Fintech solutions set to enable growth of Malaysia's Islamic capital market

KUALA LUMPUR – Malaysia’s Islamic capital market (ICM) will be using financial technology (fintech) solutions to grow, the Securities Commission Malaysia (SC) stated.

Sharifatul Hanizah Said Ali, executive director of the SC’s Islamic capital market development division, told Bernama that fintech would be used to allow new solutions with its focus on halal economics, socially responsible investing (SRI), and Islamic social finance to further strengthen Malaysia’s ICM.

She said that SC anticipates further adoption of digitisation and technology to widen and accelerate stakeholders’ capacity to enhance the Islamic financial ecosystem.

These digital solutions provided by fintech will facilitate connectivity by enabling issuers, investors, and intermediaries to access exixting and new markets in a more efficient and cost-effective way. Doing so would further boost the ICM industry’s growth.

Apart from that, she also stated that after COVID-19, small and medium enterprises (SMEs) are recognising the significance to adopting digital solutions and leveraging fintech to ensure ongoing operationalisation of their commercial activities. These SMEs are also able to get access to capital in order to maintain and expand their business further.

“Gathering capital with Shariah-compliant methods is critical for SMEs in the halal industry, which makes up a sizable portion of SMEs in Malaysia,” she added.

Fintech assisting B40 to generate income

Sharifatul remarked that the low household income group (B40) along with the youth and underprivileged, showed that fintech and Islamic fintech had offered them new avenues to generate income after losing their jobs or trying to regain financial control. The solutions offered allow for easier and effective money management with increased financial literacy.

In regards to the critical role of fintech in serving the B40 and SMEs, she explained that the SC is focusing on increasing ICM offerings to allow better connectivity, accessibility, and inclusion for all market participants especially the underprivileged.

“In order to achieve this, the SC will intensity its efforts to strengthen the Islamic social finance sector, which has been key in alleviating poverty and socio-economic development,” she stated.

Sharifatul highlighted that in the third Capital Market Masterplan (CMP3) for2021-2025, which launched in September2021, that innovation and fintech are two of the plan’s core topics.

“Fintech will be utilised as a catalyst for innovative solutions to enable continued growth and expansion of ICM products.

“Awareness and active engagement on both the demand and supply sides of the market are also critical for ensuring the ICM’s growth and extension via fintech and digital channels,” she added.

Due to that, she explained that the SC would further boost its efforts to increase awareness of alternative Islamic fundraising mechanisms such as the peer-to-peer (P2P and equity crowdfunding (ECF).

Aside from that, Sharifatul said the that the SC would continue to utilise the strengths and advances of the Malaysian ICM to achieve the various goals in sustainable developments. This is in line with the CMP3’s strategic five-year plan.

“The SC seeks to transform Malaysia into a regional SRI powerhouse through increasing the ICM’s reach to the broader economic stakeholders and creating an enabling ICM ecosystem for Islamic social financing and impact investing,” she concluded.

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