Thursday, December 1, 2022

Al Rajhi Bank Malaysia unveils Islamic digital bank; preparing SME products and open finance marketplace

Al Rajhi launches digital bank

The Malaysian arm of the world’s largest Islamic bank has unveiled its virtual bank, becoming the second Shariah bank in the Southeast Asian nation to tap the market with a fully digital Islamic banking proposition.

Right on schedule, Al Rajhi Bank Malaysia (ARBM) today launched Rize, its cloud-native digital bank after about a year of development. Rize currently offers retail products and services including personal financing, debit card and personal finance management, among others. It also offers a savings pot feature which offers a profit rate, the first in Malaysia.

The Islamic digital bank expects to progressively roll out more features over the next few months.

Among them is an open finance marketplace, CEO Arsalaan (Oz) Ahmed confirmed with IFN Fintech. The embedded finance ecosystem will include, among others, embedded Takaful and charitable finance.

“We have to understand that in order to truly put the customer at the center, we need to give complementary offerings from partners who offer products and services that we either can’t or are better at. It will start in the next few weeks and it will continue to build and we hope it will build until it becomes a world-leading ecosystem for embedded finance — we hope to achieve this in 2023,” Oz said.

Oz also revealed that the digital bank will be expanding its focus beyond retail to include small businesses.

“We want to keep it quiet but it won’t be unreasonable to expect us to do something for SMEs because we are very clear about the fact that we want to help the real economy. And when we look at SMEs, ‘S’ is typically not well served. We are going to try our very best to do something that hasn’t been done yet in Malaysia.”

ARBM’s aggressive digital push is in lockstep with its Saudi parent which has embarked on its multiyear ‘Bank of the Future’ strategy to become digital-ready. It engaged a host of partners including Oliver Wyman which designed and built the mobile bank and Feedzai to provide cybersecurity services. The bank also poached fintech expert Ikram Khaliq to head its digital banking operations early this year.

FWD Group sets up VC fund to invest in Malaysia’s Islamic fintech and insurtech markets

Insurance technology (Insurtech) concept businessman pressing text with virtual screen.

FWD Group Holdings is deepening its Islamic fintech commitment with the launch of a RM45 million (US$10.06 million) venture capital (VC) fund in partnership with Malaysian VC firm Artem Ventures to invest in Shariah compliant financial technology and insurtech.

The new fund, TIM Ventures, has already invested into four start-ups: Pewarisan, a digital platform for Islamic inheritance planning; Senang, an on-demand subscription-based insurance company; Blueduck, a zero-deposit insurance agency; and Du-It, a payment solutions company.

“By launching TIM Ventures, we hope to support early-stage entrepreneurs in Malaysia by not just providing them with financing, but also helping to connect them with the networks and expertise they need to succeed,” said Sim Preston, FWD managing director and group COO. “We hope to invest in businesses that share our vision as we work together on changing the way people feel about Takaful.”

The VC fund follows FWD launching a pre-accelerator program last year, the FWD Start-up Studio, designed to support start-ups in the Islamic and conventional insurance technology space. It had allocated RM1.2 million (US$291,698) to be mobilized over two years.

With a geographical footprint spanning across 10 Asian markets, namely Hong Kong and Macau, Thailand, Indonesia, the Philippines, Singapore, Vietnam, Japan, Cambodia and Malaysia, choosing to base the studio in Kuala Lumpur was a strategic move to capitalize on the country’s global leadership in Islamic finance to boost Takatech while also creating new opportunities in the conventional insurance space.

Binayak Dutta, FWD managing director for emerging markets and group chief distribution officer, said, that the launch of TIM Ventures and the FWD Start-up Studio underscores the Hong Kong-based company’s commitment to the Malaysian market and the role it wants to play in closing the Takaful protection gap.

Uzbek Islamic fintech start-up prepares to expand into South Asia as it eyes Islamic banking license

IMAN eyeing new licenses

Currently in its final sprint of closing its post-seed round, Uzbekistan-based IMAN confirms that it will be applying for new licenses, including an Islamic banking one, beginning January and is on track to expand into new markets including Pakistan.

New licenses

The start-up, which runs a digital Halal investment app, IMAN Invest, and IMAN Pay, an Islamic Buy Now Pay Later (BNPL) platform, is looking to apply for a microfinance license from the Uzbek central bank next January. The license will enable IMAN Pay to cater to individual entrepreneurs and non-value-added taxpayers, explained Mark Zubov, IMAN’s founder and CFO.

As at the end of October 2022, IMAN Pay has disbursed over US$6.4 million in installments and has 26,000 monthly active users. It is working on improving its credit scoring algorithm by adding 8,000 alternative data points to its model.

The start-up also intends to secure approval to offer Islamic banking services under the country’s sandbox program by March 2023.

