ISFIRE is an official publication of Cambridge Institute of Islamic Finance, United Kingdom. I was featured in an exclusive interview in its October 2019 edition.
The following are the questions and my answers:
(1) Many enthusiasts believe that Bitcoin and other cryptocurrencies are perfect substitutes for the traditional forms of money and payments methods. What are your views on this? How can this impact the Islamic financial industry?
Money is anything that is acceptable that can function as a medium of exchange and store of value that must possess these characteristics; divisible, portable, acceptable, scarce, durable and stable in value. Currency is a system of money in common use especially for people in a nation. Cryptocurrency is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions.
Going by the above definition, cryptocurrency lack some of the prerequisite elements of traditional forms of money. What’s more in recent years, cryptocurrency has been used as a speculative asset rather than a medium of exchange. This being the case, I do not see how Bitcoin and other cryptocurrencies can be perfect substitutes for the traditional forms of money and payment methods.
However, cryptocurrencies can be good alternative currencies and payment methods for the digital age. Cryptocurrencies have tremendous potentials especially because of the transparency as well as its de-centralized nature. With Facebook is expected to launch its Libra stablecoin next year, cryptocurrency may be becoming a more acceptable medium of exchange considering there are billions of active Facebook users at the moment.
Islamic financial industry can definitely benefit from the innovation of stablecoin. With stablecoin, the cryptocurrency is backed by a stable asset, and that asset can be Shariah-compliant assets. Therefore, Shariah compliant cryptocurrency backed by Shariah-compliant asset can be issued and it can be used as a digital asset for payment of Shariah-compliant products and services in the digital age.
(2) What are some of the challenges and opportunities in Islamic FinTech and what is being done in terms of increasing the share of FinTech in Islamic banking and finance industry?
Allow me to mention some challenges faced by traditional Islamic financial institutions first before answering this question. Being infants relative to most conventional counterparts, Islamic financial institutions (IFIs) are generally much smaller and more constrained on budgets and talent pools. Due to this, traditional IFIs lack resources to innovate compared to their more established conventional big brothers.
Fintech companies on the other hands are generally leaned and they focus on innovating for more efficient financial services and superior customer experiences. However, these companies often lack financial backup to survive. For those that go beyond technology innovations and attempt to operate businesses as alternative financial services’ providers, they struggle to gain customers’ trust.
With such challenges faced by traditional IFIs and fintech companies, there are huge opportunities for collaborations. Traditional IFIs have customer base and enjoy their trusts while fintech companies have technology and innovation advantage. Their collaborations could bring to the market innovative Islamic fintech solutions that would benefit end customers. One way to encourage this collaboration is via the concept of open banking which is a new and revolutionary way of using financial data by third party providers for the benefit of bank account holders.
In terms of effort in increasing Islamic Fintech share in the market, different countries have different agendas such as sandbox, innovation labs, hackatons, co-working space, etc. The agenda may be for fintech in general and Islamic fintech would definitely be able to take advantage of these programs. It is also encouraging to see Islamic finance conferences and seminars covering more and more fintech related initiatives and this indirectly encourages fintech innovation in Islamic finance space.
(3) You are involved with implementing the Silverlake Integrated Islamic Banking System (SIIBS) in Malaysia, Indonesia, Thailand and numerous other countries. What products and services have you provided, and what is the success of this system as a Shari’a banking solution?
Silverlake provides end to end IT solutions for financial services industry. In fact, we in Silverlake differentiate ourselves as a group of companies that create technologies for digital economy based on computing principles that are grounded on mathematical models. Silverlake’s founder and executive chairman is very much a mathematician at heart and therefore everything that we do in Silverlake must be based on some mathematical principles.
Although Silverlake started 30 years ago with a simple system to support basic banking products, we are now a company that provide a full-fledge banking system for both conventional and Islamic. Typical systems required for a full-fledge Islamic commercial banks bank include Customer Information File (CIF), Deposit (Saving Account, Current Account and Term Deposit), Financing (Personal, Mortgage, Term, Business, Cashline) Trade Financing, Treasury, Debit Card, Credit Card, ATM, General Ledger, Remittances and Payment as well as Reporting system. In addition, delivery channels such as Branch Delivery, Mobile Banking, Internet Banking and Self-Service Terminals (ATM, Cash Deposit and Cheque Deposit Machine) are also required.
