PhD Candidate Nida Khan: Coding The Future Of Islamic Finance

[Credit: Salaam Gateway ]

Early this month we reported a new fintech project had kicked off to build an open marketplace for Islamic and ethical finance, and built on the blockchain protocol. One of the first outputs from the programme is due this year and will involve tracking charity and zakat donations. The platform is being built by University of Luxembourg PhD candidate Nida Khan, who is an Islamic finance expert and developer of two Islamic finance apps.

Salaam Gateway speaks to Khan about three key issues:

1) The fintech scope and potential for Islamic finance to “break” traditional banking, capital market, takaful and social finance

2) Education and the Islamic Economy, and

3) Muslim women in fintech

Q: What do you hope to happen with the platform you’re developing?

Nida Khan: The most important output would be the implementation of Shariah in a transparent manner to increase the access of Islamic financial services to more consumers and untapped markets in a cost-effective manner.

Secondly, I envisage a greater revenue generation for the firms involved in this research project on account of incorporation of data analytics to aid them in their business actions and decisions.

An open marketplace is in the pipeline, where the research project is open to be joined by other Islamic financial institutions (IFIs) interested in similar deliverables. As such the platform has a very big possibility of being owned by a group of IFIs that collaborate with the existing partners and would be for all those consumers, who are interested in investing in profit sharing investment accounts.

Besides, the platform also aims to optimize the zakat collection and distribution process and the transparency provided by blockchain would prove to be invaluable to the Muslim consumers to track the money from its inception till the end. The platform on account of its being technologically in sync with times and catering to the inherent needs of the consumers would lead to a global acceptance by millennials.

Q: How big is the gulf between Islamic banking and finance and Islamic fintech or fintech that serves Islamic banking and finance? Which sector has the steeper learning curve?

Nida Khan: The gap is huge and more than for the conventional sector. Islamic banking and finance is a nascent industry and till now is trying to gain a strong foothold in the market competing with the already established conventional finance. The challenge of incorporating fintech amidst this is more than that faced by the conventional industry. Fintech or financial technology needs a thorough understanding of both finance and technology and thus definitely has a steeper learning curve.

Q: Do you think fintech can break Islamic banking and finance to achieve the maqasid, or goals of Shariah?

Nida Khan: Fintech can definitely support Islamic banking and finance to achieve the goals of Shariah by bringing in transparency to the business transactions and facilitating justice by vesting the power in the hands of the consumers in the market.

I would not say that we can do away completely with Islamic banks in the coming years. At least that’s not how I see it. I see Islamic banks as the foundation on which fintech would rest to deliver products and services to the market building upon and enhancing the already established trust in the market. I see a collaboration between Islamic banks, start-ups and MSMEs to harness the full potential of new technologies.

Q: Do you see it in the same way for other sectors as well?

Nida Khan: Definitely, yes. Consider the case of capital markets for example. Securities that are based on payments and rights, which are executed according to pre-defined rules can be coded as a smart contract in capital markets.

Q: How about takaful? Is takaful the next big thing in Islamic fintech?

Nida Khan: Takaful is a very good sector for incorporation of smart contracts as it involves peer-to-peer insurance with policyholders supporting each other in times of crisis managed by a takaful operator. The same can be accomplished by having a smart contract manage a pool of policyholders in a distributed blockchain comprising of ‘permissioned’ ledgers, which also foretell greater adherence to regulations.

Automated underwriting and claims processing through smart contracts will speed up the whole process. Fraudulent claims can be detected more easily and power would go in the hands of the policyholders as opposed to the takaful operator.

Takaful could be the next big thing in Islamic fintech if both smart contracts replicated and executed on a blockchain, and Internet of Things (IoT) are used together with data from IoT devices serving as a subset of the input data for the execution of the computer coded smart contract.

Q: Is there any fintech scope for Islamic social finance?

Nida Khan: There is definitely scope for Islamic social finance. As I said before, smart contracts are executed based on certain conditions and these conditions can be anything coded by the programmer. Islamic finance has the Shariah law as its base so the applications can be in nearly all sectors with customized codes and support of other emerging technologies.

