RISE OF ISLAMIC FINTECH IN CENTRAL ASIA

<em>Fintech, or financial technology, is changing how people can manage their finances. In the UK, the impact of financial technology has been profound. Within five years, the emergence of challenger banks and revolutionary new products challenged the traditional monopoly of banks in the financial system. In short, technology is empowering society by democratizing the banking system. It is important to note that the influence of fintech is not limited to established markets. If we look at developing regions such as Central Asia, a new generation of innovative fintech breakthroughs are applying advanced technological solutions to achieve broader development goals. This is not a continuous application of existing technologies. Instead, creative thinkers who understand the main challenges facing people in countries such as Tajikistan and Uzbekistan are promoting the digital transformation of the region. If current trends continue, Central Asia will become a new center of fintech innovation. The essence of the region's success lies not only in the reproduction of consumer financial and investment products that are currently offered in places such as London, New York and San Francisco, but also in the creation of new fintech products and services. The core of this new wave of innovation is the growth of Islamic financial technologies. When we talk about Islamic finance, we mean a banking system that adheres to the principles of Sharia. These principles include a ban on profiting from debt, paying interest, and investing capital in restricted sectors such as alcohol, tobacco, and gambling. It also provides financial and social stability by encouraging asset-backed financing. Obviously, interest payments are inherent in the functioning of non-Islamic banking systems. In response, Islamic challenger banks around the world offer Muslims the opportunity to access Sharia-compliant systems.</em> <em>Practically, Islamic fintech has become the fastest growing segment of financial technologies among the countries of the Organization of Islamic Cooperation (OIC). It is estimated that the share of Islamic financial technologies in the OIC countries accounted for 49 billion US dollars in transactions in 2020. Although this is an impressive figure, its true potential is revealed when compared with global financial technology transactions — Islamic financial technologies accounted for only 0.7% of global fintech transactions last year. The Global Islamic Fintech Report predicts that the volume of transactions in the Islamic financial technology sector of the OIC countries will grow at a cumulative annual growth rate of 21%, or $ 128 billion. This compares with the 15 percent growth expected for conventional fintech companies over the same time period. Given that Central Asian countries such as Tajikistan and Uzbekistan are part of the OIC, it is obvious that this region is the best for growth. Understanding the needs of the Muslim population, innovative companies use existing fintech solutions that already exist for consumer finance and retail investments, modifying these products and services to comply with Sharia law. This not only meets the needs of people of the Islamic faith; it also supports the creation of an alternative financial system that is sustainable and promotes broader economic development in regions such as Central Asia. Leaving aside the positive developments, there are still problems that need to be solved if Islamic finance in Central Asia wants to fully realize its potential. It is estimated that half of the region's population is still not covered by financial services. A 2019 study showed that only 79% of residents of Kazakhstan and about 50% of residents of Kyrgyzstan and Uzbekistan had access to the Internet. Although these numbers have probably improved in subsequent years, the fact remains that fintech's success is limited if a significant number of people do not have access to the Internet. While the world is becoming globalized, different cultures still manage their finances differently. There is no universal solution, and, as discussed above, new innovations should be inclusive, not exclusive. Fortunately, a new generation of fintech companies is using technology to meet the needs of the population who did not have access to fintech solutions.</em>

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