As an established IT solution provider, we have all of these components which are proven running in our customers sites at various part of the world. When we started looking into Shariah banking requirement back in 1994, we consulted Islamic finance experts to understand the fundamental of Islamic banking and finance to ensure our system is designed in such a way that it could evolve together with Islamic finance products and services. Based on our careful study, we observed that most components of our banking solutions are readily usable for Islamic banking except for Deposit, Financing, Trade Finance, Treasury and Credit Card modules.
There are distinct differences between conventional and Islamic Deposit, Financing, Trade Finance, Treasury and Credit Cards. The Islamic instruments for these types of products are governed by the underlying Shariah contracts and concept, therefore there are some peculiarities to ensure they are Shariah-compliant. In addition, there are additional components unique to Islamic banking due to the profit-sharing contracts between customers and banks. Islamic banks need to have a mechanism to keep track of various pools of funds from their shareholders, depositors and profit-sharing investors. These are important so that Islamic banks are able to compute the rate of returns and distribute profits due to their depositors and investors.
As IT Solution provider for Islamic financial institutions, we have to fully understand all the requirements and make sure that the system that we provide could enable the Islamic banks that we serve to operate efficiently, comply to regulatory and Shariah requirements, be able to provide superior customer experience and speedily bring to market new products and services.
The success of the Shariah banking system that we provide could be measured by the number of Islamic banks using it. We can proudly claim that 70% of Islamic financial transactions in Malaysia daily is enabled by Silverlake Integrated Islamic Banking System (SIIBS). We are now in the process of implementing SIIBS in another Islamic bank in Malaysia and will go live next year, Insya Allah. By then, we will be enabling 80% of Islamic financial transaction in Malaysia. Of course, we are also enabling some Islamic financial transactions in a few other countries such as Brunei, Indonesia, Singapore, Bangladesh and the UAE.
(4) You were named as the ‘Upcoming Personality in Islamic Finance’ in 2017, and received GIFAs on behalf of Silverlake in 2018 and 2019. How have these achievements contributed to your company’s further success and your own career?
Slight correction. I have represented Silverlake four years in a row, 2016 in Jakarta, 2017 in Astana, 2018 in Sarajevo and 2019 in Cape Town to proudly receive GIFA Best Islamic Finance Solution Provider awards
First of all, it is always nice to receive an international level award either for your own achievement or on behalf of the company. The aura of award ceremony such as GIFA is so positive that it motivates you to strive to achieve more. The networking during the award ceremony gala dinner not only provides you with the exposure of witnessing global achievers of your industry being recognized but also a great platform to connect with them.
For my own career, the Upcoming Personality award has helped me to gain more international recognition. It looks impressive on my CV too. At the company level, it is one of the success stories that we always share in marketing materials and presentations to impress our prospective customers. Normally when I share my pictures receiving GIFA awards during my sales presentations to Islamic financial institutions, the audience looks impressed. It definitely helps in giving more credentials to Silverlake as IT Solution Provider for Islamic Financial Institutions.
(5) What are the short-term and long-term plans of Silverlake, in the Islamic financial services industry?
As an IT solution provider and partner of choice to more than 300 financial institutions globally, we have to be on top of the technology trends. We need to know which ones are real and which ones are just hypes. We have to apply these technologies into our fintech solutions that bring values to our customers especially as the world of banking is now fraught with major disruptions such as changing customer needs, changing landscape, competitions from alternative financial service providers and open banking API ecosystems initiatives.
Our customers have high expectations for us to enable their operating model automations, merger & acquisitions as well as regionalization. They demand adaptive, scalable, agile, secured, dynamic and consistent IT solutions. We need to help our customers to achieve their visions to optimize technology investment, gear up for digital banking and embrace collaboration in the world of open banking.
Our short-term plans are to work with our existing customers on some quick wins approach to enable them for digital banking. For longer-term, we are positioning our Straight Through Banking (STB) Platform with a competency to drive our customers to win in the race to digitalization through a robust digital frontier, expandable and intelligent core system.
Silverlake STB is a synergistic piece combining the best of all components to deliver a single, powerful and scalable solution for our customers’ business requirements. We will not only focus on banking and finance but also plan to provide more holistic solution that covers the Shariah ecosystems services such as Zakat, Waqf and Sadaqah not only at the collection side but also on the distribution part, in which most of the issues are associated with.
(6) What is machine learning and how can it be implemented in the Islamic financial industry for the development and growth of Shari’a compliant services?
