Thursday 29 December 2016

Muamalat Banking System


One of my biggest achievement is to have been entrusted to lead Bank Muamalat Malaysia Core System replacement project. In fact, I was responsible even for the tender response and was involved in the commercial negotiation.

My CV was submitted in the tender response as project director should Silverlake win the project. When Bank Muamalat finally awarded the job to Silverlake in early December 2012, my duty as the captain of Silverlake team officially began. The project was officially kicked off on the 13th December 2012.

My boss, Silverlake Executive Chairman signing the contract

I was lucky to have worked well with another colleague that took care the relationship part.

With colleagues during the signing ceremony

In order to speed up the process, Silverlake and Bank Muamalat agreed to have signing ceremony and project kick off on the same day.

Bank Muamalat CEO, Dato' Redza and one of the board members talking to me giving very high expectation

The core bank system replacement "codenamed" as Muamalat Banking System or MBS was very important for bank muamalat. Most of the board members attended the official kick off.

High tea with some of Bank Muamalat top management and board members.

The project was successfully completed 16 months later. Bank Muamalat officially cutover the new Silverlake Integrated Islamic Banking System (SIIBS) on the 16th June 2014.

With key project management team from Bank Muamalat



Wednesday 28 December 2016

Fintech for Islamic Finance 2017 Outlook


(I first published this article in Linkedin on the 21st December 2017)

The 23rd Annual World Islamic Banking Conference (WIBC 2016) was held at the Art Rotana Hotel Bahrain on the 5th, 6th and 7th December 2016. The theme for this year is Economic Uncertainties: Vigilance and Growth. WIBC 2016 with its 23 years heritage had successfully attracted leading bankers, institutional investors, asset managers, policy makers, academics and other stake holders from across the globe to converge and engage into critical discussions across multiple dimensions of Islamic financial system such as banking and finance, Islamic financial market, asset allocations etc.

For the second consecutive year, one of the salient features of WIBC 2016 is on financial technology or fintech. Enterprise Excellerate, one of the two parallel sessions on Day 1 that was dedicated to fintech, saw prominent fintech personalities and advocates engaging into interesting and thought provoking discussions on fintech revolutions, challenges and regulations, fostering culture of innovations, blockchain and cryptocurrency, robo-advisors, crowd-funding, digital banking and cybersecurity. I happened to be one of the panel in discussing how best to engage customers in enhancing their digital experiences.

In addition to the dedicated stream on Day 1, fintech topics also appeared in the main agenda on Day 2 and Day 3. Islamic finance in digital age, cyber security challenges facing the banking industry and digitization of Islamic financial institutions were discussed on Day 2. Day 3 continued with two more sessions, how can Islamic finance adapt to the fintech revolution and enhancing banking growth through fintegration. I was also a panel in the latter.

Curated based on robust industry research and in conjunction with stakeholders across the global industry, the line ups of WIBC 2016 agenda pertaining to various aspects of fintech proves that global Islamic finance fraternity do realize fintech potentials as enablers to bring Islamic finance to the next stage. This is further evident by the remarks on fintech disruptions and opportunities made by numerous speakers and audiences even when they were discussing topics not dedicated to fintech.

Sitting through the whole there days of the conference, I observed that while there were still a few skeptics, the majority were in agreement that fintech disruptions was real and there were huge opportunities for fintech in Islamic finance space. For example, during CEO Power Debate session discussing the way forward for Islamic finance, a speaker highlighted the fact that Islamic finance has not fully tapped on the potential of huge muslim market in Indonesia, Pakistan and Bangladesh which coincidentally has a large unbanked segment. While traditional brick and mortar branch network could be a challenge to reach out to these prospects, digital financial services could be a good solution to drive inclusion for this segment, thanks to the amazingly high mobile phones penetration in these geographical locations.

Besides addressing fintech opportunities and disruptions in general, there were also discussions on the implications to traditional banking services. Some audiences related their unfriendly experiences with the current banking services. This could be easily solved with customer experience centric digital banking design. Customers in digital age expect personalized banking services which some of the fintech companies have been able to provide. In order not to lose more to the fintech companies, Islamic banks must embark into digital banking journey. Quoting one speaker, “Digital Banking is not about providing banking services online but about transforming banking experience from acceptable to delightful”.

I left Bahrain on the evening of 7th December 2016 after WIBC 2016 drew its curtain feeling satisfied with my own conviction on fintech in Islamic finance that we have come to past the awareness stage.  There has been enough excitement and the stake holders have begun to realize the way of doing business is changing. I believe that decision makers are getting accustomed the phrase, “if you do not disrupt you own organizations, others will”. Some have started to take actions and I am optimistic that we will be seeing more in the near future.


