As economies continue to reinvent with the integration of new technologies, new forms of solutions and ecosystems are borne in the process. At the same time, the arrival of the pandemic had also pushed for the expansion of the digital financial services to further engage more people beyond geographical boundaries and regardless of their backgrounds.
One area that has been consistently growing over the last few years has been Islamic Fintech. According to Dinar Standard’s Global Islamic FinTech Report 2021, the Islamic Fintech market is projected to grow to RM536 billion by 2025.
Additionally, Maybank has also reported that that Islamic Finance sector is currently growing at a rate of 15% to 25% per year, with Islamic financial institutions managing assets with over US$2.2 trillion globally.
With more pressure on governments to drive financial inclusion, Islamic Fintech is also seen as area that can introduce a wide range of situations for more customers beyond geographical borders and at the same time position Malaysia as a leading Islamic fintech hub.
A New Centre Of Interest
“I believe Islamic Fintech has become the new center of interest for IT startups and development since the Islamic Digital Economy had been identified as one fo the Key Economic Growth Activities (KEGA) in SPV 2030 by Putrajaya,” says Chee Yong Mok, Managing Director of Cardtrend Systems.
He further highlights that both Fintech and Islamic Fintech share similar definitions but the main point of departure is that Shariah guidelines must be observed in the latter.
By definition, Islamic Fintech is the digitalisation of Islamic Finance. Its utilities range from payments, blockchain, anti-money laundering (AML) effrots to big data and machine learning in Islamic finance.
It’s designed to fulfill unmet financial needs in the Muslim market and any investments in the digital infrastructure or economic development worldwide that is Shariah compliant. The sector also has potential to grow in Malaysia as only less than 5% of fintech companies operating in Malaysia are catered to Islamic fintech.
Maybank Chairman Tan Sri Zamzamzairani Mohd Isa believes that the potential for Islamic fintech is immense as it provides huge opportunities for players to offer strong infrastructure and products for their customers.
In a media report early this year, the Chairman stressed that there has not been a shortage of concerted efforts and programmes by government agencies working with various business associations to propel the international growth of the industry and cement the country’s position as a global leader in halal innovation and production.
He further highlighted that sustainability is also well entrenched in the doctrine of Maqasid Al-Shariah or the objectives of Shariah, which emphasises sustainable developments to promote welfare and prevent harm, not only to humankind but also the environment.
“I think the Islamic Fintech environment in Malaysia is comfortable. People can access different kinds of aid easily from agencies such Malaysia Development Economy Corporation (MDEC),” Yong Mok says.
MDEC has introduced a dedicated unit that has been tasked to support the Islamic digital economy and fintech space.
The Need For More Islamic industrial Providers
“I think we don’t only need more industrial providers, we also need stronger collaboration among Industrial providers, because this can further strengthen Malaysia’s position as the leading Islamic Fintech Hub, and the country will share the biggest pie in the global Islamic Fintech market.,” Yong Mok says.
However, he acknowledges that the path in achieving a recognition on a global scale will not be without its challenges. He points out that players in the sector generally face business challenges that includes finding their comfortable path and USP among others.
He also shares three problems that industry players face with current Shariah-compliant digital transactions and these include transaction transparency, automation of review process and limited Shahriah-compliant digital product range and services.
“With the guidance of agencies such as MDEC, iConnect project by INCEIF University and MOSTI, and other programmes in the future, industrial providers would be able to develop solutions according to framework and guidelines to address the shortage over time,” he tells Disruptr.
Cardtrend is set to embark on its Islamic Fintech journey with a dedicate team in Q2 2022 and along MDEC’s programmes and guidelines.