Monday, November 28, 2022
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Editor's PickIndustry leaders identify key focus areas to develop Malaysia’s Islamic fintech funding...

Industry leaders identify key focus areas to develop Malaysia’s Islamic fintech funding ecosystem

Industry stakeholders in Malaysia have identified four key priorities and six strategic recommendations to facilitate an effective Islamic fintech funding ecosystem in Malaysia.

These focus areas were the outcome of a high-level industry dialogue hosted by IFN Fintech and supported by Malaysia Digital Economy Corporation last year.

Background

The Malaysian government has identified Islamic fintech as a strategic avenue to further bolster its global Islamic economic standing and as a source of economic growth. There is much to gain from developing this area. However, establishing a vibrant supportive ecosystem is a collaborative exercise involving many moving components, with funding as an instrumental factor of success for any start-ups.

The importance of a robust funding mechanism was highlighted during the first two dialogues under the Malaysian Islamic Fintech Initiative. A survey with 200 Islamic fintech start-up CEOs and founders from across the world conducted by IFN Fintech in June 2021 found that funding remains the biggest hurdle faced by Islamic fintech start-ups, a persistent concern that was also highlighted by the start-ups in 2020.

To address this perennial issue, the third instalment of the Malaysian Islamic Fintech Initiative focused on mobilizing funding for Islamic fintech start-ups, who find it twice as hard to secure funding due to a myriad of factors including a lack of Islamic finance awareness and understanding from investors. These prevent Islamic fintech start-ups to grow and scale up to serve the financial inclusion agenda. The closed-door dialogue was participated by international and domestic players.

Principal findings

  • Malaysia is a promising emerging ASEAN fintech start-up ecosystem
  • Start-ups need to create and amplify brand story
  • Investors still unclear about differences between Islamic and conventional finance
  • Scarcity of Islamic investment capital remains a hurdle
  • There is more than one source of funding
  • Access to human capital as important as access to funding

Key focus areas

  • Better prepare Islamic fintech start-ups
  • Amplify awareness
  • Broaden funding pool
  • Built the number of Islamic fintech start-ups

Recommendations

  • Establish Islamic fintech and incubation programs
  • Generate awareness and amplify Islamic fintech success stories
  • Capitalize on ESG alignment
  • Involve agnostic players – start-ups and investors
  • Expand alternative funding options
  • Build talent pool

The full report can be downloaded here.

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