Malaysia Emerges as an Islamic Fintech Hub

Government Supports Growth of Financial Startups
Sukuk Bond Issuance Accounts for Half, Most Related Companies

[Image source=AP Yonhap News]

[Asia Economy Kuala Lumpur, Hong Seong-ah, Guest Reporter] As the Malaysian government actively promotes the development of Islamic fintech, the Islamic fintech industry is expected to grow rapidly.

According to the report "Islamic Fintech in Malaysia: Reality and Prospects" released on the 22nd by the Islamic Finance Education Center (INCEIF), Malaysia is the fastest-growing country in the Islamic fintech industry among Southeast Asian nations. Islamic fintech refers to financial services combined with IT and mobile technologies in accordance with the Sharia principles, the ethical code of Islam. The report stated that the Malaysian government has revitalized fintech businesses, including electronic payments, by actively fostering the mobile and e-commerce markets. Malaysia's central bank accelerated electronic payment initiatives, which led to the growth of fintech startups.

As of September 2020, there were approximately 200 domestic and foreign fintech companies in Malaysia. As of October 2019, Malaysia had 26 Islamic fintech companies, leading the world. The country with the second-largest number of Islamic fintech companies after Malaysia is the United Kingdom (19 companies), followed by the United Arab Emirates (UAE, 16 companies), Indonesia (12 companies), and the United States (10 companies).

The reason Malaysia leads in the Islamic fintech sector is that it has actively promoted Islamic finance over the years. Malaysia holds the highest market share in the global Islamic finance market. At the end of 2019, Sukuk bonds issued by Malaysia accounted for 48% of the total Sukuk issuance, ranking first. This figure is more than twice that of Saudi Arabia, which ranks second in Sukuk bond issuance.

Additionally, the Malaysian government encourages innovation in financial institutions and government agencies while building a fintech startup ecosystem. The Securities Commission Malaysia (SC) operated the first digital initiative, the fintech community alliance (aFINity), in 2015, gathering fintech companies and financial innovators. In 2016, it applied a regulatory sandbox in the fintech sector to diversify businesses and announced an incubation platform to support new companies, thereby fostering the development of the fintech industry.

This content was produced with the assistance of AI translation services.