Qatar, a key player in the regional and global Islamic finance industry, is experiencing strong growth in its Islamic fintech sector. This momentum is projected to continue through 2028, with the industry expected to expand at an annual growth rate of 10%, according to a new report by Qatar Financial Centre (QFC) and the London Stock Exchange Group (LSEG).

Qatar’s Islamic fintech transaction volume reached nearly QAR 10 billion (US$2.7 billion) in 2024, growing at a compound annual growth rate (CAGR) of 26% from QAR 3 billion (US$824 million) in 2020. Volumes are projected to reach QAR 16 billion (US$4.4 billion) by 2028.

According to the report, payments and enabling technologies currently stand as the largest segments of Qatar’s Islamic fintech market in terms of the number of companies. This reflects the rising popularity of e-commerce, mobile wallets, and contactless payment solutions. Meanwhile, enabling technologies like blockchain and artificial intelligence (AI) are playing a critical role in modernizing Qatar’s financial services sector and enhance the overall financial infrastructure.

The digital assets and blockchain segments are also growing in importance, underscoring the region’s push to integrate advanced financial instruments within the framework of Islamic finance. Blockchain, in particular, is seen as an attractive technology for enhancing transparency and security, key pillars that align with Islamic finance’s emphasis on ethical and transparent financial practices.

Strategic initiatives

The growth of fintech in Qatar has been underpinned by a series of strategic initiatives and supportive measures.

The Qatar Fintech Hub (QFTH), founded by Qatar Development Bank (QDB) in collaboration with the Qatar Central Bank (QCB) in 2020, was created to foster innovation and growth in the fintech sector. The hub supports fintech startups through its incubator and accelerator programs, and provides startups with essential resources, including mentorship and network opportunities. In the same year, the central bank launched a regulatory sandbox for promising fintech solutions, enabling faster market entry, reduced testing periods, and a more streamlined evaluation process.

In 2023, the QCB launched the Qatar Fintech Strategy to enhance the competitiveness of its financial sector. The strategy targets several key segments, including digital payments, regtech, insurtech, wealthtech, blockchain and cryptocurrencies, and cybersecurity, and prioritizes developing a pioneering infrastructure and a supportive environment for fintech.

The QFC Digital Assets Lab was launched the same year, providing a platform for innovation, research, and development within the field of distributed ledger technology (DLT).

Separately, the QCB has made significant progress on its central bank digital currency (CBDC) project, completing the infrastructure for the digital currency and commencing its first pilot in 2024.

Supportive regulations

In addition to these initiatives, the central bank has introduced a range of regulations designed to accelerate the digital transformation of the financial services industry and expand the scope of fintech solutions in Qatar.

These regulations include the Payment Services Regulation, introduced in 2021 to formalize the licensing and supervision of payment service providers; the E-KYC Regulations issued in 2023 to streamline customer onboarding and verification processes through electronic methods, enhancing security and efficiency in identity verification; DLT Guidelines, published in July 2024 to provide a clear regulatory framework for the use of distributed ledger technology in the financial sector; and the Artificial Intelligence Guidelines, issued in September 2024.

Other notable regulations issued in 2024 include the Buy Now, Pay Later (BNPL) Regulations, which set licensing requirements and consumer protection measures for such providers, and the Loan-Based Crowdfunding Regulation, which aims facilitate short-term financing for small and medium-sized enterprises (SMEs) through innovative financial platforms.

BNPL, blockchain, digital banking among top trends

The report also highlights emerging trends and opportunities shaping Qatar’s Islamic fintech landscape. First, it emphasizes the potential of BNPL services. Islamic finance principles, which prohibit interest and emphasize ethical lending, align well with the BNPL model’s interest-free structure. By integrating BNPL services within a Shariah-compliant framework, fintech companies in Qatar can deliver compelling solutions that combine financial inclusivity with adherence to Islamic principles.

Digital-only Islamic banking is another growing trend, with the number of digital-only Islamic banks in the region increasing. This industry is being driven by robust digital infrastructure and growing demand for Shariah-compliant financial services. In Qatar, the opportunities for setting up digital-only banks are promising, supported by a conducive regulatory environment and a high level of digital adoption among the population. Furthermore, the central bank has introduced several regulatory enablers to facilitate the entry of new digital fintech players, including a digital bank regulatory framework.

Another trend outlined in the report is the potential of blockchain to create new avenues for growth and resilience in the Islamic finance industry. For example, blockchain can facilitate Shariah-compliant microfinance services, lowering transaction costs and broadening access to financial services. The technology can also improve the efficiency and transparency of Zakat and Sadaqah transactions, which are both forms of charity, ensuring that funds are swiftly and accurately distributed to those in need. Additionally, blockchain can be leveraged for more efficient issuance and trading of sukuk, which are Shariah-compliant financial certificates similar to bonds, increasing their liquidity and attractiveness to investors.

Qatar is a prominent player in the global Islamic finance scene, with total assets in the country reaching QAR 694 billion (US$191 billion) by the end of 2024. According to the Islamic Financial Services Board (IFSB), the global Islamic financial services industry reached US$3.8 trillion in total assets in 2024, meaning that Qatar accounted for approximately 5% of the global market share.

Featured image: Edited by Fintech News Middle East, based on image by thanyakij-12 via Freepik