2017 looks very promising for collaborations for innovative solutions between fintech companies with the traditional financial services’ providers. We can expect to see more of the “platformification of banking” that kicked off in 2016. Platformification is a strategic partnerships between existing banks and startups toward becoming banking platforms. Platformification concept originates from the platform idea of plug-and-play business model that allows multiple participants (producers and consumers) to connect to it, interact with each other and create exchange value. 

Capital TV Business Segment on Fintech and Islamic Capital Market

For the 2nd time this year, I agreed to appear in the Capital TV to talk about Fintech. This time is on Fintech and Islamic Capital Market. We did the recording on the 27th December 2016.

Getting ready for the recording

During the recording, I was asked the following questions:

1. Much has been discussed about financial technology or Fintech. Can you recap what is fintech all about?

2. What are fintech innovations in the Capital Market space?

3. Is there any indication on how much have been invested for the development of fintech in the Capital Market?

4. Please give some insights on the fintech influence in Islamic Capital Market Development and what are the challenges?

5. What are your observations and recommendations on the potentials of fintech in the Islamic Capital Market

Recording is in session

Fintech innovations in Capital Market space are crowdfunding and P2P online platforms, online and mobile trading platforms, social trading platforms, high frequency trading program and robo advisors.

The host is taking notes
According to Accenture Fintech Evolving Landscape 2016 report, USD 50 billion has been invested in fintech companies since 2010. 

Engrossed with the subject which I love to talk about
This is my last program on fintech for this year. There will be a lot more next year. 2017 looks very promising on fintech development..

The whole set up for the recording session
Stay tuned for a lot more sharing on my involvement as financial technology advocate in Islamic finance space.

Wednesday 14 December 2016

23rd World Islamic Banking Conference (WIBC 2016)


The 23rd Annual World Islamic Banking Conference (WIBC 2016) was held at the Art Rotana Hotel in Bahrain on 5th, 6th and 7th December 2016. The theme was Economic Uncertainties: Vigilance and Growth.

Just like the previous WIBC in 2015, one of the key focus of WIBC 2016 was on financial technology (fintech) and the impact to Islamic Finance. On Day 1, there were two parallel sessions on IIFM and Enterprise Excellerate (EE) focusing on financial technology discussion. The theme of the EE program was "Embracing Disruption, Fostering Innovation". I was one of the panelists in the session on "Enhancing the digital customer experience: how best to engage customers? It was an interesting panel discussion.



I was also involved in another panel discussion on Day 3 of the conference. The session was on "Enhancing Growth through Fintegration". 



When not involved in panel discussions, I listened attentively to other presentations and panel discussions. There were numerous interesting and thought provoking real issues and opportunities raised by speakers as well as audiences. In general, most participants were in agreement that fintech plays an important role to bring Islamic banking and finance to a greater height.

Wednesday 23 November 2016

First Islamic Equity Crowdfunding Platform in Malaysia


SCxSC is an annual conference organized by Securities Commission Malaysia. SCxSC 2016 conference on the 3 & 4 November will revolve around specific areas of Digital Finance as follow:

1. Equity Crowdfunding
2. Peer-to-peer (P2P) financing
3. Digital Investment Services
4. Distributed Ledger Technology

In conjunction with SCxSC 2016, Securities Commision Malaysia announced the first 6 approved P2P financing operators. The six registered operators are B2B FinPAL, Ethis Kapital, FundedByMe Malaysia, ManagePay Services, Modalku Ventures and Peoplender.

One of them is the world’s first license for Shari’ah-compliant P2P. This license was awarded to EthisKapital.com, which will focus on funding small businesses, and real estate development projects. The team is spearheaded by Umar Munshi, a technology entrepreneur, supported by former senior World Bank and Barclays Bank executives.
I was there to witness this historic event!
With Dato' Dr Adnan Alias, IBFIM CEO and En. Azman Che Doi previous SIDC CEO

Fintech Interview in conjunction with the Royal Award for Islamic Finance 2016



As part of the publicity for the Royal Award for Islamic Finance 2016, the media team organized an interview on Fintech in Islamic Finance. I was one of the interviewees besides Raja Teh Maimunah (the CEO of Hong Leong Islamic), Elain Lockman and Kyri Audreou (both are co-founders of Ataplus, an equity crowdfunding company).

The interviewers are journalists from Business Times (News Straits Times), Berita Harian and Islamic Finance News (IFN).

The Royal Award for Islamic Finance (The Royal Award) is a distinctive Award recognizing leaders and visionaries who inspire others to create a positive impact in the world through the shared values and principles of Islamic finance. The Award is presented by His Majesty, the King of Malaysia.

The biennial Royal Award initiative spearheaded by Bank Negara Malaysia and Securities Commission Malaysia recognizes individuals who have excelled in advancing Islamic finance globally through their contributions and achievements. 

