IFintechs take Southeast Asia by storm
IFintechs, or Islamic fintechs, are experiencing rapid growth and opportunities in Southeast Asia. Malaysia, an emerging economy of 32 million ASEAN people, has been named a leader in the maturity model of iFintech hubs. The ASEAN nation of 32 million people enjoys high growth and a high level of productivity, according to the Global Islamic Fintech Report 2021.
Malaysia is also number one out of 64 key iFintech markets in the world according to the Global Islamic Fintech (GIFT) Index, showing the most robust ecosystem supporting the industry.
Six countries in the Asia-Pacific region ranked among the top 20 in the report’s country index list: Indonesia (4e location), Pakistan (8e), Singapore (12e), Hong-Kong (14e), Australia (16e) and Bangladesh (19e).
The report, produced by the Islamic economics management consultancy firm DinarStandard and the ethical digital finance consultancy and investment firm Elipses, counted 241 iFintechs worldwide, including 62 in Southeast Asia. The GIFT Index looked at 32 indicators spanning five categories: Islamic fintech market and ecosystem, talent, regulation, infrastructure and capital.
Malaysia and Indonesia digital economy and Islamic finance
Malaysia and Indonesia both have large Muslim populations and governments that stimulate the aspirations of the Islamic economy. Malaysia has its vision of shared prosperity and Indonesia has its national sharia (Islamic law) economic plan.
“The government has identified the digital economy and Islamic finance as key catalysts in its Vision for Shared Prosperity. With these two pillars, Malaysia will continue its efforts to become the heart of digital ASEAN and the essential driver of various advancements within Industry 4.0 ”, said Surina Shukri, former CEO of Malaysia Digital Economy Corporation (MDEC) , in a report last year.
“Since it is widely recognized as a benchmark of excellence in Islamic finance by the international community, Malaysia has all the assets to lead the Islamic fintech agenda.
“Its robust regulatory environment, its well-established Islamic financial community, its increasingly influential and affluent population, the government’s unwavering commitment to Sharia finance, and foresight as well as the willingness to adapt and pose the basics foundation of fertility Islamic fintech sector.
Indonesian Vice President Ma’ruf Amin, speaking at the inauguration of Indonesia’s 2021 Sharia Summit on Wednesday September 22, said: “In terms of Sharia economics and finance, the government continues to take steps to strengthen regulation and management, digitization, research and innovation, human resources, awareness and literacy.
IFintechs seek to fill the void
IFintechs have a higher growth projection at 21% CAGR by 2025 than conventional fintechs at 15% CAGR for the same period, according to the report. IFintechs seek to fill the void for the underserved or unserved Muslim population, who has 1.8 billion people worldwide, following the principles of Sharia law.
Last year, a World Bank (WB) document stated that more than half of the world’s population under the age of 34 is Muslim. “This young demographic is very tech-savvy, with source markets having high mobile and internet penetration compared to the global average,” the newspaper said.
IFintechs also attract consumers of ethical finance, as they both champion common environmental, social and corporate governance (ESG) factors and outcomes.
The World Bank report identified three opportunities for iFintechs:
- Help leap Islamic financial services to reach and impact.
- Address significant financial inclusion gaps in key markets.
- Provide Islamic social finance to support the Sustainable Development Goals (SDGs) and global needs.
The United Nations Development Program (UNDP) estimated in 2018 that zakat (compulsory charity for Muslims) could contribute between $ 200 billion and $ 1,000 billion globally to poverty reduction.
Feeding solutions by iFintechs
Last May, the Securities Commission Malaysia (SC) and the United Nations Capital Development Fund (UNCDF) launched the FIKRA Islamic FinTech Accelerator Program, the first of its kind for its Islamic capital market.
It aims to nurture iFintechs to generate new ICM offers, accessibility and integration of social finance. The three-month program will host a public virtual demo day to introduce its attendees to the SCXSC Fintech Conference 2021 next month.
Global Islamic Fintech Report listed nine iFintech service segments, fundraising, deposits and loans, and payments as the most popular categories. Other segments include alternative finance, capital markets, digital assets, wealth management, insurance, and social finance.
With the Islamic fintech market expected to reach $ 128 billion by 2025, coupled with the expanding reach of digitization and growing demand for its services by Muslims around the world, the future is bright. more diverse and vibrant iFintech ecosystems in ASEAN and beyond. .