What is the future of Islamic Banking?

In this latest podcast episode, “What is the future of Islamic Banking?”, Darren Franks chats with Mohammed Kaka, COO at Al Baraka Bank.

In this podcast episode Mohammed Kaka, shares insights into his journey, Al Baraka’s evolution, the intersection of finance and technology and what maybe the future of Islamic Banking

Al Baraka’s 18-Year Evolution

Over the past 18 years, Mohammed has played diverse roles at Al Baraka, from finance and audit to forex and sales. He now oversees sales and digitalization, reflecting the industry’s shift toward becoming IT-centric service providers.

Principles of Islamic Banking

Often referred to as ethical banking, it is rooted in principles guided by the Quran. The key differentiator is the prohibition of interest. Islamic banking operates on profit-sharing, cooperative models, ensuring a risk-sharing approach. Contrary to popular belief, it is open to everyone, not just followers of Islam. It provides an alternative for those seeking financial services aligned with ethical and Sharia principles

Asset-Backed Financing and Benevolent Loans

Al Baraka primarily engages in asset-backed financing, avoiding interest-driven transactions. The bank aims to foster partnerships in financial endeavors, ensuring risk-sharing and adherence to Islamic principles.

What is the future of Islamic Banking

Regulatory Landscape and Collaboration

In South Africa, Al Baraka collaborates closely with regulators like the Reserve Bank. Regulatory support is crucial for Islamic banking’s growth, evident in recent developments, such as the government’s issuance of a REN-denominated Sukuk.

Challenges and Opportunities in Cryptocurrency

Mohammed acknowledges the speculative nature of cryptocurrencies but believes that with proper regulation and reduced volatility, they could become more acceptable within the Islamic banking framework. A Sharia board assesses investments to ensure compliance with ethical standards.

Global and Local Perspectives

While the sector has deep roots in the Middle East, South Africa has made significant strides, with regulators actively engaging and adapting tax legislation to accommodate Islamic finance transactions.

As the sector continues to evolve globally, Mohammed’s journey at Al Baraka reflects the industry’s dynamic nature. From its foundational principles to embracing digitalization, Islamic banking navigates the intersection of tradition and innovation, offering ethical financial solutions to a diverse clientele.


1. How is Islamic Banking evolving in the digital age?

It is embracing digital transformation, similar to the wider financial industry. This evolution involves the integration of digital banking technologies, such as blockchain and fintech innovations, that comply with Islamic financial principles. Digital platforms are being developed to offer Sharia-compliant products and services more efficiently, broadening access to customers worldwide. This digital shift is expected to enhance customer experience, improve financial inclusion, and introduce new Islamic financial products into the market.

2. What are the main challenges facing the future growth?

One of the primary challenges is the harmonization of Sharia compliance across different jurisdictions. Since it is based on Sharia law, which can vary from one country to another, creating standardized products that are globally accepted can be complex. Additionally, the sector faces competition from conventional banks, regulatory challenges, and a need for skilled professionals who are versed in both Islamic finance principles and modern financial practices.

3. How is Ethical Banking contributing to sustainable and ethical finance?

The foundation inherently promotes ethical finance practices by adhering to Sharia principles, which emphasize fairness, transparency, and social welfare. It avoids interest-based transactions and invests in sectors that have a positive impact on society. As such, it is seen as aligned with sustainable finance, supporting projects that are environmentally friendly and socially responsible. This alignment is attracting not only those who seek Sharia-compliant products but also customers interested in ethical investment options.

4. What innovations are anticipated in products and services?

The future is expected to see innovations that further align with digital trends and customer expectations. These include the development of Sharia-compliant fintech solutions, such as digital wallets, peer-to-peer lending platforms, and blockchain-based smart contracts for more transparent and efficient transactions. There’s also a growing interest in developing sophisticated investment products, such as green sukuk (Islamic bonds) to fund renewable energy projects, and microfinance services to support small and medium-sized enterprises (SMEs).

5. How can it increase its global footprint and attract a broader customer base?

Expanding the global footprint involves several strategies, including education and awareness campaigns to demystify Islamic finance principles for a wider audience. Collaborations between Islamic and conventional financial institutions can also pave the way for hybrid products that appeal to a broader market. Additionally, leveraging technology to improve accessibility and user experience can attract customers who are looking for ethical and socially responsible banking options, regardless of their religious beliefs.

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