3rd Annual Islamic Fintech Leaders Summit – Interview Article

25 - 26 OCTOBER '23

PAVILION HOTEL KUALA LUMPUR

Embarking on the third instalment of our Islamic FinTech Leaders Summit series, the 3rd Annual Islamic FinTech Leaders Summit, held the Pavilion Hotel, Kuala Lumpur, on 25th to 26th October 2023. This year, our focus centered on the pivotal theme of nurturing a financial realm grounded in resilience, inclusivity, and sustainability.

Throughout this insightful gathering, participants delved into the intricate fusion of fintech with Maqasid al-Shariah, the Sustainable Development Goals (SDGs), financial inclusivity, technological innovation, and the revolutionary landscape of payment mechanisms. The summit was a convergence point, fostering an environment ripe for knowledge-sharing and networking among industry peers, cultivating an ecosystem designed for comprehensive financial inclusion.

We had the privilege of engaging with industry luminaries, tapping into their perspectives on the multifaceted dynamics within the realm of Islamic Fintech. Here, we offer a snapshot into the captivating narratives they shared:

Emnes Events: Can you share about Islamic FinTech landscape in Philippines?

Atty. Arifa A. Ala, Assistant Governor of the Financial Supervision Subsector III of Bangko Sentral ng Pilipinas: Islamic banking and finance in the Philippines gained traction in August 2019, after the passage of the Republic Act No. 11439 or the Islamic Banking Law. The enactment of the Law and its prompt implementation by the Bangko Sentral ng Pilipinas (BSP) and other agencies have spurred the growing interest in Islamic banking and led to the establishment of an enabling regulatory environment, which allows Islamic banks to operate viably alongside conventional banks. Islamic banking can benefit Muslim and non-Muslim Filipinos and provide alternative investment and financing options for those who would like to diversify their portfolio.

BSP data as of end March 2023 shows that out of the 479 total unbanked cities and municipalities in the Philippines.

Islamic banks in the country can benefit from the BSP’s initiatives on fintech, given that the BSP has adopted a single regulatory framework for both conventional and Islamic banks. Digital banks, which fall under a separate and distinct category of banks, may also offer Islamic banking products and services. Digital banks are considered key enablers toward greater digital transformation and financial inclusion.

The BSP launched its Digital Payments Transformation Roadmap (DPTR) in October 2020, and one of its key strategic initiatives is digitalization. The roadmap aims to promote digitization of payments and the development of a secure, profitable, and interoperable payment system that caters to the welfare of consumers. The roadmap consists of three key pillars, namely: (1) Digital Payment Streams, which allow exploration of digital payment use cases that fuel wider acceptance and use of digital payments services; (2) Digital Finance Infrastructure, which supports the boost in digital payments adoption to ensure security, efficiency, and interoperability within the ecosystem; and (3) Digital Governance Standards, which ensure that the expansion of use cases is bound by sound standards that safeguard the integrity and privacy of consumer data. Islamic banks can play an important role in achieving the targets of this roadmap.

As we have more Islamic banks in the Philippines, we hope to see more initiatives that aim to use fintech in the delivery of financial products and services.

Emnes Events: How can Venture Capitalists capitalize on the spur innovations aligned with Islamic principles?

Manav Narang, Director & APAC Lead, Financial Services & Health of Plug and Play APAC: I think the most important thing to understand is what are the regulations, being innovative within those regulations and also what the corporations want. Because in today’s age the capital is drying up and things getting a bit more difficult to grow. It is good to understand how they can work with the corporations such as Maybank, Hong Leong, RHB, Public Bank. They cannot do everything by themselves and they looking to working with fintechs. So, understanding what problem you can solve starts with that. Get validation, work with those corporations and grow. Earlier I used to see a lot of startups that were doing everything and competing with the bank and had an ambition of taking over their market share. No matter what you do, you cannot disrupt the banks. You can start small; start with the biggest pain point that you think the customers have which the banks cannot solve for many reasons. That is why even in Singapore you see a lot of new banking licenses were given. It is not to threaten the banks but because banks cannot solve everyone’s queries. There are some unserved and untapped markets. The most vital here is to understand what consumers want and then work on it to develop something. And if you are serving them better in a way that bank and big corporations cannot, they will want to work with you. They will want to co-create things with you.

Emnes Events: What is the role of open banking and APIs in facilitating collaboration between banks and fintech companies for enhanced payment and remittance services? Can you also in a nutshell share your journey of creating a fintech and superapp in MENA and North Africa region?

Waleed Sadek, Founder & CEO of PaySky & Yalla Super App, Egypt: There are multiple dimensions to answer this. The first one: regulations and licensing. Instead of fintechs investing time, efforts and money in obtaining licenses to operate in the designated market, to be able to make payments and remittances by partnering with existing licensed banks over their APIs. They can utilize their existing licenses and investments and top this up with additional innovation and enhance user experience that the fintechs can generate and usually offer. The second dimension is data. There is a lot of historical data about the customers that banks would hold. So, by availing access to the historical customer data, financial institutions and fintechs will be able to better profile a customer from creditworthiness perspective and cross-sell propositions to them. It is definitely an imperative necessity for growth of financial services in both developed and developing markets.