“Had a very positive meeting with the Central Bank of Uzbekistan and got initial green light for an Islamic banking sandbox license. Our goal is to have a fully-fledged banking license by 2024!” Zubov wrote in an update.

New markets

These developments come as IMAN gains solid momentum for its international expansion strategy.

It has formed a joint venture in Kazakhstan in partnership with its strategic investor, AlSaqr Finance, which is licensed to offer Islamic financial services in Kazakhstan. IMAN expects to launch its Kazakh business before the end of the first quarter of 2023.

Zubov also revealed to IFN Fintech that the company is in due diligence with several banks in Pakistan to introduce co-branded Halal BNPL and investment products.

“The Uzbek market is very similar to Pakistan in terms of digital and e-commerce penetration, and we are seeing a lot of demand for Islamic finance in Pakistan,” Zubov told IFN Fintech, adding that the start-up is also keen on the Bangladeshi market. The Federal Shariat Court of Pakistan in April directed the banking system to eliminate Riba by 2027, transforming the Islamic Republic’s financial and banking system to comply fully with Islamic principles.

IMAN’s aggressive growth is fueled by a US$1 million seed financing closed in February. It currently has secured US$1.2 million in commitments for its US$1.5 million post-seed round, led by AlSaqr and a US-based venture capital fund.

“These funds will enable us to reach breakeven in Uzbekistan by summer next year,” Zubov noted. The firm plans to begin its pre-Series A funding round to support its South Asian expansion in the second quarter of 2023.

Blockchain project

IMAN is also jumping into the crypto world with Umma Finance, its Islamic decentralized finance (DeFi) protocol connecting crypto investors with real-world sources of yield in emerging markets. Earlier in July, the company confirmed that it had received grant commitments from Algorand and NEAR protocols to fund the initial development of the DeFi protocol.

It intends to launch the minimum viable product (MVP) on the testnet by January, with the goal of attracting at least 10,000 users by the time the MVP is ready.

RHB Asset Management plans Islamic digital offerings through online platform

Top view of digital tablet with financial year overview on screen. Businessman analyzing investment charts with digital tablet on wooden desk at office. positive stock market trend.

Malaysia’s RHB Asset Management (RHBAM) intends to onboard Islamic and ESG-themed funds to its RHBAM MyInvest digital platform.

The RHBAM MyInvest platform currently offer four conventional funds under the MyInvest Core Portfolio Series. It is targeting to attract RM100 million (US$22.18 million) in assets under management for the series within the next six months, Managing Director Eliza Ong said. Ong did not specify a timeline for introducing the Islamic and ESG funds.

The digital platform was first introduced in 2020 for Employees Provident Fund (EPF) members to invest; RHBAM, however, has transformed the app to become a digital investment platform, allowing users to manage their wealth. Through the platform, investors can monitor fund performance, view their asset allocations and e-statements, conduct portfolio simulations as well as set and track investment goals.

Further enhancements within the RHBAM MyInvest platform are scheduled to be introduced in stages to include even more features and funds designed to address the evolving demands of various investors, the asset manager confirmed.

BNM readying digital Takaful regulations; to open applications in 2023


Bank Negara Malaysia (BNM) is seeking feedback on its exposure draft on the Licensing and Regulatory Framework for Digital Insurers and Takaful Operators (DITOs), as it prepares to issue up to five DITO licenses next year.

The exposure draft, released after incorporating market feedback on a related discussion paper received in February, outlines the proposed framework to facilitate the introduction of DITOs in Malaysia. It looks specifically at licensing and application procedures as well as eligible business models and distribution channels. BNM will receive feedback until the 28th April 2023.

DITO aspirants will need to submit a comprehensive five-year business plan, which will include, among others, their strategy to manage technology and cyber risks, including protecting consumer data and authenticating online transactions.

The minimum paid-up capital for a licensed DITO is set at RM40 million (US$8.87 million), however, operators are given a leeway of three to five years, known as a foundational phase, which is also accorded to digital banks. During the foundational phase, lower minimum paid-up capital requirements and more flexible regulatory treatments will be applied to DITOs.

Should DITOs fail to demonstrate credible prospects for long-term viability or meet higher prudential standards consistent with those applied to all existing licensed insurers and Takaful companies at the end of their foundational phase, they will need to implement an exit plan according to conditions set out in the exposure draft.

The exposure draft recognizes a diverse range of business models, including:

  • DITOs opting for full assumption of insurance/Takaful risks (by leveraging on appropriate risk-transfer mechanisms to manage their underwriting capacities);
  • DITOs administering risk-sharing arrangements with fresh approaches to respond to the insurance/Takaful protection needs of consumers; and
  • DITOs serving as intermediaries to connect consumers with insurers and Takaful operators), without assuming insurance/Takaful risks directly.