Machine learning is an application of artificial intelligence (AI) that provides systems the ability to automatically learn and improve from experience without being explicitly programmed. Machine learning focuses on the development of computer programs that can access data and use it to learn for themselves. In financial services industry, machine learning could apply to credit decisioning, risk assessment, fraud prevention and process automation. An example of the application in Islamic financial services industry is a Shariah-compliant robo-advisor that uses neural network machine learning technology to pick stocks from Shariah compliant S&P500 Index.
Machine learning could also improve Shariah screening process. The AI will learn the selection behaviour of Shariah scholars and screen trough company data for any anomaly. This will significantly improve Shariah screening process which will lead to discovery of more investable shariah-compliant instruments in the market.
These are just a few examples. The potentials of machine learning applications in Islamic finance industry are huge. Machine learning could be applied to innovations that may improve Islamic financial institutions (IFIs) general processes efficiencies and customer experiences as well as innovations in Shariah-compliant products and services.
(7) SDGs are the talk of this decade. What in your view can be the role of FinTech, more specifically Islamic FinTech in achieving the SDGs?
The SDGs are the blueprint to achieve more sustainable future for all. As these SDGs are very much in line with the objectives of Shariah, Islamic Finance and Islamic FinTech can definitely play crucial roles in supporting the implementation of SDGs agenda.
There are a few areas where Islamic fintech could contribute towards achieving SDGs. A very obvious one is Islamic crowdfunding platform as a more flexible avenue for fundraising especially for those who do not have the privilege of getting financing from traditional banks due to lack of credit history. Crowdfunding has been proven to promote financial inclusion.
Talking about financial inclusion, it is estimated about 3 billion people globally who have little to no access to financial tools that could improve their lives. Most adults in emerging economies do not have a bank account and what’s more a financing facility. Some do not even have valid identifications. Consequently, credit information coverage is low thus limiting these poor people’s chances in getting funding from traditional financial institutions.
The concept of Islamic social funds (Waqf, Zakat and Sadaqah) has been there to assist the destitute. However, various issues have been associated with the management of such funds. There needs to be a mechanism for productive uses of these funds in order for the hardcore poor to be financially inclusive in the future. Otherwise, they will be trapped in the vicious circle of poverty forever.
Electronic payment system could address this issue. Through collaboration with Islamic financial institutions (IFIs), Islamic social fund bodies could distribute the funds electronically to the beneficiaries. In this case, social smart card concept could be deployed. The beneficiaries of the social funds can be registered and issued with a smart card which is an electronic identity document with integrated payment functionality. As IFIs issue the smart card, a bank account that links to the card is created.
The social funds could then be credited into the bank accounts linked to the social cards. The utilization of the funds can then be controlled by the usage of the cards. For example, funds for the poor to be utilized for the purposes of buying basic food stuffs such as rice, flour, bread, cooking oil etc. can be controlled by making the beneficiaries to use the smart cards when purchasing such food items at participating merchants only. The social smart card with integrated payment facility could address the issues associated with cash distribution of Islamic social funds. It provides the mean to control the recipients of the funds (validated by the biometric identification embedded in the card) and control the money spent by limiting the cards acceptance at participating merchants.
Most importantly, the mechanism will create data that allows monitoring of the whole program, tracks the funds movement and provides transparency. More sophisticated mining of the data employing latest technology such as Artificial Intelligence could also help future planning and more efficient management of Islamic social funds. On the beneficiaries’ part, the usage of the smart card over the electronic payment ecosystems will leave a digital footprint which could be extracted for credit scoring purposes thus enabling them to apply for micro financing facility from financial institutions.
(8) Silverlake Axis has been recognised as GIFA Best Islamic Finance Solutions Provider 2019 for the fourth time in a row. What has been the success factor behind this achievement and how do you propose to continue in the future?
The main success factor is definitely our commitment to what we do. We have 100% success track record in implementing our solutions for our customers and we take pride in that. We provide end to end IT solutions for our customers and most of these components such as the core system and the delivery channels are mission-critical. Migrating from old core systems to new ones is akin to doing heart transplants on human bodies. It requires specialized expertise and sufficient experience to ensure success.
We are very experienced in what we are doing. It is a known fact that when banks decided to give us the job to replace or renew their core systems, they can have some comfort that we will make sure the job will be done successfully. We will deploy whatever necessary resources to get it done. Not to say that it is smooth sailing all the time but our coming to three decades of experience has prepared us with proven methodology and hard-earned experiences to face the challenges.
In addition, we are not only committed but also very passionate about what we are doing. Our people will go extra miles to understand the business requirements and proposed workable solutions to our customers. When comes to project implementations, our people are ever willing to put in the extra hours required to meet project timeline.