We had a very unique journey in building PaySky and commercializing our solutions in the market. We have 2 propositions. B2B proposition whereby we license our technology to banks, telcos and even the Central Banks. We have already empowered more than 10 countries over Africa and Middle East with payment infrastructure to enable financial inclusion, specifically for merchants and small businesses. As we stand now, there is an excess of 3 million merchants powered by our technology that were not really part of financial services ecosystem before then. That, of course, enhances how the economy functions and a dark impact on the GDP. On the other hand, we have a B2C proposition whereby we took one of our solutions which is the superapp with financial services core and we started to commercialize it ourselves in the market under a brand name “Yalla” just to set a role model of how technology based solution can disrupt the classic financial service offerings which broke all records in the Egyptian market onboarding more than a million customers in the first 9 months and processing billions of Pounds transactions. We believe that there is a theme that can be replicated across other markets.

Emnes Events: How banking technology and innovative FinTech solutions can bridge the gap in financial inclusion by providing accessible and inclusive Islamic Finance products tailored to the needs of unbanked Muslims? Can you please leverage on your experience in Indonesia and what is the main difference between Malaysian and Indonesian markets?

Ronald Yusuf Wijaya, Chairperson of Indonesia Sharia Fintech Association (AFSI), Indonesia: In innovative and banking technology we are complimenting each other. We understand that banks have their own strings and regulations but that is where the fintech companies come with more agile solutions, and technology is always innovating – all of this will be created based on the needs of the users, in this case, the less fortunate people and all the Muslims.

Since 2016 technology has been evolving rapidly, that is when we had our first fintech license in Indonesia. Since then more and more innovation has come to life until the regulators understood that they need to supervise this growth of technology. That is why at the moment we have 18 categories of fintech in Indonesia including peer-to-peer, securities crowd funding, payments and financial digital innovation. That is a very short brief of what is going on between regulators and innovations right now in Indonesia.

Emnes Events: What is the role of Islamic FinTech in improving financial access for gig workers and what stage of development of digital Islamic banking for the gig economy?

Dr. Mohamad Anouar Gadhoum, CEO of Payday Takaful, United Kingdom: Islamic fintech is a vital tool for financial institutions to reach and outreach the gig workers in a very efficient way, in a low cost and innovative way as well. Islamic fintech helps gig workers to get access to financial services which they can’t get in normal conditions due to unforeseen circumstances they are facing during the month and also unaffordable and unfair prices of the financial and insurance services. So, through fintech, the cost of financial and insurance services is reduced in a way to be affordable for all such kind of community gig workers in a way they get access easily. In addition to that, the Islamic fintech helps the financial institution to touch and to access these untapped markets in low cost, effective, smart way and in a short period of time. Islamic fintech today is in its increase in wave, of course, it differs from market to market. There are some stable regulated markets like Malaysia, for example, or the UK, South Arabia, some GCC countries etc. However, in some countries there is no such stability that we are facing here, thus there are a lot of the challenges with the regulators and financial institutions to adhere the third point which is most important to alleviate this access to forge the trust between financial institutions and the technology providers. Financial institutions always would like to play solely the game and they dislike anyone who joins or to provides such kind of services. So now we need to find a collaboration way and synergize efforts for both of them to provide services in smart way as the end beneficiary are the gig workers and this impact cannot be reached without use of technology today.

Emnes Events: If we are talking about capacity of Fintech to innovate and disrupt traditional financial paradigms, exploring how these advancements can be guided by the broader ethical and sustainable goals embraced by Islamic finance principles?

Dr. Hilal Houssain, Associate Manager, Knowledge Solutions Team, Islamic Development Bank Institute (IsDBI), Saudi Arabia: If we focus on capacity-building of the current practitioners in the Islamic Finance for the FinTech, I think, now it is changing, the academia and professional certifications. It is not anymore about having one discipline because fintech is a marriage of finance and technology. It is a mixture of multidiscipline. For the capacity building, we need to make sure that the people working in the ZAP Finance are also equipped with the knowledge on technology, on this emerging technology. During panel discussion one of the speakers was talking about quantum computing. We need to be equipped with this knowledge and we need to be really eager to learn more and more. If I am coming from economy or finance, I should learn about technology. And the other way around. Also, people working in technology development should learn about finance and economy. Now when comes to Islamic finance, definitely we need to look at Shariah compliance as well. People coming from conventional finance and economy should learn about Islamic finance, Shariah compliances and technology. We have to have at least the 3 disciplines put in one place so we can push the agenda of the Islamic financial development using emerging technology – fintech.

The 3rd Annual Islamic FinTech Leaders Summit underscored the ongoing transformation influenced by technology in the ever-evolving landscape. The integration of Artificial Intelligence and ground-breaking solutions presented at the summit signifies a profound shift in Islamic Fintech. While embracing these advancements, the pivotal challenge remains harmonizing technological integration with ethical Shariah principles. This summit served as a guiding compass, emphasizing the imperative of leveraging technology to fortify resilience, foster inclusivity, streamline operations, and uphold the principles of sustainable development goals (SDGs).

This congregation of industry pioneers, regulators, investors and startups provided an invaluable opportunity for collaborative discourse, laying the groundwork for collective advancements within the ecosystem. With eager anticipation and enthusiasm, we are looking forward to reconnecting next year. There, the dialogue and progress will undoubtedly continue to unfold and shape the future of Islamic Fintech.