THE Royal Award 2016 for Islamic financial services is conferred on Professor Datuk Rifaat Ahmed Abdel Karim by the Yang diPertuan Agong Tuanku Abdul Halim Mu'adzam Shah on the 14th November 2016 at a ceremony held at the Kuala Lumpur Convention Centre.

The three previous recipients of the Royal Award were Datuk Dr Abdul Halim Ismail, founding member of Malaysia's first Islamic bank (2014); Iqbal Khan, CEO of Fajr Capital (2012); and Shaikh Saleh Abdullah Kamel, founder of the Dallah al Baraka Group, one of Middle East's largest conglomerates (2010).

Monday 31 October 2016

Opportunity awaits Islamic fintech ventures

In his keynote address during the Global Islamic Finance Forum (GIFF 5.0) in May 2016, Datuk Muhammad Ibrahim said: “Fintech is challenging the status quo of the financial industry”. He added that the overall banking revenues could be at risk by 2025 due to financial technology or fintech innovations.

In the very same speech, the governor mentioned that Bank Negara Malaysia (BNM) had been engaging with fintech firms to better understand their activities and providing guidance on the regulations that may apply to them. He also announced that BNM had commenced a review on the regulatory framework to suit fintech innovations.

In June 2016, BNM established Financial Technology Exposure Group (FTEG), which would serve as the focal point on fintech-related queries that include matters related to regulation and adoption of fintech by the FSI (financial services industry) sector. The momentum continued with a discussion paper on fintech regulatory sandbox framework issued on July 29, 2016.

“Regulatory sandbox” is a concept where businesses can test innovative products, services, business models and delivery mechanisms in a live environment without immediately incurring all the normal regulatory consequences of engaging in the related activities.

The discussion paper sets out the key principles and the proposed approach in operationalising the so-called sandbox.

The central bank had invited written comments on the specific questions set out in the paper as well as any general comments. Finally, after incorporating public feedback on the discussion paper, BNM issued Financial Technology Regulatory Sandbox Framework (FTRSF) on Oct 18, 2016, which took effect immediately.

Applicability

The sandbox framework is applicable to all financial institutions licensed under Financial Services Act (FSA) 2013, Islamic Financial Services Act (IFSA) 2013, Money Services Business Act (MBSA) 2011 and Development Financial Institutions Act (DFIA) and all fintech companies intending to carry out businesses defined in all the Acts stated above. Applicants to participate in the sandbox programme can be a financial institution on its own, a fintech company on its own or a collaboration of a financial institution with a fintech company.

One of the key objectives of the FTRSF is for BNM to provide a regulatory environment that is conducive for fintech innovations to be deployed and tested in a live environment within specified parameters and timeframes.

To participate in the sandbox programme, interested parties must fulfil the eligibility criteria and submit the required documents as specified in the framework. In addition, the applicants must identify risks that may arise from the testing of the product, service or solution in the sandbox and propose the necessary safeguards.

Islamic Fintech

For Islamic financial services, it is stated that in assessing the risks and evaluating the proposed safeguards, BNM will give due regard to ensuring innovative solutions for Islamic financial services are consistent with prevailing Shariah standards.

Fintech companies that collaborate with Islamic financial institutions (IFIs) could leverage on the respective IFIs’ existing Shariah governance processes. Fintech companies that intend to provide services within the purview of IFSA 2013 need to ensure that they are well versed with the prevailing Shariah standards, either by employing people with the required knowledge or by engaging services from Shariah consultants.

Proactive approach

The fintech sandbox framework provides a conducive environment for fintech deployment. The Malaysian central bank governor has been extremely vocal and proactive in fintech initiatives.
Under his stewardship, BNM is seen as progressive on fintech development. In a short few months after his appointment as the governor, we have seen BNM making at least one announcement every month on matters related to fintech, leading to the recent issuance of the sandbox framework.
Fintech startup companies could also take advantage of the government initiatives known as Startup & SME Promotion Year declared in the recent Budget 2017 speech by Prime Minister Datuk Seri Mohd Najib Razak.

The conducive environment for fintech development and Malaysia’s proven track record in Islamic finance make Malaysia a good candidate to lead Islamic fintech movement.

As one of the “big-four” global centres in Islamic finance, Malaysia is well positioned to take advantage of the opportunities. Malaysia’s vibrant Islamic finance industry, which has been attributed to the strong government and regulatory support, could be leveraged further to push for Islamic fintech agenda.

A group of eight fintech companies operating across eight different countries had already recognised this prospect when they chose Malaysia to launch Islamic Fintech Alliance, a reference point for knowledge and advice, and facilitate business matching between entrepreneurs and investors to develop a Shariah-compliant fintech ecosystem.

Malaysian startup companies and IFIs should collaborate to seize the opportunity and help to accelerate the development of Islamic fintech ecosystem. Bounty of opportunities await Islamic fintech ventures!