Intermediaries such as enablers, agents, brokers and managing general agents are scoped out from this framework, as these intermediaries do not assume any insurance/Takaful risks and have no obligation under the insurance policy/Takaful certificate.

ADIB customers turn to digital app to participate in IPOs


A lion’s share of subscription to Shariah compliant IPOs facilitated by Abu Dhabi Islamic Bank (ADIB) this year has been through its digital app, in line with the bank’s digitalization push.

ADIB in a statement confirmed that 80% of its clients subscribed to IPOs this year did it through its mobile app, including for the IPOs of Americana Restaurants and school operator Taleem. As a receiving bank for the two IPOs, customers of ADIB were able to subscribe and apply for additional subscription leverage to both.

“IPO investments are surging in the region and the UAE will continue to experience an IPO boom in the coming year, we are proud to supporting the strategy of UAE government of expanding the capital market,” Dr Amer Al Ameri, ADIB’s head of private banking, said. “We have witnessed that IPOs are becoming a popular investment option among our client base and are delighted to offer them a convenient, in-app access for these two key IPO subscriptions.”

This growth in IPO digital subscription moves hand-in-hand with the growth of its other digital avenues.  In the first quarter of 2022, 40% of ADIB’s personal finance applications were executed digitally through its mobile app. The bank has over 700,000 digitally active customers.

Central Bank of Kuwait prioritizes ESG fintech solutions for sandbox

Central Bank of Kuwait prioritizes ESG in sandbox

Hot on the heels of releasing a circular on sustainable finance for the banking industry, Central Bank of Kuwait (CBK) has announced that priority will be given in its regulatory sandbox to test fintech products and services that support the sustainability agenda.

It is hoped that by prioritizing ESG finance solution testing in the sandbox, the Kuwaiti financial system would benefit from more innovative sustainable fintech solutions which would subsequently enhance the adoption of social and climate-related financial instruments.

The circular, which serves as guidelines on sustainable finance for the banking industry, was released this month. The document, which has been designed in line with the New Kuwait Vision 2035 and integrates the principles of the UN SDGs, defines sustainable finance as well as outlines ESG benchmarks and forward principles.

CBK’s steely ESG focus coupled with its robust Islamic banking system and digitalization ambitions may be a boon to its Islamic fintech sector. Like the traditional Islamic banking sector, Islamic fintech start-ups are increasingly leveraging and integrating ESG into their business proposition to appeal to a wider audience.

Tweeq secures Saudi license to offer e-wallet services

Man in Saudi Arabia is using laptop and doing online purchase and banking white sitting and relaxing at home and maintaining social distance

Digital payment start-up Tweeq will be going live, having obtained a license from the Saudi Central Bank (SAMA) to provide e-wallet services.

Founded in 2020, Tweeq is building a mobile-first spending account allowing users to make payments, execute remittance and save.

The licensing of Tweeq by SAMA follows the granting of a permit to another payment company in October, Tiqmo. The regulator currently licenses 23 online payment firms, with another five granted an in-principal approval.

Growing the digital payment community is in line with SAMA’s role of promoting fintech and supporting Saudi Arabia to become a cashless society.

Islamic purchase order financing platform Ta3meed enhances offering


Islamic fintech financing platform Ta3meed has selected Singapore-headquartered digital banking solution provider Moneythor to implement smart loyalty features in its purchase orders (PO) financing platform in Saudi Arabia.

The Moneythor solution is powered by real-time data, coupled with machine learning and behavioral science techniques to provide data-driven personalization capabilities for digital financial management.

Ta3meed provides Shariah compliant financing based on government-backed POs, based on a P2P model as the financing extended to SMEs to fund their working capital are crowdfunded from institutional and individual investors. According to the start-up, the Saudi government until September 2021 issued 738,610 POs worth over SAR664 billion (US$176.82 billion).

The start-up is understood to be the first PO financing platform to be licensed by the Saudi Central Bank. Founded in 2019 by Islamic banker Mohamad Abdullah Alshaikh, who now serves as chairman and CEO Amohamed Alomayyer, Ta3meed has disbursed over SAR124 million (US$33.02 million) across 98 projects as at the end of August 2022, according to Fintech Saudi’s latest annual report. The average return for investors stood at 16.5%.

This latest partnership follows a string of other collaborations including with online marketplace Dealcom to provide its Pay Later service as well as an agreement with Trans Gulf Readymix Concrete Co to provide financing solutions to vendors and suppliers.

WahedX welcomes Samin Abedi to investment committee


WahedX, the equity crowdfunding arm of Islamic robo-advisor Wahed, has welcomed Samim Abedi to its investment committee.

Samin is the chief investment officer at Wahed and has over a decade of experience in investment management including at JP Morgan Asset Management and Google. Prior to joining Wahed in 2018, Samin helped manage a US$30 billion credit portfolio and founded his own healthtech start-up.