Economics Varna
Keywords: Islamic finance, blockchain, financialization, fintech, crowdfunding


Islamic finance, as a new economic paradigm based on ancient principles and rules, needs to embrace the new IT opportunities in order to be up to date with the contemporary financial industry. This process will become a “bridge” between the past and the future of socially responsible financing. The world’s financial and economic environment in our days is marked with immense inequality and imbalance. With the emergence of the global capital structures, solely ruled by the principles of the financial markets, the main focus of the economy shifted from real entrepreneurship to a form of capital bureaucracy. The financialization of the economy is a crucial phenomenon of contemporary capitalism, which could lead the world economy nowhere. Structures such as hedge funds, venture capitals and private equities create no real value.  The main objective of such financial management firms is short term profits. By cutting costs (firing workers, reducing investments etc.) they have harmful impact on the companies they invest in. In order to evade deleterious effects on the economy, caused by the financialization, an interest free environment and financial technology (fintech) development need to be implemented. Islamic finance as a no-interest based intermediary can be fully embedded in such processes. By nature the Islamic mode of financing excludes the dealing with debt and purely monetary activity. The digital disruption can bring independence, shrink costs, and improve services as a whole. Blockchain is the technology which provides the contemporary base for development of the fintech. On one hand it enables maximum security of transactions and on the other it energizes crowdfunding. In the Islamic finance context of the profit and loss sharing paradigm, the new disruptive technology has the potential to reduce the risk and to increase productivity. In the end by increasing trust, blockchain and Islamic finance can mitigate debt-based financing.

Author Biography

Miroslav Kamdzhalov, University of Economics Varna
"International Economic Relations" Department


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