Islamic financial institutions must be open to rethink business approach

KUALA LUMPUR: Islamic financial institutions must be open to rethink their traditional business models and approach to doing business.

Deputy Finance Minister Datuk Amiruddin Hamzah said this would prove their willingness to forge digital partnerships and strategic alliances that have the potential for the co-creation of innovative solutions.

“Globally, 82 per cent of incumbents are expected to increase financial technology (fintech) partnerships in the next two to three years. Collaboration with the fintech community should therefore become the norm.

“For example, collaboration with crowdfunding and peer-topeer financing startups can be a win-win growth opportunity,” he said in his keynote address at the 15th Kuala Lumpur Islamic Finance Forum (KLIFF) 2019 yesterday.

Amiruddin said through such partnerships, banks can refer potential borrowers who do not meet their target credit profiles to these lending platforms, and who can in turn refer businesses which have upscaled their operations to the banks for higher financing options.

“Globally, fintech start-ups are making large inroads and are openly challenging traditional financial players in their own space, thus significantly reshaping consumers’ expectations of financial services.

“Fintech offers tremendous opportunities to financial institutions. There is no doubt in my mind that financial institutions that fully embrace the advancements in technology will be the future winners,” he added.

Currently, there are an estimated 670 million digital banking consumers in Asia alone and the number is expected to reach 1.7 billion by 2020.

Amiruddin said with a population of 32 million, Malaysia has a high mobile and Internet penetration rate of about 141 per cent and 85.7 per cent, respectively.

“With such a diverse population and a growing middle class, Malaysia is an ideal test bed for developing and commercialising fintech solutions, “he said, adding that entrepreneurs stand to gain from fintechs which provided technological support to realise Islamic finance’s goal in creating a risk sharing economy.

“This will in turn benefit entrepreneurs who will gain wider access to bank-intermediate credit,” he said.

A mi rudd in noted that Malaysia’ s Islamic financial institutions are in a good position to benefit from the growth multiplier offered by fintechs, which requires the industry to invest in technology and have the right talent to accelerate technological adoptions.

The two-day forum which starts today is organised by the Centre for Research and Training, in collaboration with Amanie Group, Messrs Hisham Sobri & Kadir, Association of Shariah Advisors in Islamic Finance and Association of Islamic Banking Institutions Malaysia. — Bernama