Islamic Fintech Solutions for the Capital Market
Fintech (Financial Technology) is the application of disruptive technology to traditional financial services, to achieve savings and optimize cost, time and system efficiency. Fintech concepts such as Digital investment management (Roboadvisory) Equity crowdfunding, Peer-to-peer Lending and Digital asset exchange (cryptocurrency exchanges) are creating opportunities to meet the needs of increasingly sophisticated corporate clients and investors within the capital market.
In recent years, Islamic fintech which focuses on the use of technology to deliver Shariah-compliant financial solutions, products, services and investments has gradually gained prominence with a global total of 161 companies as of March 2021 according to the IFN Fintech Landscape. Islamic fintech is based on Shariah principles, which calls for the well-being of human-kind and integrates ethics and justice within fintech solutions.
Islamic Fintech by Vertical
Peer-to-Peer (P2P) Financing
Equity Crowdfunding (ECF)
Digital Investment Managers (DIM)
Where does Malaysia fit in the Islamic Fintech sphere?
Malaysia’s robust Islamic finance regulatory environment, the digital affinity of Malaysians, a strong Islamic finance community, and the government’s pledge to champion the Islamic economy has opened doors for Malaysia to be a global Islamic fintech hub. Further, Islamic finance and the digital economy has been identified as Key Economic Growth Activities (KEGA) by the Malaysian government through its Shared Prosperity Vision 2030 (SPV 2030), building the case for Islamic fintech to drive financial inclusion in Malaysia.
Malaysia has become a prominent Islamic fintech market with 21 Islamic fintech providers out of a total 161 globally as of March 2021, according to the IFN Islamic Fintech Landscape. Of this number, however, only 4 Malaysia-based platforms currently provide capital market services such as equity crowdfunding, peer-to-peer lending and digital investment management. Given the potential opportunity for Shariah-compliant fundraising by Halal businesses as well as potential investment opportunities by Muslim investors it is expected that Islamic Fintech within the capital market space in set to grow.
Recent developments in the Islamic fintech environment in Malaysia:
- July 2020, the Shariah Advisory Council of the Securities Commissions of Malaysia issued a resolution which permits the trading and use of digital assets. The SC has yet to issue the complete guidelines, however it is seen as a landmark development for the launch of Shariah-compliant crypto-trading facilities.
- Shariah Advisory Council (SAC) of Bank Negara Malaysia (BNM) has issued a ruling that e-money is a permissible payment instruments under Shariah which came into effect on 19th May 2020
Supporting institutions have started to pay attention to Islamic fintech. MDEC established a dedicated department to support the Islamic digital economy and fintech and MOSTI recently established a fund to support Islamic fintech. INCEIF and ISRA have introduced initiatives to support capacity building as well as research and development in Islamic fintech.
FIKRA - Islamic Fintech Accelerator
The Securities Commission Malaysia (SC) and the United Nations Capital Development Fund (UNCDF), through its Centre for Financial Health programme, launched an innovation programme to develop a vibrant Islamic fintech innovation ecosystem in Malaysia’s Islamic capital market (ICM). FIKRA, the first accelerator programme dedicated to fintech solutions in Malaysia’s Islamic Capital Market, aims to identify and scale relevant fintech solutions to support the growth of innovative start-ups through a conducive collaborative environment that will equip them with the requisite mentorship, regulatory guidance, networking and funding opportunities.