Suhaimi Ali: Catalysing technology towards building an inclusive and
progressive Islamic financial system
Keynote address by Mr Suhaimi Ali, Assistant Governor of the Central Bank of Malaysia
(Bank Negara Malaysia), at the 3rd Annual Islamic Fintech Leaders Summit, Kuala
Lumpur, 25 October 2023.
* * *
Assalamu'alaikum w.b.t and a very good morning,
Meet Aishah, a working professional with a jam-packed schedule. As her car takaful
coverage nears its expiration, she navigates the labyrinth of websites and, with a few
swift clicks, renews her policy and road tax without ever setting foot outside her home.
Meanwhile, across town, Ahmad finds himself in need of a caffeine boost. He saunters
into a cosy café, deftly taps his debit card on the payment terminal, and seconds later,
relishes the taste of his freshly brewed coffee. For Ahmad, it doesn't end there. Having
some spare time on his hands, Ahmad effortlessly opens an online account to secure
his children's education fund, expertly navigating the intuitive interface of a mobile
application to transfer funds in real-time. These snapshots of everyday life showcase
the transformative power of fintech: it has made our lives easier, more efficient, and
seamlessly connected. In fact, this entire paragraph is written by generative AI with my
role limited to only providing a prompt.
Distinguished guests, ladies, and gentlemen,
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I am delighted to be here today at the 3 Annual Islamic Fintech Leaders Summit.
Examples that I just shared are only a minor fraction of what we are experiencing today.
How intriguing it is to witness financial consumers' activities becoming deeply integrated
into digital ecosystems. Over the years, we have witnessed how technology
progressions and sophistications have advanced the finance world. Among others:
i. Technology helps in improving efficiency and accuracy in finance by providing
real-time data, enabled automated compliance, and provided tools for analysis
and reporting. Technology such as blockchain is evolving - mobilised to provide a
secure, transparent, and decentralised framework for a wide range of
applications. We have also seen Application Programming Interfaces or APIs
playing a crucial role in allowing different software systems to communicate,
collaborate, and interoperate, regardless of their differences in technology or
architecture, thus creating the much-needed efficiency.
ii. Technology also enables accessibility and inclusivity: It facilitates the unbundling
of financial services, allowing fintech players to offer specialised and tailored
financial products and services to customers. This, among others, catalyses
access to financial services, bridging the gap between the unbanked or
underbanked with the formal financial system, including in the areas of
sustainability.
iii.
iii. And technology also facilitates decision-making: For example, data analytics
enables financial institutions to process huge quantities of data to produce
meaningful insights and use for fraud detection. Robo-advisors are used to create
and manage investment portfolios. And now, the Generative AI has allowed for
creation of new content and data which can assist in tasks like drafting contracts
and assisting with financial reporting. In the future, professionals are likely to
collaborate with generative AI-"assistant" to transform fundamental processes,
reengineer business collaborations and reduce risks.
Against this backdrop and align with this year's theme of "Tech Toward Sustainability:
Empowering Resilient Ecosystem", I hope this summit will further catalyse efforts in
leveraging the ever-expanding technology evolution towards enhancing the Islamic
finance industry to be more competitive, inclusive, and sustainable.
Although technology is agnostic to either Islamic or conventional finance, the untapped
opportunities within Islamic finance are eminent. We can view this from the lenses of
traditional roles of the Islamic financial institutions, as well as from collaboration
perspective, with emergence of fintech companies offering diverse, innovative, and
potentially disruptive solutions. Globally, the Islamic fintech sector is showing signals of
prospect with close to 400 Islamic fintech companies present to date. The market size
1 2
of Islamic fintech in the OIC countries is projected to grow at CAGR of 17.9 , relative
3
to global fintech growth rate at 13.5%, to reach USD179 billion by 2026 .
Revolutionising change in Islamic finance through greater adoption
of fintech
Ladies and Gentlemen,
Today, I wish to focus my remarks on how Islamic finance, could be revolutionised
through greater adoption of fintech from three fundamental aspects:
Firstly, we must
optimise use of technology as tools to better deliver the
objectives of Shariah (Maqasid Shariah). This can be achieved by leveraging on
technology to promote inclusivity, sustainability, integrate decision making and impact
Maqasid Shariah
considerations with , while continuing to advance accessibility and
transparent services to customers. Looking at the progress that we have made,
application of fintech has facilitated a more inclusive and efficient wealth
distribution through sadaqah and waqf by utilising digital analytics and interactive
online platforms. For example, the development and applications of various digital
donation platforms have facilitated cross-border investments and waqf contributions for
various purposes. In Malaysia, there is myWakaf initiative, a crowdfunding platform
which aims to mobilise the Waqf fund to support sectors of education, healthcare, as
well as economic empowerment. More can be explored in this space. The use of data
analytics and fintech tools can be further optimised to better analyse investors or
contributors' preferences and behaviours, allowing them to opt for the best choice of
outcomes. This increases the efficiency of wealth distribution and enable more effective
Islamic financial intermediation including via Islamic social finance instruments. In the
future, blockchain technology could also be optimised to enhance transparency,
accountability, and trust in financial transactions. It can facilitate microfinance, support
green sukuk issuance and trading, as well as improve efficiency in the utilisation and
distribution of waqf , zakat and sadaqah , and even the CSR money.
