(Edited version of this article was published in my column at The Malaysian Reserve on Monday 9th January 2017)
Welcoming the New Year 2017, I would like to reflect on the progress
of the financial technology (fintech) for Islamic finance. Despite the fact
that fintech was not particularly familiar subject within Islamic finance
communities until at least 2015, 2016 records quite remarkable achievements. Initial
efforts by fintech entrepreneurs few years earlier became more concerted and prominent
in 2016. The following are highlights which deserve recognition.
The Investment Account
Platform (IAP), Malaysia’s first multi-bank platform for financial
intermediation in the Islamic financial system, was launched on the 17th
February 2016. Owned by a consortium of six Malaysian Islamic Banks, the IAP
serves as a central marketplace to finance small and medium enterprises (SMEs)
with an initial funds of RM 150 million. Datuk Muhammad Ibrahim, the Governor
of Bank Negara Malaysia, in his keynote speech during Global Islamic Finance
Forum 2016 referred to IAP as “the first Islamic banking intermediated
internet-based platform that combines the expertise of Islamic banks and
efficiency of technology to channel funds from investors to viable economic
ventures”.
Eight Islamic Crowdfunding Platform operators from across
the globe clicked together to form Islamic
Fintech Alliance (IFT Alliance) and launched it on the 1st April
2016 in Kuala Lumpur, Malaysia. The founding members are BlossomFinance
(USA/Indonesia), EasiUp (France), EthisCrowd (Singapore), Narwi (Qatar),
FundingLab (Scotland/Palestine), KapitalBoost (Singapore), Launchgood (USA) and
SkolaFund (Malaysia). According to the alliance’s chairman and the founder of
EthisCrowd, Umar Munshi, “the alliance was set up to boost the growth of
fintech among Muslims with hopes that they bring significant positive impact
especially to those in developing countries”. The alliance has three primary
objectives namely, (1) foster safety and trust by establishing, promoting, and enforcing shared standards
for Islamic financial technology, (2) broaden the reach of Shariah and social
impact financial technology by supporting a network of innovators, and (3) support
development of a sustainable global ecosystem by interfacing with and providing
industry insights to regulators and other key stakeholders.
Robo Advisors are fintech innovations that have been disrupting
traditional investment advisory services. Robo advisors provide online,
automated and algorithm-based wealth management services without the use of
human financial planners. On the 26th September 2016, New York-based
Wahed Invest Inc. launched Wahed, the world’s
first automated Islamic investment platform with “the aim of providing access to halal
portfolio management for 2 billion Muslims around the world”. In
addition to being the world’s first automated ethical investment platform,
Wahed offers lower minimum investment amount of USD 7,500. Wahed is claimed to
be the first global Robo Advisor to be accessible by the world’s lower
socio-economic demographic. According to the statement during the launching,
Wahed was available in the United States and would be rolled out to over 100
countries worldwide by 2017.
On the 28th September 2016, Finocracy announced
Future Finance 2030, the first Global
Islamic Fintech Hub which would be the focal point of the fast growing
Islamic fintech space. The fintech hub will be at CH9, a business accelerator
that envisions to enhance the entrepreneurship ecosystem in Bahrain and GCC region.
Future Finance 2030, expected to launch in the 1st quarter 2017,
will include key elements that will continue to power rapid expansion of
Islamic fintech while building connectivity with the wider Islamic finance
industry. The plan includes an accelerator program, a virtual network to connect various businesses, educational programs
for executives and students, and a global hackathon series that will encourage Islamic
Fintech development across emerging markets.
Two months after the launching of world’s first Islamic Robo
Advisor, Wahed, on the 27th October 2016, the Kuala Lumpur-based
Faringdon Group announced that it would be launching the Asia’s first Shariah compliant Robo Advisor. The online tool called
Algebra will provide automated portfolio management advice. Open to investors across
all geographies with a minimum investment amount of USD 200 per month, clients
can choose funds from Islamic Master Select Portfolio. The CEO Stuart Yeomans said
that “Algebra brings together the sound investment principles of Shariah
compliant funds with the next generation investment tools".
On the 3rd November 2016, Securities Commission
Malaysia awarded six Peer to Peer (P2P) licenses, one of which is the world’s first license for Shariah compliant
P2P. The license was awarded to Ethis Kapital which focuses on funding
small businesses and real estate development projects. Together with seven
other crowdfunding platforms, Ethis Kapital is part of Ethis Ventures that
builds, runs, and initiates Ethical and Islamic Crowdfunding platforms. According
to the Chairman, Dr. Shahridan Faiez, Ethis Kapital has twin focus which are to support and develop the
Islamic Sharing Economy in Malaysia and to grow into a serious global player.
Although launched last year, some of these initiatives have been
targeted to only start their operations in 2017. Further progress of these
initiatives and new innovative entrants will position 2017 for more
excitements. Malaysia and Bahrain are very likely to take the lead. Malaysia
has issued Fintech regulatory sandbox framework on the 18th October
2016 and Central Bank of Bahrain is considering fintech regulations. With
facilitative environments provided by these two leading Islamic financial hubs,
I am optimistic that more amazing achievements will be recorded in 2017 for
fintech in Islamic finance.