Going forward we will definitely leverage on our decades of collective intelligence and commitments of our people but at the same time adapt to the changes. Our chairman gave his advice in one of our management meetings for us to hold on to the following principles:
‘It Is Not the Strongest Nor The Most Intelligent of the Species that Survives But the Most Adaptable’ Charles Darwin/Megginson
‘We Are What We Repeatedly Do, Excellence, Therefore, Is Not An Act, But A Habit’ Aristotle/Durrant
(9) As a CEO how do you motivate your team? Please share with our readers some of the leadership secrets and your personal leadership approach.
My job scope in Silverlake is not limited to Islamic banking and finance. I am also a subject matter expert for Silverlake core banking system and a presales consultant for Silverlake Straight Through Banking Platform.
As far as CEO role is concerned, I am lucky that I am responsible for Silverlake Islamic Banking related activities only. We have a group CEO that oversees the overall company management. My Islamic banking team is quite small relative to the overall size of the company because we leverage on a common pool of resources within the group.
When it comes to Islamic Banking related activities, this structure allows me to get involved in details. I work very closely with my small team and we get support from the common pool in almost everything that we do. I treat my team members as my friends. I listen to them, share with them my ideas and give them constructive feedbacks.
My own notion of a boss or a superior in any organization is someone that your subordinates can approach whenever they need help or advice in carrying out their duties. This is how I want my boss to be, someone that I can go to when I need help or guidance. However, I don’t expect my boss to prescribe the solution in details. I am looking for direction and guidance so that it would leave some flexibilities to use my own creativities in doing my work. This is how I have been behaving as the superior of my team members.
To be such a superior, you have to know what your subordinates are doing to a certain level of details. Therefore, you cannot just delegate and not spending time to understand the nitty-gritty of what is going on. Else, you will not be able to advise when they come for help.
Most importantly, I try to be a good example for them. I don’t expect them to listen to me just because I am their boss, rather I would like to earn their respects so that they willingly follow me. My own boss of 22 years, the chairman of Silverlake Group, once advised me; you cannot autocratically command people but you should logically lead them.
(10) Who has inspired you the most and how? How has this inspiration developed you in the Islamic finance industry?
I am generally inspired by all successful people especially those that have made some kind of impacts to society as a whole or to a particular industry or a niche area. For example, I am very inspired by the current Prime Minister of Malaysia, Tun Dr. Mahathir Mohammad. To me, he has made a big impact to Malaysia. It was during his previous term as the captain of Malaysia that the people enjoyed significant benefits of the development and economic growth.
Those days Malaysians were known in the international arena for having a respectful leader. I still remember a conversation with a stranger from India that happened to study at the same university with me in America. When I introduced myself from Malaysia, he said “oh you have a great leader, very good for your country” and I was very proud of that moment.
I am also inspired by my boss, Mr. Goh Peng Ooi, the founder and executive chairman of Silverlake Group. He started Silverlake in 1989 from nothing and now we are a global company with more than 5000 employees. I joined Silverlake in 1997 when it was still quite small and I can proudly say I have grown with the company. The fact that I have stayed this long is because I admire his vision and his forward-looking attitude to ensure Silverlake continues to be relevant and successful.
In Islamic Finance Industry, I admire Datuk Dr. Mohd Daud Bakar, a well-known academician turned businessman. I respect his farsightedness in applying Shariah principles into contemporary issues to allow innovation of Islamic financial products and services. I am also inspired by Prof Dr. Mohd Azmi Omar, the current CEO and President of INCEIF. I had known him since the beginning of Silverlake’s involvement in providing IT solution to Islamic financial institutions as we used to consult him. When I decided to get Master in Islamic Banking and Finance, I approached him to be my thesis supervisor. While Prof Azmi spent a lot of time as academician and “administrator” of Islamic Finance training and higher education institutions, he has also done a lot of consulting to help develop a few countries’ master plans for Islamic banking and finance.
Inspired by such people, it is my dream to create an impact in Islamic finance industry. I came from a technical background. There are always conflicts between business people and technical people because they speak different lingo. That’s when I decided to complement my technical knowledge with Islamic finance business knowledge so that I could be the bridge between technical and business people. After a while, I realized I became quite good at it and people started listening to me and seeking my advice.
Once I have created an impact at work, I thought I would like to contribute more to the Islamic finance industry to create bigger impact. That’s when I decided to start contributing my ideas related to Islamic financial technology through publications and speaking and conferences and seminars.
Edited version of these answers were published in ISFIRE October 2019 edition.