Islamic Financing

Islamic Banking at a Turning Point

Islamic banking is experiencing strong growth across global markets, especially in the Gulf Cooperation Council (GCC) and the Kingdom of Saudi Arabia (KSA). With assets projected to grow from $2.2 trillion in 2016 to nearly $3.8 trillion by 2022, this sector presents significant opportunity.

Yet, many Islamic banks face challenges that limit profitability and competitiveness. Despite serving a market deeply committed to Sharia-compliant financial services, banks still rely heavily on manual, document-intensive operations, outdated systems, and slow product innovation. As a result, operational costs are high, risk management is suboptimal, and customer experience lags behind that of conventional banks.

This whitepaper identifies the key barriers Islamic banks face and outlines 10 critical technology-driven capabilities they need to unlock growth, serve untapped and underbanked segments, and remain competitive in a fast-digitalizing world.

Current Challenges Slowing Islamic Banking Growth

Even as demand rises, Islamic banks struggle with:

• Limited competitive edge — Conventional banks often offer faster, more seamless digital experiences.
• Time-consuming manual operations — Lending and servicing rely on paper-heavy processes.
• Poor risk management — Limited early-warning systems to predict defaults and control portfolio risk.
• Lack of product personalization — Difficulty designing and launching innovative, Sharia-compliant offerings.
• Compliance complexity — Staying current with evolving Sharia law and regulatory requirements is manual and costly.
• Suboptimal customer experience — Long turnaround times and non-intuitive digital channels lead to frustration.
• Fragmented systems — Siloed platforms and poor integration with third-party providers hinder efficiency.

These gaps result in higher operational costs, lower efficiency, and missed opportunities to expand into new customer segments such as digitally savvy millennials and underbanked populations.

The Opportunities Ahead

The Islamic banking market is full of untapped potential, particularly among young, mobile-first customers who value Sharia compliance but demand the same digital convenience as global fintechs.

With the right technology, Islamic banks can:

• Deliver faster, customer-friendly lending processes and digital onboarding.
• Use real-time data and analytics to identify cross-sell opportunities and tailor offerings.
• Build customer trust with transparent, Sharia-compliant digital processes.
• Expand reach with mobile-first solutions that engage younger generations and underbanked communities.

10 Must-Haves for a Modern Islamic Banking Platform

1. End-to-End Automation

Digitize the full product lifecycle — from loan origination to servicing and collections — for better visibility, accountability, and agility. Dynamic loan origination tools help respond quickly to market and regulatory changes.

2. Advanced Underwriting & Credit Analysis

Combine qualitative and quantitative indicators (even unconventional ones like social patterns, spending behaviors, and bill payments) to expand credit access safely and profitably.

3. Intelligent Risk Management

Integrate risk scoring systems that can predict defaults early and trigger alerts, helping banks maintain portfolio health while safely growing their customer base.

4. Configurability & Flexibility

Offer easy-to-design custom products and forms while adapting quickly to regulatory and customer needs. A flexible rules engine supports personalized Sharia-compliant plans.

5. 100% Compliance Monitoring

Embed real-time Sharia and regulatory compliance checks to detect and alert on any breaches, ensuring adherence to local and Islamic regulations.

6. Scalability & Security

Support high transaction volumes with distributed architecture and robust security controls including encryption, intrusion detection, and multi-layer firewalls.

7. SIMAH Integration

Leverage the Saudi Credit Bureau (SIMAH) to summarize and interpret customer credit profiles intelligently for better lending decisions.

8. SAMA Compliance

Easily integrate with AML and fraud detection systems to comply with the Saudi Arabian Monetary Authority (SAMA) and other global regulators.

9. Multilingual Support

Enable English, Arabic, and other languages in both customer-facing interfaces and documentation to improve accessibility and engagement.

10. Integration Ecosystem

Adopt a platform-based approach to connect seamlessly with third-party systems like SIJIL, SAP, AML tools, and other regulatory frameworks for smooth operations and compliance.

How Newgen Empowers Islamic Banks?

Newgen’s low-code digital automation platform is designed with deep insights into Islamic banking needs and global best practices. It enables banks to:

• Develop and launch Sharia-compliant products quickly.
• Digitize and automate complex document-driven workflows end to end.
• Integrate easily with SIMAH, SAMA-compliant systems, AML tools, and external partners.
• Support multilingual interfaces, Arabic screens, and Hijri calendar features.
• Embed calculations like Takaful, VAT, and Hamish Jiddiyah seamlessly.

Trusted by over 400 BFSI customers worldwide, Newgen helps Islamic banks improve efficiency, reduce costs, strengthen compliance, and deliver superior customer experience without sacrificing cultural and religious alignment.

Benefits Realized by Islamic Banks Using Newgen

• Lower operational costs through automation and digital servicing
• Faster product launches and regulatory adaptability
• Improved risk control with predictive analytics and real-time alerts
• Enhanced customer experience with intuitive mobile-first and multilingual engagement
• Compliance confidence with built-in Sharia and local regulatory checks

Why Now Is the Right Time?

Islamic banking is growing, but so is competition — both from traditional banks going digital and from agile fintechs targeting Sharia-conscious customers. Delaying modernization means higher costs, customer churn, and missed opportunities in underbanked markets.

Banks that embrace automation, AI-driven risk control, and seamless digital experiences will lead the next phase of Islamic finance innovation.

Begin Your Islamic Banking Transformation

If your Islamic bank is ready to move beyond manual, fragmented systems and deliver digitally advanced yet fully Sharia-compliant services, now is the time to act.