@Halal July/August 2020 | Page 18

18 Finance @Halal | July-august. 2020 Establishing Malaysia as the Islamic fintech hub Malaysia Digital Economy Corporation (MDEC) carries out digital economy initiatives to help the B40s, M40s and micro SMEs to embrace and adopt digital technologies BY CAMILIA REZALI Digital convergence has widely altered the way our financial industry operates. This starts from shifting how people sort out their financial investments, transactions to even managing their savings. Digitalisation is not only changing the financial industry alone, but it is also shifting all sort of companies from small businesses to large corporations, and from non-profits organisations to government agencies to speak in a universal language of computers. Technology is ever-growing, and the only way for industries to grow and expand especially during this Covid-19 pandemic is through “digital transformation”. MDEC’s Vice-President of Fintech and Islamic Digital Economy Norhizam Abdul Kadir said the transformation of every single industry was crucial, especially with the current economic situation. “You got to embrace, adopt new digital technologies to increase business efficiency and productivity,” he said. Looking at the growth of the fintech industry globally, the State of the Global Islamic Economy Report 2019/20 stated that Islamic finance had the most significant number in the world with US$521.3 billion growth. On top of that, IFN Islamic Fintech Landscape identified a total of 138 companies worldwide offering Islamic fintech services across 11 verticals as at the end of December 2019. Last year, Malaysia continued to lead in the Global Islamic Economy Indicator (GIEI) according to the State of the Global Islamic Economy Report (SGIE) 2019/20. Information, IT and Infrastructure hold the highest percentage in Islamic fintech with 18 per cent, followed by block chain and crypto currency (13 per cent) and P2P financing (12.5 per cent). Although Malaysia has continuously been ranked No 1 in the Global Islamic Economy Index, Norhizam believed there were still gaps in financial inclusions that needed to be addressed, especially for those who are under served. Even if 95 per cent of Malaysians own a deposit account, there are still a portion of the B40s group whom do not have bank accounts yet. “This is common in emerging markets where disciplines of wealth may not be well distributed. The divide between the household income between T20s and the B40s is widening wherein this community is facing economic inequality,” he said. Another concern is the lack of financial knowledge among Malaysians. From a Financial Education Network Report called the Malaysia National Strategy for Financial Literacy published by Bank Negara, one out of three Malaysians rate themselves to be low in financial knowledge. Islamic finance applies a different approach from conventional banks when it comes to financing and investment matters. There are different products and services developed by these Islamic financial institutions to meet customers’ needs. Bringing players together Islamic financial products and services are very trusted. However, it is not properly understood due to the reduced level of financial knowledge among Malaysians. In addressing these issues in the fintech industry, there are a number of initiatives by MDEC. Some of the initiatives are through platforms such as eRezaki, eUsahawan, GLOW and Tech Talent Development. e-Usahawan is not just about digitalisation. It is also about teaching on how to get access to e-commerce business and capital markets while eRezekienables citizens, especially low-income groups, generate additional income by doing digital assignments via online crowd sourcing platform. Besides providing such platforms, MDEC also introduced the concept of Orbit. This is where players in the financial industry are brought together. Norhizam said one of the critical purposes of Orbit, a fintech hub, was to help fintech startups gain access to regulators. This is done through the quarterly Regulatory Bootcamp, which generally also sees participation from both Bank Negara Malaysia and the Securities Commission Malaysia. “The one we have now is in partnership with the United Nation’s Capital Development Fund. There is an Orbit where we take Malaysian companies to help United Nations drive financial inclusions not only in Malaysia but also to all other emerging markets across the network of the United Nations,” said Norhizam. MDEC also focusses on on assisting companies in financial support as well as introducing robo-advisors to assist the B40s in opening financial investment accounts and receiving financial advice. MDEC works closely with companies such as Aspirasi, Micro Leap and other venture capital firms to support and facilitate micro “You got to embrace, adopt new digital technologies to increase business efficiency and productivity.” — Norhizam Abdul Kadir financing, especially for micro SMEs and ‘Makcik Kiah’ kind of individuals. It is done with different sets of ‘KYC’ which includes the use of social media, mobile and e-commerce platforms. Investment platforms such as Wahed Invest, StashAway, HelloGoldand Luno are also included. “We are also supportive of the initiatives from larger organisations like TM, Angkasa, Post Malaysia and MARA. For example, Angkasa has come out with an initiative called MyAzZahra which is an is an electronic online application system developed for all cooperatives under the umbrella of Angkatan Koperasi Kebangsaan Malaysia Bhd (ANG- KASA),” said Norhizam. On the issue of the shortage of talent, the said areas like data analytics is seen as the most crucial area which requires good talent and this needed to be addressed soon. For this, MDEC is working closely the Ministry of Education to work with the schools and universities to introduce digital studies in education. “We are also working with the institutions of higher learning on a programme called the ‘Premier Digital Tech Universities’ where we work with faculty members to look at developing latest and relevant-to-industry programmes such as computer science, programming, coding as well as the convergence of other verticals,” Norhizam said. On top of that, there is an initiative called #MyDigitalMaker where skills such as app development, robotics and 3D-printing are taught and developed by students and teachers. Having these approaches, MDEC is confident the nation will generate more talent in the fintech industry. For Islamic financial inclusion to have an impact on the nation’s economic empowerment, livelihoods and broader welfare effects, MDEC is working with all the relevant agencies and partners to make this happen.