My column as appeared in THE MALAYSIAN RESERVE 31 October 2016

Wednesday 26 October 2016

Fintech and Islamic Finance

A few journalists have recently interviewed me on the subject of fintech in Islamic finance space. The following is a compilation of my answers to all the interview questions.


1.    Islamic fintech is fast becoming a catchphrase for the Shariah finance industry – are Islamic banks truly on board with the fintech movement? Do they have the resources to do so and how are they positioning themselves to leverage fintech instead of risking being swept away by the disruption?

Islamic banks have not been truly on board with fintech movement. We have not heard much of Islamic banks fintech agenda except for the Investment Account Platform (IAP) which was launched by a consortium of Malaysian Islamic banks in February this year. In fact, IAP was described as the first fintech platform for Islamic Banking. The consortium members are Bank Islam, Bank Muamalat, Affin Islamic, Maybank Islamic, Bank Simpanan Nasional and Bank Rakyat. We hardly hear anything on these banks’ own fintech stories.

At group level however, CIMB, RHB and Maybank have been very active with their fintech initiatives. CIMB launched fintech incubation programme in May 2015. RHB partnered with Startupbootcamp to bring digital innovations to the banking market in Malaysia in April 2015. Maybank organized Maybank Fintech 2015 in partnership with L337 ventures and more than 100 technology companies from 10 countries.

Based on the above 3 banking groups’ initiatives on fintech, their approaches seem to be collaborations with fintech companies. This could be an indication of the lack of internal manpower. If these 3 banking groups have to resort to partnerships with fintech companies, it is unlikely that the Islamic banks have sufficient internal resources to work on fintech innovations. Therefore, the obvious way forward is for these Islamic banks to collaborate with fintech companies to proactively disrupt themselves or else face the risk of being swept away!


2. Is Malaysia best positioned to lead the Islamic fintech movement? How so?

Malaysia is absolutely well positioned to lead in Islamic fintech movement. First of all, Malaysia has been recognized as the world’s most important Islamic finance centre. As one of the “big 4” global centres in Islamic Finance, Malaysia is well positioned to take advantage of the opportunities. Islamic fintech movement could leverage on Malaysia’s vibrant Islamic finance industry which is attributed to the strong government and regulatory support. Based on some of the regulators’ initiatives already in place, Malaysia seems to be moving towards this direction. In mid-2015, Malaysian Capital Markets and Services Act was amended to recognize and regulate crowdfunding platforms. In September 2015, SC launched the aFINity@SC initiative to create a network for Fintech stakeholders to engage with SC. During Global Islamic Finance Forum 5.0 in May 2016, the newly appointed BNM Governor Datuk Muhammad Ibrahim announced that BNM had been actively engaging with fintech firms as part of its process to review the necessary regulatory framework. In Jun, BNM Financial Technology Enabler Group (FTEG) was established. The function of FTEG is to formulate and enhance the regulatory policies in order to facilitate the adoption of fintech. In July, Discussion Paper on Fintech Regulatory Sandbox was issued. The discussion paper also covers fintech for Islamic financial services. After incorporating public feedbacks on the discussion paper, BNM finally issued Fintech Regulatory Sandbox Framework on the 18th Oct 2016. Meanwhile, anticipating that Malaysia will play a key role in supporting Islamic fintech, Islamic Fintech Alliance was launched in Malaysia by 8 of so called Islamic fintech start-ups from all over the world.


3.      What is next in the fintech space?

We can expect bigger momentum of fintech development especially in the following areas:

a)      Rise of Fintech in Asia Pacific region. Now Asia Pacific is already second biggest in fintech investment after north America which are mainly driven by fintech hubs in Mumbai, Banglore, Beijing and Tokyo.

b)      Emergence of newer fintech segments such as Insurtech (targeting Insurance space), Risktech (focusing on risk management solutions) and Regtech (focusing on regulatory aspect of financial services).

c)      Most importantly, there will be more collaborations between banks and fintech companies as banks seem to have accepted that fact that fintech disruptions are real and begun to realize the potential of collaborating with fintech companies to accelerate their evolutions.


4. What is driving the growth of these platforms?

There are a few factors that are driving growth of these platforms:

a)      Customer demands for more innovative and cost effective financial services’ solutions

b)      Digital revolution in financial services

c)      Funding supports from VCs and corporates

d)      Mentoring supports such as incubation and acceleration programmes


5. Is there potential for secondary market creation?

Yes there is definitely a potential for secondary market creation. In fact secondary market is needed to allow flexibility for those who have invested via crowdfunding or P2P financing platforms to exit prior to the maturity of their investments. In certain situations, these investors may need to withdraw from the investments earlier. With secondary market in place, investment via crowdfunding and P2P financing fintech platforms will be more liquid. Without secondary market, it will cause inconvenience to both fund raisers as well as investors as fund raisers may have difficulty paying the investors before the scheduled due dates.


