Thursday, May 23, 2024
InterviewINTERVIEW: Malaysia building its Islamic fintech proposition

INTERVIEW: Malaysia building its Islamic fintech proposition

In this interview, Norhizam Kadir, the vice-president of Fintech and Islamic Digital Economy at Malaysia Digital Economy Corporation (MDEC), provides his insights into the Malaysian Islamic fintech landscape and how the government agency is rallying support as well as mobilizing resources to build the country’s Shariah fintech proposition at a global scale.

Malaysia’s Islamic fintech journey is an interesting one. We have seen the country grabbing more spotlight in recent times as compared to the “early days” of Islamic fintech when the likes of Dubai and Bahrain were seemingly at the forefront, or at least more vocal about their Shariah fintech ambitions. MDEC is central to several of the developments in Malaysia. I would like to start with MDEC’s latest fintech initiative – the Fintech Booster program. Where does the story begin?

It started off with conversations we had with Bank Negara Malaysia (BNM). In fact, it was with the governor as we were looking at how we could play a role in being supportive to the capacity building of fintech companies, especially with the early-stage start-ups and fintech start-ups at the ideation level. We realize they needed to understand the aspects of regulatory compliance and we need to facilitate access to market opportunities as well as establish a technology platform which can also serve as an opportunity for these tech companies to later apply for BNM’s regulatory sandbox.

Through our partnership with BNM, we came up with Fintech Booster. This is essentially a capacity building program that would help fintech companies, especially those at ideation level, to be able to maneuver through regulatory compliance, the first pillar we launched recently. Coming next year, we will also be activating the second and third pillars where we would be providing support from business model and market access perspectives, as well as technology integration later.

And to do this, we have to do it together with the public sector. The first pillar (regulatory compliance), we are working with six partners comprising legal firms, Shariah compliance advisors, as well as consulting companies to help these start-ups grow their business in Malaysia.

How much interest has the program garnered? Is there any interest from any Islamic fintech startups at all?

Yes. The number of companies that have signed up for Fintech Booster exceeded 150 in the first week of its launch. About 40% of questions asked and submissions to modules were specific to the Islamic market.

It has generated some level of coverage and we have gotten a lot of interest from foreign companies looking at how to set up presence in Malaysia, getting into Fintech Booster, understanding the requirements of BNM, and penetrating the Malaysian market.

It seems that the Fintech Booster program was born out of a need to properly facilitate or educate fintech founders navigate the regulatory compliance infrastructure as well as getting themselves started in Malaysian fintech environment. Does that reflect the maturity of the ecosystem? How would you characterize the current Islamic fintech ecosystem in Malaysia?

I like to look at it from an opportunity standpoint. Malaysia has its advantage, especially in Islamic finance – we have always been at the forefront when it comes to the development of Islamic finance, especially in setting up standards, world-class standards for Islamic finance.

There are huge opportunities within the Islamic economy and for Islamic fintech, opportunities are not just within Malaysia but across boundaries. There will be 2.2 billion Muslims by 2030. And what is interesting is that out of this 2.2 billion, you see this increasing affluence, especially among Muslim countries like Indonesia, Pakistan, Bangladesh and some countries in Africa such as Senegal and Nigeria.

We have this 50-50-50 strategy where we identify opportunities in emerging Islamic markets where there are more than 50% Muslim population, more than 50% Internet penetration and more than 50% unbanked.

Opportunities in this underserved 50-50-50 markets are huge. We should be setting up the right platform for them to grow. We need a test bed for these Islamic fintech companies to be testing their solutions – Malaysia can be that test best before these start-ups start expand across emerging Islamic markets.

One of the Islamic fintech initiatives MDEC has undertaken is the Dialogue Series, which we had the honor of facilitating and organizing. As an outsider, what should one understand from these dialogues – Walk us through the outcomes.

This dialogue series have been very beneficial for us in understanding the needs and requirements of the ecosystem. As a government agency, we should not be coming up with strategies without having the industry syndicated.

And thanks to IFN in coordinating this series, we have completed two sessions. The first one was to understand Malaysia’s Islamic fintech proposition, and the second dialogue focused on how Islamic fintech could drive financial inclusion.

The industry has given us strong input and strong feedback which we translated into strategies. For example, feedback indicated there is a need for industry participants to be able to be on a platform to help them to increase capacity and market access – which culminated in the Fintech Booster.

Another recommendation was to focus on financial literacy and financial health, especially within the underserved market, the B40s and MSMEs. We are currently working with 12 fintech players in pushing a digital adoption strategy and increasing access, affordability and availability of alternative financing schemes through a platform that we built called e-Berkat.

What have been done after the Dialogues? Of all the recommendations made, what have been enacted upon? What next?

One of the other recommendations that was mooted during the dialogue was to have the government play a bigger role in setting up a national Islamic fintech task force. And that is a big charter. We do feel that there is a need to have a uniformed voice among government agencies and across ministries to look at enabling the Islamic fintech agenda.

We are bringing this up with players, the industry, as well as the public sector. The task force’s main focus is to drive financial inclusion.

It is still early days, but you have an idea of how the task force will look like?

That is an interesting question. We are working with the Ministry of Finance and the Ministry of Communications and Multimedia. A lot of things are happening behind the scenes right now. We have met up a couple of times, our industry has been syndicated and we have some structure.

What I can share with you right now is that the mandate focuses on financial inclusion and we have the involvement of institutional bodies – religious bodies – in pushing that agenda. It is going to be exciting because there will be a consolidated platform. I think that is what the country needs – a push from the top, getting everyone to realize that Islamic fintech can enable and play a role in pushing the digital agenda.


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