As one of the largest market of Islamic Finance, Malaysia Interested to have Islamic Digital Bank. Several fintech start-ups are eyeing an Islamic digital banking license to operate in one of the most sophisticated Shariah finance jurisdictions in the world, as the regulator prepares to release its virtual banking guidance before the year ends.
At least one-fifth of the parties interested in setting up a mobile-only bank in Malaysia would build their business on a Shariah proposition, IFN Fintech has learned.
Bank Negara Malaysia (BNM) is expected to unveil its digital banking framework in December which will also accommodate Shariah banking operations. It is learned that over 10 institutions comprising incumbent traditional financial players and new disruptors from both the local market and foreign shores have expressed keen interest in securing a digital banking license in Malaysia.
Suhaimi Ali, the director of financial development and innovation at BNM, confirmed that from this pool of interested institutions, there are several keen on an Islamic digital banking license, stopping short of divulging names and exact numbers. Until today it is expected that at least two start-ups are eyeing licenses to serve the Muslim segment.
“The number of licenses [to be issued] depends on the value proposition they bring,” shared Suhaimi, who also explained that the regulations, which are already more than 50% ready, incorporate business models from various markets including those in Europe and in Australia. “We are planning to issue a consultation paper by the year-end for comments and then we will fine-tune the rules.”
If things were to go smoothly, this means that ASEAN’s fourth-largest economy by GDP could potentially welcome its first fully digital Islamic bank earliest in the second half of next year. This would certainly add another string to its bow following the country’s extension of a crowdfunding license two years ago to NusaKapital, which has the distinction of being the first Shariah crowdfunding platform anywhere in the world to be regulated, and the greenlight given to Ethis Ventures to operate as the first regulated Islamic peer-to-peer financing platform earlier in May.
On the latest news, iSunOne (Company from Hong Kong) already secured buy-in from Malaysian government to build blockchain-based Islamic financial system. This company has secured the support of the Malaysia Productivity Council (MPC) to build an Islamic financial system on the blockchain, which believe would involve a Shariah compliant virtual bank
Mr. Tian Chua, Chairman of MPC, expressed his welcome to this cooperation: “24% of the world’s population is Muslim, of which 71% do not have financial bank accounts. The financial system of the Islamic world is still very traditional and backward. In this promising market, iSunOne provides global digital banking services on blockchain and delivers an innovative solution for both Islamic finance and conventional finance. iSunOne protects personal privacy and can make a difference in Islamic finance. MPC will promote iSunOne in the Malaysian financial industry, including banks, payment sectors, securities trading firms, and the Malaysian government. MPC will arrange proof-of-concept trials and technology testing for suitable solutions.”
Mr. Chen Ping, Chairman of iSunOne, TideiSun Group said: “With more than 5 years of experience in blockchain technology development, iSunOne provides a wide range of fintech services including e-wallet, trading, asset management to a global user base. Malaysia as a multi-ethnic country choosing iSunOne as the country’s blockchain financial services provider affirmed iSunOne’s strength in blockchain technology and finance. Especially in Islamic finance which prohibits interest and requires risk/profits sharing, iSunOne has a unique advantage.”
MPC will allocate more funding for iSunOne to build an Islamic financial system on blockchain. MPC will formulate measures to encourage the application of iSunOne by commercial organizations, and draw up in the near future strategies for training blockchain technology-related talents. To overcome the obstacles faced by iSunOne (such as financial products, registration, license application, etc.), MPC will recommend government departments to consider the need to introduce regulatory measures on such technological adoption in light of future development. MPC Chairman Mr. Tian Chua is also vice-president of Parti Keadilan Rakyat (PKR, or The People’s Justice Party) and a Special Advisor to Works Minister of Malaysia.
Image Credit: BNM Facebook Page
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