Islamic fintech needs a synchronised, focused initiative to penetrate rural areas

For the sector to make an impact, it needs to see the emergence of more players and more integrated involvement of the related authorities


ISLAMIC financial technology (fintech) is still very much an urban play and lacks a strategic push forward, local players said.

For the sector to make an impact, it needs to see the emergence of more players and more integrated involvement of the related authorities.

Wahed Inc regional head Syakir Hashim said Islamic fintechs’ coverage is limited to urban areas with little real effort to penetrate the rural zones.

“We need more collaboration between fintech corporations, ministries and state governments to bring these Islamic fintech innovations to Malaysians beyond urban areas,” he told The Malaysian Reserve.

Wahed, a US-based Islamic fintech corporation operating in the wealth management space, came to Malaysia in late October after getting the licence to establish robo-advisory services for the local market.

Investment crowdfunding platform provider Ethis Kapital Sdn Bhd group founder/MD Umar Munshi (picture) said the going for start-ups are still at a slow pace though there have been various efforts undertaken by the regulators and authorities.

“The current efforts are fragmented. We need a synchronised, focused and specific initiative led by a specific government entity, or perhaps a special committee to drive the move,” he said.

He noted that some of the agencies involved are the Securities Commission Malaysia (SC), Malaysia Digital Economy Corp and Bank Negara Malaysia.

Umar said the ecosystem would need to be improved with the inclusion of more space for entrepreneur development and funding for those who are just starting out.

“I would propose for big government funds like Khazanah Nasional Bhd and Permodalan Nasional Bhd or even Lembaga Tabung Haji to be part of the funding programme so there will be innovation in the Islamic start-up fintechs,” Umar added.

They noted that fintech has the potential to make Islamic finance a more attractive business as technology could generate a better efficiency, reduce costs of operation and spur competitiveness.

In the effort to become a global Islamic fintech hub, Malaysia has welcomed three firms in the wealth management, personal finance and crowdfunding space.

Despite still in the infancy stage, Islamic fintech players and regulators would need to unleash a strategic effort to boost the sector in Malaysia. They certainly see plenty of potential.

Syakir said Wahed has managed to gather a few thousand client sign ups on its platform within the first two weeks after its launch.

The app “Wahed Invest” offers an automated investing service designed for Shariah and ethical investing.

In Malaysia, Wahed’s subsidiary, Wahed Technologies Sdn Bhd, is the licensed entity operating as the digital Islamic investment manager.

Last month, Wahed announced the launch of what it calls Malaysia’s first Islamic digital investment platform.

Wahed’s digital investment management services allow investors access to a Shariah-compliant portfolio — that is transparent, impartial and aims to empower Malaysians at large to take charge of their financial wellbeing.

On its part, the Ethis equity crowdfunding (ECF) platform is expected to launch its operation in Malaysia early next year after gaining a licence from the SC in June.

According to its website, Ethis has up to 21,000 ethical members across the globe from 59 countries that provide funding for social housing development projects in countries like Indonesia with the aim of helping families break out of poverty.

The group now has branches and representative offices in Jakarta, Kuala Lumpur and Dubai.

“About three years ago, we were awarded a peer-to-peer (P2P) licence in a joint-venture company, but we have left the venture to form this ECF business. ECF has an interesting scope, which is why we decided to move forward with this market,” he said.

He said Malaysia’s steadily growing ECF scene is seeing more encouraging market acceptance.

“I think what needs to happen is for more public engagement and awareness about ECF. ECF can be implemented in many other areas. For example, we are also looking for a property crowdfunding portfolio for Ethis Malaysia, of having wakaf by using ECF to develop wakaf land or projects,” he added.

Ethis is the first Islamic-based crowdfunding platform to be introduced to the Malaysian marketplace.

The Islamic fintech space got some wind behind it sails in 2016, following the introduction of investment account platform, Islamic crowdfunding, Islamic fintech alliance, Islamic P2P financing and Islamic robo-advisor.

In total, including the nonShariah compliance fintechs, there are 21 ECF and P2P platforms registered with the SC which have collectively raised RM587 million for more than 1,600 small and medium enterprises as at end of last month, according to the SC.