6. Both the SC and Bank Negara Malaysia have issued guidelines on equity crowdfunding and fintech respectively – what other regulations does the fintech community needs? Regulatory infrastructure aside, what else does the industry need to move forward?

SC’s and Bank Negara Malaysia’s guidelines on crowdfunding and fintech respectively have been good starts for fintech development. It is an important milestones that enable entrepreneurs to start Malaysian based fintech businesses. However, as fintech is all about innovations, there should not be too much or too detail guidelines. Too prescriptive framework or guidelines will hinder creativities.

Nevertheless, regulations addressing cybersecurity threats will definitely help to protect fintech consumers.

Other than regulatory infrastructure, government incentives such as funding programs and tax incentives will definitely help in accelerating fintech development.


7. How is fintech disrupting the local market and what can we expect from it?

The disruptions are largely positive but pose some threats to the traditional financial services providers.  First of all, Fintech contributes to the evolutions of the local financial products and services offering.

To the consumers, fintech innovation provides choices which are more aligned to individual needs and more competitive financial services cost. Latest technology embraced by fintech leveraging on internet, mobile devices and social media integrations make financial transactions more automated, user friendly and more convenient thus superior customer experience. Crowdfunding and P2P Financing options provided by fintechs are also a blessing for individuals or SMEs that require financing but do not qualify to obtain financing from traditional financial institutions. Investors are also entitled to higher potential returns by investing directly into the business ventures that they finance via online financing marketplace.

However, traditional providers face more intensified competitions with fintech sharing their pies. With consumer options to invest through online P2P and crowdfunding marketplace, FIs would end up with reduced Deposit and Investment portfolio. Spoilt by the fintech innovations of more cost effective financial services anytime, anywhere, integrated and automated, local FIs are facing consumers’ demands of similar if not better services.


8. What kind of challenges and opportunities can we expect from this revolution?

The opportunities are countless. The following are just some examples:

a)    Very promising industry with VCs, private equity firms, corporates and some other players pouring in more than $50 billion into global fintech start-ups since 2010
b)    Various fintech incubation and acceleration programs have been established in various parts of the world in support of fintech start-ups
c)     All sort of technologies available that have made it much easier for start-ups to innovate fintech solutions.
d)    Symbiotic relationships between traditional players with fintech companies are emerging
e)    Healthy development of financial products and services offering
f)     Elimination of “credit intermediaries” offering lower prices and/or higher returns
g)    Consumer empowerment giving access and more choices as well as more visibility to financial products services
h)    Highly automated offering connectivity, cheaper and faster financial transactions
i)      Potential platform for equity financing (Musharakah & Mudharabah) which has not been very successful in traditional Islamic finance institutions

Some of the challenges are:
a)    Cybersecurity Threats – new risk exposures. As technology advance, so doo hackers’ abilities.
b)    Immature Technology – Innovations are fresh from the oven and not well “market” tested.
c)     Regulatory Attentions – Regulatory agencies are keeping close watch particularly on legal jurisdiction and customer protection.
d)    Cultural Challenge – Fintech is changing the nature of financial services. Therefore, there will be a cultural change in adopting the innovations.
e)    Threat to Traditional Business As Usual Model – Spoilt by sophisticated fintech solutions provided by fintech companies, consumers are demanding similar if not better options from traditional providers.


9. How quick is Malaysian market adapting to this changes versus the rest of the region? What are the factors contributing to this pace?


Compared to other countries in the region, Malaysia market is quite slow in adapting to the revolution. For example, in terms of regulator’s initiative, Malaysia is at least 1 year behind Singapore. In terms of regulator’s initiative, Monetary Authority Singapore (MAS) has proposed regulatory Sandbox, Bilateral Agreement with Australia to boost fintech trade, Open APIs initiative and fintech-bridge deal with UK’s Financial Conduct Authority. Even in Islamic Finance space, fintech company from Singapore EthisCrowd has emerged as the winner of the best Islamic crowdfunding platform.


Factors that could have contributed to this pace are lack of regulatory support (at least up until mid of this year) and lack of innovations by local fintech start-ups.

10.  What are the fintech innovations playing out in IF? What is the state of IF fintech? And how has it grown?

Generally, the different types of fintech specializations are Money Transfer, Mobile Payment, Trading Platforms, Wealth Management, Credit Scoring, Peer to Peer (P2P) Lending and Crowdfunding. In IF,
Fintech innovations are mainly in the forms of Crowdfunding and P2P Financing platforms.
Islamic Finance Fintech is still in its infancy and growing although not very rapidly. The number of fintech players specializing in IF is still considerably low.


