This article is published in Banking Insight, First Quarter 2017, by Asian Institute of Chartered Bankers. Writers Dalila Bakar and Nazatul Izma gathered views from five Islamic finance industry leaders, I am one of them, and put together a story.
“Fintech (financial technology) developments in the Islamic Finance space are still very nascent, but key Islamic finance markets like Malaysia, UAE and Bahrain are seeking to support and grow Shariah-compliant fintech”.
The following are my thoughts highlighted in this article.
“Fintech in Islamic finance is very far behind compared to fintech in the conventional finance space. Islamic finance fintech is still in its infancy and growing although not very rapidly. The number of fintech players specialising in IF is still considerably low,” explained Othman Abdullah, Managing Director (Islamic Banking / Public Sector Solutions), Silverlake Group of Companies.
Generally, the different types of fintech specialisations are Money Transfer, Mobile Payment, Trading Platforms, Wealth Management, Credit Scoring, Peer-to-Peer (P2P) Lending and Crowdfunding. “In Islamic finance, fintech innovations are mainly in the forms of Crowdfunding and P2P Financing platforms,” said Othman.
Meanwhile, Othman surmised that: “From the consumer perspective, it is estimated that by 2020 two to three billion new consumers will be entering the digital finance space, and that 80% of these new consumers will be Muslims.”
But fintech in IF is not without its hurdles. Othman singled out paralysis in innovations and ignorance of Shariah
guidelines and compliance as barriers to fintech in IF. “Lack of innovation is the same syndrome that has been faced by
Islamic finance in general. Most of the Islamic finance products in the market today are the ‘Islamised’ version of
conventional products.” While fintech is an agnostic tool, fintech start-ups also need to improve their familiarity with Shariah guidelines in developing financial services products for Islamic finance to ensure Shariah compliance. “Unlike traditional Islamic financial institutions where there are Shariah teams well-versed with Shariah requirements who participate in product development to ensure Shariah compliance, fintech start-ups do not have such a facility,” remarked Othman.
“The most outstanding is probably EthisCrowd which received the Best Islamic Crowdfunding Platform Award at the 6th Global Islamic Finance Award 2016 held in Jakarta and the Islamic Economy Award at the Global Islamic Economy Summit 2016 held in Dubai recently,” said Othman.
As one of the players that provided feedback for the regulatory sandbox framework, Othman proposed that the guidelines be made more specific, less general and less high-level to facilitate Shariah compliance, especially since smaller fintech players might not be wellversed with the Shariah requirements.