A NEW NORMAL WILL REQUIRE ISLAMIC FINTECH TO ADDRESS FINANCIAL INCLUSION (PART 2 OF 2)
The COVID-19 pandemic has been an unexpected catalyst, similar to the Global Financial Crisis in 2008-2009 which back then, provided the impetus to growth of fintech. In this context of the COVID-19 impacted economy, in order to emerge victorious in the long term, our local fintech and Islamic fintech companies will have to seize the moment and future-proof their business during this period.
Islamic Fintech: Serving the Underserved Market
In spite of our high banked-population 17% of Malaysians have a life insurance policy, possibly pointing to the fact that budgeting and financial planning are still low on the take up. Six out of 10 Malaysians work in the gig economy or are self-employed, and thus, have to opt for a scheme that supports their pension or retirement needs either with the EPF, or privately.
Underserved markets in Malaysia offer opportunities for Islamic Fintech players as Malaysia strives towards ‘financial Inclusion’ as a goal within sustainable growth with fair and equitable distribution, in line with Shared Prosperity Vision 2030. Add to that the recent COVID-19 crisis and its anticipated impact on the overall Malaysian economy, and you get an underserved that is readier than ever for digitally abled and enabled enterprises. The underserved will now grow to include those dependent on the digital economy for a boost in their livelihoods - alongside a severe need to educate and connect communities as part of financial inclusion.
Players successful in Malaysia such as Wahed Invest, Finterra and Ethis are key Islamic Fintech companies which are making a splash, but every activity in the fintech space is of value to the underserved – MSME and B40 population. Take the instance of an initiative by MDEC collaborating with Koperasi Warga Hijrah Selangor (KoHijrah) and Aspirasi (a subsidiary of Axiata Digital), to offer working capital financing up to RM3000 to eligible members of KoHijrah. Successful applicants are then given exposure to digital marketing techniques and instruction on how to activate the customer’s service for food delivery through digital platforms.
Alluding to the fact that Islamic Fintech is all about financial inclusion, Umar Munshi of Ethis Ventures Malaysia said, “The world is rapidly reinventing itself with technology, bringing huge gains to society. Muslims especially, have the opportunity to create new solutions and ecosystems in the Islamic Digital Economy, to match and serve unique needs, based on the universal ethical principles of Islam.”
Onward, Islamic Fintech
Islamic Fintech and Islamic Digital Economy encourage financial inclusivity by increasing awareness and providing access to MSMEs, B40 and the gig economy through digital financial instruments which address various aspects of SLIP or Savings, Lending, Investment and Payments.
It is the financial inclusiveness of Islamic Fintech that Norhizam feels is the Islamic Digital Economy’s biggest asset. “Malaysia’s Islamic fintech players will continue to serve underserved markets both locally and globally – as Malaysia builds on the strength of Islamic products and services, to be the #1 Islamic Fintech nation in the world,” concludes Norhizam.