INCEIF report: Malaysia has potential to be world leader in Islamic Fintech

• One of fastest-growing Fintech markets in SEA with 200 local, foreign startups
• Guidance on the entrepreneurs, regulatory scene, supporting institutions, funding

Malaysia has the potential to be the world leader in Islamic Fintech as it has shown a steady growth in Fintech investments and activities, making its mark regionally and globally.

A newly launched report, Islamic Fintech in Malaysia: Reality & Outlook, in making the claim, said Malaysia has become one of the fastest-growing Fintech markets in Southeast Asia with nearly 200 local and foreign Fintech companies operating in the country as of September 2020.

The majority of Malaysian Fintech activity has been concentrated in the wallets and payments space, where mobile and e-commerce has led to real demand from underserved consumers and merchants. This trend has also been supported by the central bank, Bank Negara Malaysia, with its agenda to accelerate the country’s transition to e-payments, and thus, realise the consequent cost savings and other benefits.

Malaysia’s robust regulatory environment, comprehensive Fintech landscape, supportive Islamic finance community and the government’s commitment to champion the Islamic economy, has already paved the way for Malaysia to be a global Islamic Fintech hub. With such vision and advantages, Islamic Fintech startups in Malaysia can secure long-term growth prospects by scaling up to serve the global Islamic economy, consisting of almost 1.8 billion people around the world.

INCEIF collaborated with International Shari’ah Research Academy (ISRA) and Malaysia Digital Economy Corporation (MDEC) to jointly prepared the report which explored the Fintech ecosystem and the potential of Malaysia to be a global Islamic Fintech hub.

The report gives a guide to local and foreign Fintech entrepreneurs to establish and grow their startups in Malaysia. It takes one through the regulatory environment, the supporting institutions, the funding opportunities, the human capital development initiatives and the necessary Shariah governance framework to ensure the Shariah compliance of Islamic Fintech solutions.

The report comes at a critical time to highlight the rapid development of the Islamic Fintech. Further innovations that are entering the mainstream include alternative financing platforms, Insurtech, blockchain and remittances. A burgeoning subsector has since emerged from the Fintech industry, namely the Islamic Fintech niche, which focuses on the use of technology to deliver Shariah-compliant financial solutions, products, services and investments.

INCEIF President & CEO Prof Mohd Azmi Omar said, “With the adversity created by the Covid-19 pandemic, developing Islamic Fintech is now more crucial than ever before, specifically in catering to the financial needs of the SMEs and the B40 community. Islamic Fintech holds the potential to provide inclusive and sustainable financial solutions that can uniquely cater to the financial needs of all segments of the society.”

ISRA executive director Prof Mohamad Akram Laldin said, “Although Islamic Fintech is still in its early stages of progress, it has a great potential of exponential growth if a conducive ecosystem is achieved. And for that, Malaysia has a great advantage in leading the global industry in Islamic Fintech by leveraging on its position as an Islamic finance hub and intensifying its efforts in value-based and sustainable financial solutions.”

MDEC CEO Surina Shukri said, “Today, we are one of the fastest-growing Fintech markets in Southeast Asia with nearly 200 companies in the ecosystem. This has contributed to Malaysia being ranked the number 1 Islamic economy globally by the State of the Global Islamic Economy Report 2020/2021. With all these achievements in place, together with the efforts of agencies like MDEC to grow the ecosystem, we are confident that Malaysia is poised to be ASEAN’s Islamic Fintech Hub, further strengthening our goal to position the country as the Heart of Digital ASEAN.”

Investors and entrepreneurs who wish to be part of the Islamic fintech ecosystem are looking for real cases of Islamic Fintech solutions. The report also highlights a number of the prominent companies in the Islamic fintech ecosystem, with in-depth interviews with their founders and CEOs who shared their experience of providing Islamic fintech solutions in Malaysia.

Islamic Fintech in Malaysia: Reality & Outlook is authored by INCEIF subject matter expert on Fintech Dr Kinan Salim, ISRA subject matter expert on Fintech Dr Moutaz Abojeib and INCEIF director of research management centre Assoc Prof Baharom Abdul Hamid, with the contribution of 28 scholars, Fintech industry players and experts.

The report is another initiative by INCEIF to provide the bridge between academia and industry, working together with industry players and regulatory bodies to support the growing Islamic finance industry globally.