KUALA LUMPUR (May 24): Malaysia is the leader in the field of Islamic financial technology (fintech) but the ecosystem is still very small. Islamic fintech is drastically lagging compared to other fintechs and startups, said the panel on “Maintaining Malaysia’s #1 Position As The Leader in Islamic Fintech”, held at the DisruptInvest Summit 2024.
Kestrl founder and chief operating officer Daeng Termizi noted he has been in the business of Islamic fintech for a few years but has not seen new players in the field for some time.
“[It’s] hard to be in a heavily regulated industry if the infrastructure is not there,” said Daeng. One of the biggest reasons for the slow adoption and new startups for Islamic Fintechs he said was the many misconceptions and confusion behind Islamic finance itself.
Many people, especially millennials, believe that Islamic finance is only for Muslims, or that only Muslims can facilitate Islamic banking. When in truth, anyone can. The technology itself is “agnostic”. The Islamic part comes from the practices used in banking, said Daeng.
He suggested letting go of the “Islamic finance” moniker and calling it something like “alternate finance”, which has shariah-compliant offerings among other types of finance that cover the same ground, like sustainable finance. “Most don’t realise that sustainable finance has a lot of overlap with Islamic finance,” said Daeng.
Dr Nafis Alam, professor and head of the school of business at Monash University Malaysia, concurred with Daeng, as tackled the topic of millennials and how most are not aware of what Islamic finance even is.
“[We] need to [change] the concept that non-Muslims are not allowed to do Islamic finance or that it can only be run by Muslims out of the equation,” said Nafis, adding this misconception is the big reason for the lack of growth.
Hong Leong Islamic Bank Malaysia chairman Datuk Hamzah Kassim said that “startups are very product driven, sometimes they don’t look at the customer”.
Hamzah took a different approach in addressing how Islamic fintechs tend to focus too much on the Islamic side, and should instead build off the pre-existing infrastructure like Islamic finance did when it started.
“When [Islamic finance] first started was a conventional bank with a window for Islamic banking,” said Hamzah. Building off the existing customer base, it created different products and grew from there. Islamic fintechs, however, are taking it from a different angle and are not leveraging on the established infrastructure from existing fintechs.
“Banks like Maybank are moving very fast ahead, leveraging on existing models, when we look at Islamic fintech, we need to look at how it started. We need to encourage those stuck in Islamic finance to come out, release them to be part of the whole fintech ecosystem,” said Hamzah.
