Growing demand for fintech in Islamic finance

The Islamic Financial Services Board (IFSB) sees the growing demand for financial technology (fintech) within the Malaysian Islamic financial services system, as customers seek alternatives that prove to be more resilient.

IFSB secretary-general Jaseem Ahmed said demand for fintech within Islamic finance had increased following the global financial crisis.

“There are tremendous opportunities for fintech within Islamic finance.

“In the aftermath of the global financial crisis, there has been a loss of confidence, so people are looking for alternatives,” he told reporters on the sidelines of IFSB’s Annual Meetings and Side Events 2017 yesterday.

Jaseem added that commercial banks are really taking up fintech to reach out and improve the attractiveness of their products at a lower cost.

“From our perspective, we welcome those opportunities, with focus on stability, resilience and regulatory issues. There are as yet unexamined issues that might have to be looked at more carefully.”

Jaseem also said he expected sukuk or Islamic bond issuance to continue remaining strong in Malaysia.

“I don’t see why not. Malaysia has been a path breaker and leader in the way it has pursued national economic development, through infrastructure financing and capital market development.”

According to the IFSB’s Islamic Financial Services Industry Stability Report 2016, Malaysia was the largest corporate sukuk issuer in the world in 2015, accounting for nearly 33.7 per cent or US$5.98 billion (26.5 billion ringgit) that year.

According to the report, the Malaysian corporate issuers hail from sectors such as agriculture, telecommunications, retail, real estate, financial services, healthcare services and transportation.

“Among these have been two perpetual sukuk issued by a real estate company and a financial services provider.

“The issuances have been across a wide variety of maturities and utilising the local currency as well as the dollar.”

Overall, in terms of combined corporate and sovereign sukuk issuance activity in 2015, Malaysia retained its position as the largest issuer of sukuk in terms of volume, accounting for 50.4 per cent or US$29.8 billion (132 billion ringgit) that year.

Second was Indonesia, which accounted for an increased 13.2 per cent or US$7.8 billion (34.6 ringgit billion) of the issuance in 2015.

The IFSB event, which ends tomorrow, comprises forums that bring together key stakeholders of the Islamic financial services industry.