11.      Where does fintech stand in IF as opposed to conventional finance?

Fintech in Islamic Finance is very far behind compared to Fintech in the conventional finance space. Fintech revolution in the conventional space emerged shortly after 2007-2008 financial crisis. However fintech in Islamic Finance just started in the past few years. There are a lot more fintech innovations in the conventional finance. According to Accenture Fintech Evolving Landscape 2016 report, more than $50 billion has been invested in almost 2,500 companies since 2010. Although there is no figure directly available for Islamic finance, judging from only a handful fintech players in IF, fintech in IF is nowhere near fintech in conventional space.


12.      What IF banks and IF countries/markets are leading in fintech?

As of now, there are no Islamic Banks or countries/markets that is really leading in Islamic fintech yet. However, Malaysia, UAE and Bahrain may potentially lead in IF fintech due to the fact that these countries, which are leading in Islamic Finance, seem to have put in efforts to facilitate fintech developments. For example, the Regulatory Sandbox discussion paper issued by BNM in July this year has a provision on Islamic finance. Abu Dhabi and Dubai are known to have been striving to support and develop their local technology start-ups. Recently, Finocracy and CH9 announced their initiatives of Future Finance 2030 which they claimed would be the 1st Global Islamic Fintech Hub which potentially will make Bahrain to be the Islamic Fintech Capital.


13.      What are the opportunities for fintech in IF?

The opportunities for fintech in IF is huge as the industry is very new and largely untapped. From consumer perspective, it is estimated that by 2020 there will be 2-3 billion new consumers that will be entering digital finance space. It is also estimated that 80% of these new consumers will be muslims. This is definitely a significant opportunity for IF fintech. Those who would like to be IF fintech entrepreneurs could also leverage on the various fintech incubators and accelerators out there that provide all sorts of supports such as networking and funding opportunities, mentorships, customer acquisitions etc.


14.      What are the challenges for fintech in IF?

There are probably two main challenges for fintech in IF. One is lack of innovations. This is the same syndrome that has been faced by Islamic finance in general. Most of the Islamic finance products in the market today are the “Islamized” version of conventional products. The second main challenge is unfamiliarity with shariah guidelines in developing financial services products. Unlike traditional Islamic financial institutions where there are Shariah team whom are well versed with Shariah requirements that will take part in product development to ensure Shariah compliance, fintech start-ups do not have such facility.


15.      What is the size of the IF fintech market? Which are the key start-ups?

As of now, there is no statistic available specific to IF fintech market. The key start-ups are EthisCrowd and Kapital Boost which are based in Singapore, LaunchGood based in USA, beehive based in Dubai and Blossom based in USA and Indonesia. Other IF fintech start-ups are Narwi, Easi-up, FundingLab, SkolaFund and Ata-plus. The most outstanding is probably EthisCrowd which received the Best Islamic Crowdfunding Platform Award at the 6th Global Islamic Finance Award 2016 held in Jakarta and Islamic Economy Award at the Global Islamic Economy Summit 2016 held in Dubai recently.


16.     What regulations/laws have been put into place to support IF fintech? What are the BNM regulations for IF fintech? And what are the other ASEAN and global IF regulations?

There is no IF fintech specific regulations or laws. IF fintech will have to comply with whatever regulations/laws out there that fintech in general will have to comply. From Shariah compliance perspective, the financial services provided by IF fintech will have to comply with the prevailing Shariah ruling of the jurisdictions that the IF fintech is operating in. For example, the BNM fintech regulatory sandbox issued in July this year stated that one of the intended outcomes was to ensure innovative solutions for Islamic financial services are consistent with the prevailing Shariah standards.


17.      What are IAPs? How are they a fintech platform for IF? How does IAP support fintech?

IAP is a short form of Investment Account Platform, an Islamic fund raising and investment intermediary online platform owned by a consortium of Islamic financial institutions in Malaysia. IAP was launched on the 17th February 2016. IAP will serve as a central marketplace to finance small and medium-sized enterprises with Malaysian government backing the scheme. Initial member of the consortium were Bank Islam, Bank Muamalat, Affin Islamic and Maybank Islamic. Later on, Bank Rakyat and BSN also joined. IAP model is quite similar to online crowdfunding platform where fundraising projects will be listed in the platform to attract investment from registered members of the platform. The key difference is that IAP is the first bank-intermediated fintech platform. It is a fintech for Islamic finance because IAP is backed by Islamic financial institutions and both the fund raising and investment activities are in accordance to Islamic finance principles.


18.      How will Brexit affect IF fintech?

Brexit could have impacted UK’s fintech industry in areas such as regulation and passporting, data sharing, anti-money laundering, human capital, the role of banks, London as a fintech centre and venture capital. As far as IF fintech is concerned, there is probably no direct impact. Although fintech industry has been well established in the UK, there was hardly any fintech innovation in the Islamic finance space. Indirectly however, the adverse impact of Brexit on UK fintech industry in general could have affected the potential for IF fintech to benefit from the maturing fintech industry in the UK.

