By HABHAJAN SINGH / Pic By ISMAIL CHE RUS
Islamic finance will require a digital transformation blueprint in its armoury as the industry attempts to chalk its next significant move.
In a recent interview, former Bank Negara Malaysia (BNM) governor Tan Sri Dr Zeti Akhtar Aziz (picture) singled out the need for the blueprint when asked what was required to ensure that the Islamic finance industry remains at the cutting edge.
Zeti — who is now the group chairman of Permodalan Nasional Bhd and a member of the Council of Eminent Persons — said the move would be “timely”.
She said the blueprint would identify the key infrastructural building blocks that would be required to achieve digital readiness in a manner that would be aligned to the unique value proposition of Islamic finance.
“In this regard, the characteristics of Islamic financial technology (fintech) that are necessary should be outlined along with the appropriate regulatory regime and the supporting resources in terms of talent, public policy and the systems that need to be in place,” she said during an interview published in the recent issue of the Islamic Finance Knowledge Repository (I-FIKR).
I-FIKR is published by the International Shariah Research Academy for Islamic Finance, a Malaysian based outfit established to promote applied research in the area of Shariah and Islamic finance.
BNM, now led by Datuk Nor Shamsiah Mohd Yunus, has played a key role in the development of fintech.
As early as mid-2016, BNM had announced plans to introduce a regulatory sandbox framework to allow financial institutions regulated by the central bank, and fintech companies looking to carry out businesses regulated by the bank, certain regulatory flexibilities to experiment with fintech solutions in a production or live environment.
The underlining idea was to encourage innovation and improve the delivery of financial services.
In the interview, Zeti said for the incumbent Islamic financial institutions, each player should have their own respective detailed implementable action plan for their digital transformation.
“There should also be key milestones set that are well sequenced, within which an orderly transition can be made into becoming a digitally enabled institution.
“Commensurate with this is the regulatory oversight for fintech which should be clearly outlined.
“In the event that it would not reside under a single regulatory body or agency, a framework for collaboration between the respective agencies should be clearly spelt out so as to ensure accountability and coherence, to facilitate the orderly development of the industry,” she said.
In the process, Zeti said a policymaker- regulator-player platform should be established.
“This would facilitate an orderly transition that will identify and collectively address comprehensively the important areas to advance the agenda.
“This would entail an iterative process which requires regular engagement and dialogue,” she said.