Waqf is also a very good model for using the output of my current research as a template for further modification and customization as per need. Waqf ahli, for example, can easily be coded in a smart contract by the founder at the time of creation of the waqf with due consideration to inheritance law if needed. The founder of any waqf, in general can get a smart contract programmed such that it leaves no scope of giving anybody access to modify the computer code later on.

This smart contract would become irrevocable once deployed on the distributed ledger preventing fraud, tampering or distribution of benefits from the waqf fund to beneficiaries other than the designated in the smart contract.

The smart contract can be coded to be effective after a certain event or time or date as the case may be. The benefits can be traced leaving no scope for any ambiguity as to their distribution.


Q: What are your qualifications and how did they lead you to this PhD programme to develop a fintech platform for ethical and Islamic finance?

Nida Khan: I have a Master Diploma in Islamic Finance from AIMS, UK and a Master’s degree in Information and Computer Sciences from the University of Luxembourg. I also have a Bachelors in Computer Science and Engineering (Honors) from Uttar Pradesh Technical University, India.

While doing an online course from Harvard University through edX I developed the world’s first Islamic finance education iOS app as a final project for the course on computer science. Last year I developed the first-of-its-kind Islamic finance android app.

I am a certified Islamic Finance Expert, a certified takaful professional and hold a certificate in Islamic finance from AUSCIF, Australia. I am also in my fifth year of a long-term study programme from ‘Prophetic Guidance’, UK.

Q: As the holder of many academic and professional qualifications, how have all of your achievements also been grounded in “Islamic sciences” as opposed to the secular?

Nida Khan: My focus has always been on Quran and Sunnah as far as Islam is concerned. My foray into Islamic finance was because of the push given by my husband who saw my existing Islamic knowledge as a base for my input to the Islamic economy and then I started the Master Diploma course in Islamic finance.

Q: How do you reconcile “religious Islam” and the prevalent secular, modern higher education system to drive the Islamic Economy?

Nida Khan: This is a very pertinent question and something many are struggling with in the present times. Islam is a very progressive religion. Islam does not stop one from assimilating knowledge and advancing technologically.

The prohibitions that exist in Islam are for the betterment of the individual himself and steer the person towards a healthy, balanced and a stress free life. The majority of the people do not read the authentic religious scriptures from which knowledge should be derived and rely on the speakers of Islam believing blindly their interpretation of the religion. The need for an inquiry into the background of what is said is not present and hence the resulting disputes so prevalent nowadays in our community.


Q: There has been a buzz in the Islamic fintech space in the last couple of years, led by a handful of people in different countries, e.g. Umar Munshi and Ethis, Raafi Hossain and Finocracy, Chris Blauvelt and LaunchGood. They have even set up the Islamic Fintech Alliance. Is it a problem that there’s a dearth of women in Islamic fintech?

Nida Khan: It is definitely a problem because when we leave out women from a certain economic activity we are deprived of the expertise and inputs from one of the biggest emerging markets. Women are not just contributors to the global economy through their business initiatives but they also form the pillars of the family on which the future generation thrives.

If there is more inclusion of women in diverse sectors then apart from the women think tanks, one would see more future innovators and leaders in that sector through the education imparted by those women to their children. Having a woman contributing to the economy implies you are training an entire generation to be raised through her, which in terms of investment has far-reaching economic benefits.

Q: What have held back Muslim women in fintech and what can be done to lower or even break down these barriers?

Nida Khan: The problem is not specific to Muslim women. We have a glaring lack of women in general in STEM (Science, Technology, Engineering and Math) with figures of women PhDs in Mathematics and Computer Science being 28% and 24%, respectively.

This global problem coupled with the fact that Muslim women suffer from a lack of proportional representation in businesses, employment and research is the major reason for the dearth you see in fintech. The primary facet that needs focus is a change in the mindset of both the genders towards the roles traditionally assigned to them.




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