Secondly, use of fintech as enabler for Islamic financial product and services
innovation, particularly towards impact-driven financial solutions. For example,
future adoption of smart contracts in Islamic finance through Distributed Ledger
Technology (DLT) could help to enhance transparency and traceability which is vital in
the sequencing-based execution of Shariah contracts. These applications can help the
Islamic financial institutions to better manage risks of non-compliance in a cost-effective
manner and therefore allowing greater focus to be directed towards other areas such as
product innovation that can strengthen their competitiveness and resilience going
forward. In the takaful space, digital takaful solution with seamless end-to-end customer
experience can go a long way towards elevating consumer trust on the value of takaful
protection.
Thirdly, fintech can enhance outreach and decision-making process for customers
and investors seeking for Shariah-compliant products. This will spur greater
growth by enabling access to more clients to grow their wealth in a manner
consistent with religious beliefs and values via a convenient and automated way. One
example is the introduction of world's first Shariah robo-advisory technology, and use of
data algorithms to offer Shariah-compliant investment and portfolio management
services. Through technological advances such as cloud computing, AI and data
analytics, Shariah-compliant investors can now access their options using real-time
data, hence assisting evidence-based decisions.
At our end, Bank Negara Malaysia remains committed and is highly supportive of
innovations and digitalisation that bring positive outcomes to consumers. Our resolve is
to ensure that our policies and regulations continue to keep pace and remain be fit for
purpose going into the future. Some updates on our key initiatives may include:
i. We are finalising improvements to Fintech Regulatory Sandbox by year end to
facilitate faster time-to-market innovations, safeguarded by capabilities in risk
management, governance, and compliance.
ii. Digital banks, including Islamic digital banks are expected to commence
operations earlier next year to further advance financial inclusion and contribute
towards sustainability agenda This will increase opportunities for our society to
participate in the economy - by overcoming geographical barriers, reducing
transaction costs, and promoting better financial management, as well as helping
individuals and businesses gain better access to more personalised solutions
backed by data analytics.
iii. The framework for Digital Insurers and Takaful Operators (DITO), is also expected
to be finalised by the first half of 2024, with aims to encourage wider participation
from players in the insurance and takaful value-chain including providing clarity for
emerging and innovative business models such as embedded takaful and
takafulas-a-service.
iv.
iv. Digital empowerment is also one of the identified key themes in advancing Islamic
finance under the stewardship of the MIFC Leadership Council.
Ladies and Gentlemen,
Strengthening the symbiosis between Islamic fintech players and
other stakeholders within the ecosystem
Henry Ford says, "If everyone is moving forward together, then success takes care of
itself". The optimisation of Islamic fintech opportunities calls for further strengthening of
the symbiosis within the ecosystem, and beyond. Active participations and ongoing
interests by fintech players and innovators, industry experts and thought leaders,
regulatory bodies, as well as Shariah experts are what we need, and we know it is not
going to be an easy feat.
The nation is ready to take on the role of a pioneering testbed centre for Islamic fintech
innovation and solutions. With a well-established Islamic fintech market and ecosystem
in place, which consists of conducive regulation , ready infrastructures and talent
pool, Malaysia offers a fertile ground for exploring and developing cutting-edge Islamic
finance technologies. Malaysia can lead the way in shaping the future of Islamic finance
through innovative fintech solutions and key to this is having a long-term symbiotic
relationship within the ecosystem.
To conclude, I would like to congratulate the organisers and the sponsors for organising
this summit. It is a strong exhibit of the industries' commitment to gather all the global
fintech leaders, innovators, and the financial services community, in curating a resilient
Islamic fintech ecosystem moving forward.
Allow me to remind all of us to keep looking ahead and play an integral role to better
serve the people and planet. The Islamic Golden Age, with its legacy of innovation and
enlightenment, reminds us of the potential for human progress when knowledge,
diversity, and cultural exchange are embraced and celebrated. Technological
achievements of the times had a profound influence on the wider world, shaping the
cause of human civilisation. In this modern finance world, we must also strive for
excellence in our actions.
As the world population is getting more technologically adept, it presents to us the
opportunity to do good efficiently, to create more impact and values in finance and to
better serve Maqasid Shariah . On this note, I wish everyone a beneficial and productive
summit ahead.
Thank you.
1
Compound Annual Growth Rate
2
Global Islamic Fintech Report (GIFT) 2022, Dinar Standard and Elipses
3
Global Islamic Fintech Report (GIFT) 2022, Dinar Standard and Elipses