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Editor's PickA race to the end: A breakdown of contenders eyeing an Islamic...

A race to the end: A breakdown of contenders eyeing an Islamic digital banking license in Malaysia

This post was updated on the 21st July 2021 to include newly confirmed contenders.

Applications for the highly coveted digital banking license being awarded by Bank Negara Malaysia (BNM) closed yesterday, the 30th June 2021. With only five licenses up for grabs, the competition is indeed stiff. Here is a look at the entities contending to secure a license to offer Shariah compliant digital banking services.

Arcadia Acres-Hextar Global-Ihsan Equity

On the 21st July, Hextar Global confirmed that is has applied for a digital banking license as part of a consortium comprising investment holding company Arcadia Acres and Ihsan Equity, an SPV set up by Fass Payment Solution, an e-money license holder.

MyAngkasa Digital Services-Boustead Holdings

On the 2nd July, MyAngkasa Digital Services (MDS), a subsidiary of the National Co-operative Movement of Malaysia, confirmed it had formed a consortium with insurance brokerage company Boustead Holdings to bid for an Islamic digital banking license from BNM. The consortium, which includes e-money service provider MRuncit Commerce, has received the fully backing of the Ministry of Entrepreneur Development and Cooperative, and the Cooperative Commission of Malaysia.

Pertama Digital-Crowdo-INFOPRO

Pertama Digital was rather reticent about its Islamic digital banking ambitions when it first revealed that it formed a consortium with peer-to-peer financier Crowdo and tech firm INFOPRO (which offers Islamic banking tech solutions) to bid for a virtual banking license. However, the consortium did drop some signals hinting at a potential Islamic proposition.

Just this week, the Pertama Digital consortium confirmed in a bourse filing that it is indeed laying the foundations for an Islamic digital bank.

“The digital bank aims to sustainably provide affordable and ethical financing products, while hand-holding the B40 (bottom 40% income group) and micro, small and medium enterprises to nurture good financial management, pouring rocket fuel into post-pandemic productivity,” it noted. 

Green Packet-Zico-M24 Tawreeq

Just a day before the application deadline, communication device firm Green Packet revealed that it is throwing its hat into the ring, via a consortium with management consulting legal firm Zico Holdings and factoring company M24 Tawreeq. In a bid to establish a unique proposition in this tightly contested race, the consortium is focusing on building a fully-fledged Islamic digital bank. Considering that Zico Holdings and M24 Tawreeq are known names in Islamic finance, this Islamic finance flavor did not come as a surprise.

“Through our years of experience in addressing the needs of the underserved market via Kiple and its products, we have learned so much about their financial needs and the glaring gap between their unique struggles and the financial products or services available today,” shared Ku Kok Peng, Green Packet’s group chief strategy officer. kiplePay, a digital wallet, is one of several fintech initiatives by Green Packet such as Xendity, an e-KYC firm it acquired in 2020 for US$10 million.

RHB-Axiata

Telecommunication giant Axiata Group, which recently merged with Norway’s Telenor, formed a digital banking consortium with RHB Bank early June. We learned that Axiata and its subsidiary e-wallet Boost Holdings as well the bank intends to leverage on the success of their Islamic financial products to provide Shariah financial services through the planned virtual bank.

Boost Holdings will hold a majority stake of 60% while RHB will own the remaining 40% in the digital bank, which will be an extension of RHB’s strategy to increase financial inclusion and an expansion of Boost Holdings’s fintech experience in digital microfinancing and microinsurance services.

“(The partnership) is the culmination of a strong relationship seeded since 2018 with RHB that has seen fruitful partnerships between RHB Islamic Bank and Boost e-Wallet,” Axiata said.

MyMy-Sukaniaga

Licensed e-money operator MyMy and Sukaniaga, which runs the MyAzZahra cooperative financing digital platform, were the first in the country to make public their Islamic digital banking aspiration. Entering into a formal partnership back in March, the Islamic fintech duo were also seeking a third strategic partner to join the consortium.

MyMy had previously expressed interest in securing a license to become a regulated Islamic digital bank when BNM first opened license applications with a deadline set for the 30th June 2021. However, IFN Fintech has learned that MyMy has forgone its intentions to apply for a license.

Through the grapevine…

Over the last few months, several others were rumoured to be eyeing a license including Islamic cooperative bank, Bank Rakyat, and the Malaysian Industrial Development Finance which had attempted to convert into an Islamic bank in the past, although none of these were confirmed by the entities themselves. National oil company Petronas was reportedly looking to set up a digital Islamic bank, although it had refuted the claim.

Other entities which have announced their digital banking aspirations but not necessarily on an Islamic platform include the likes of Grab, Sunway, MoneyLion and Razer Fintech.

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