Friday 21 October 2016

Global Islamic Finance Award as The Best Islamic Finance Solution Provider 2016


As Silverlake head of Islamic Banking, I am very proud with this recognition. Global Islamic Finance Award 2016 presentation ceremony was held at Fairmont Hotel in Jakarta on the 29th September 2016. This award is truly an accomplishment for all the hard works that my team and I have put in all these years.

GIFA recognizes Excellence in Islamic Finance. It is organized and managed by Edbiz Consulting. The objective of GIFA is to highlight the best practices in Islamic Banking and Finance and celebrate the success of institutions and individuals, with an ultimate objective of promoting social responsibility, Shariah authenticity and commitments to Islamic Banking and Finance.

There were more than 60 awards of various categories presented to the deserving winners during the ceremony. The highlight of the event was the presentation of Global Islamic Finance Leadership Award 2016 to His Excellency Joko Widodo, the President of the Republic of Indonesia.

As a Malaysian, I am also very proud that while GIFA is a global event, there were many institutions and individuals from Malaysia that emerged as winners of various categories of awards. This clearly indicates Malaysia's position is leader in global Islamic finance space.


The trophy and certificate

With colleagues and guest from Indonesia Association of Islamic Banking

With Malaysian and Indonesian colleagues
 

Friday 23 September 2016

Labuan Offshore Financial Services Authority (LOFSA)


In 2001 I had the opportunity to present system aspect of Islamic Banking to a crowd in Labuan Offshore Financial Centre organized by LOFSA. It was a good experience although I was still quite new in the industry back then. If I were to present now, I can give much better presentation.

In any case, the presentation was well received by the audience that LOFSA sent me an encouraging thank you letter.


Thursday 15 September 2016

Banking and Digital Economy Summit 2016, Vienna, Austria


 
Banking and Digital Economy Summit (BDES) is Silverlake annual event. Previously it was called Banking and Technology Summit (BTS). Since 2012, the event has been renamed to BDES following the digital economy revolution.
 
This year BDES was held at Imperial Riding School Vienna Hotel, Vienna Austria. The theme of this year is Digital Reimagined - From Finance to Fintech.
 
As usual, Silverlake BDES events are organized for Silverlake customers and business partners. Silverlake will line up interesting presentations to update the audience on the latest happenings in the company as well as what is happening in the market.
 
The agenda for this year BDES is as shown in the following image:
 



Quite a number of top personnel from Islamic banks that are using Silverlake system attend this year BDES including Dato' Redza from Bank Muamalat Malaysia and Encik Kamarul Arrifin from Affin Islamic Bank Malaysia.

With some of my colleagues




 


 


Thursday 1 September 2016

Islamic Market Programme 2016 - Fintech Storm: Disruptions and Opportunities

A snapshot of IMP 2016 Agenda
 
Islamic Market Programme is a yearly event organized by Securities Industry Development Corporation (SIDC), a learning and development arm of the Securities Commission Malaysia. The theme of this year programme is "Enhancing Sustainbility of Global Businesses: Role of the Islamic Capital Market".
 
I was given a slot in this 3 day programs. I was invited to talk about Fintech disruptions and opportunities in Islamic Capital Market. I started with introduction of what fintech and is and continued with evolution and revolution of fintech for the past 6 decades. Subsequently, I focused on the following 3 main items:
 
1. Global Fintech Investment in Capital Markets
2. Fintech Innovations in the Capital Market Space
3. Fintech Influence in Islamic Capital Market (ICM) Development and the Challenges


Addressing IMP 2016 Participants
My key message to the participants was that Fintech brought numerous opportunities but a disruption to the business as usual models.

Engrossed in delivering my messages
KPMG Frontiers in finance had nicely put it, "a perfect storm of conditions is brewing that makes financial technology (fintech) the right solution for the right conditions at the right time. And the time is now".
Group photo with other speakers, participants and the organizer

 I also took the opportunity to sit through the whole 3 day programme and gained a lot of insights from other speakers.

Friday 19 August 2016

BNM Fintech Regulatory Sandbox Discussion Paper and Islamic Financial Services

Following the establishment of Bank Negara Malaysia (BNM) Financial Technology Enabler Group (FTEG) on 2nd June 2016, BNM issued a discussion paper on Fintech Regulatory Sandbox on the 29th July 2016. BNM in its Press Statement said that "the Sandbox will allow regulated financial institutions (FIs) and fintech companies looking to do businesses regulated by the Bank to experiment with fintech solutions in a production or live environment, subject to appropriate safeguards and regulatory requirements." BNM invited written comments on the discussion paper to be submitted by 30th August 2016.
 
Clauses specific to Islamic finance are as follows:
  1. Section 1.6 of the discussion paper states that one of the intended outcomes is to ensure innovative solutions for Islamic financial services are consistent with prevailing Shariah standards.
  2. Section 3.2 defines "Islamic Financial Services" as Islamic financial intermediation activities including Islamic banking and takaful services which leverage on technological innovation
In my opinion, the above clauses are not a problem for financial institutions as they should already have Shariah governance to ensure compliance to the prevailing Shariah standards. Collaborative fintech companies that partner with Islamic financial institutions should also not have any problem as they can ride on the Shariah governance of their partners. However, it is a big challenge for competitive fintech companies especially small start-ups which are not familiar with Shariah requirements.
 
I would recommend BNM to have a section on guidelines to comply with "prevailing Shariah standards". The guidelines should clearly differentiate the requirements for Collaborative and Competitive fintech companies. Some of the details to be included are the governance structure and the measures to be taken for ensuring the compliance.
 


Thursday 18 August 2016

Fintech Raya Special on CapitalTV



I had this interview program with a private TV channel, CapitalTV, to talk about Financial Technology (Fintech). CapitalTV made this special program for business news aired on the second day of eidul fitri (Hari Raya Puasa) 2016.

The following are some of the pictures captured during the recording of the programs.



Monday 15 August 2016

Musharakah Mutanaqisah and Its Implementation in Home Financing Products in Malaysia



This is another collaboration effort with my wife. This paper, Musharakah Mutanaqisah, the Contract Elements and its Implementation in Malaysian Home Financing Products was published in the collection of academic articles by Kolej Polytech Mara (KPTM).

The following is the conclusion of the paper:

" Musharakah Mutanaqisah is an Islamic equity financing instrument. It is a form of partnership in which one of the partners promises to buy the equity share of the other partner gradually until the ownership of the subject of the Musharakah is completely transferred to him. However, the buying and selling agreement must be independent of the partnership. Shariah forbids the contract of partnership is entered as a condition for the contract of buying and selling.

Musharakah Mutanaqisah contract is a combination of two (2) contracts, Musharakah and Ijarah which have to be concluded separately. Shariah scholars internationally including Bank Negara Malaysia Shariah Council and AAOIFI, are in consensus of the permissibility of the contract.

From Shariah contract perspective, Musharakah Mutanaqisah is a binding contract. The contract comprises the elements of sale and lease which are binding and create a constructive obligation on the contracting parties. The obligation is created on the party who has agreed to buy the share of his partners and therefore he is required to pay the price of the shares. The financier, on the other hand, is also obliged to sell his share to the customer according to the ratio that has been agreed upon at the beginning of the contract.

Musharakah Mutanaqisah contract and its implementation in Malaysia as a Home Financing instrument is still a long way to go. It only started in 2006 with only seven (7) banks so far are offering this product. Since Musharakah Mutanaqisah is more globally accepted compared to BBA Home Financing which is more prevalent in Malaysia, the motivation for Malaysian banks to offer Musharakah Mutanaqisah based products is very clear. To make Malaysia a global hub in Islamic Finance industry, it is crucial for Malaysia to offer products that are aligned to globally accepted Islamic principles.

However, banks in Malaysia are still quite slow in adopting Musharakah Mutanaqisah. Instead migrating to Musharakah Mutanaqisah based financing, banks in Malaysia seems to be moving towards Commodity Murabahah based financing which is another debt based financing. At least two banks, KFH Malaysia and Citibank Malaysia, have discontinued their Musharakah Mutanaqisah based home financing products. One of the key reasons, there are still a number of unresolved issues if these banks were to strictly follow the rules of Musharakah Mutanaqisah contract. It is not that it is impossible. But, to implement it within the existing banking framework and legal regulations, operationally there are some challenges. Bankers have to change their mindset to be more “landlord” likes.

One of the main considerations for banks to offer Musharakah Mutanaqisah is the risk management aspect. The application of Shariah principles in Musharakah Mutanaqisah contracts creates distinct relationships, rights and obligations of the parties to the contracts. As a result, banking institutions are exposed to both market risk associated with the joint ownership of the underlying asset, as well as credit risk associated with the obligation on the part of the customer to acquire, and on the banking institution to sell, its share of ownership in the asset. Therefore, banks will have to have a more robust risk management system.

Although there are some issues and challenges for banks to offer Musharakah Mutanaqisah, these should not discourage them. Rather, a more collective efforts needs to be put in place to address these issues/challenges so that the Home Financing Products based on Musharakah Mutanaqisah principle will become more popular especially because the contract is more in line with higher objective of Shariah as proven by global acceptance of Shariah scholars on the permissibility of the contract."