Organisation:
TechCrunch
Resource Link:
Published in 2023, Link
My Key Takeaways
Islamic Fintech in Southeast Asia (SEA) – not that niche any more?
My takeaways from an insightful TechCrunch article on the Fintech boom for Muslims in SEA.
First, what’s shariah-compliant financing?
- Shariah-compliant financing adheres to Islamic law, forbidding interest accrual, speculation, and financing non-halal businesses (e.g. tobacco, massage houses)
- Financial offers are backed by underlying assets.
- All fees and charges are clearly defined.
- Example: A lender might buy fish feed and sell it at a profit to a farmer, who pays it off after harvesting fish in about 3-4 months.
State of Islamic Financing in SEA and Growth Opportunities
- Islamic fintech market size in the Organisation of Islamic Cooperation (OIC) countries was $79 Billion in 2021, 0.83% of global fintech transaction volume. The growth opportunity is immense!
- Islamic fintech’s global market size is expected to reach $179 Billion at a 17.9% CAGR by 2026, outpacing traditional fintech’s 13.5% CAGR growth.
- SEA’s Islamic banking market is worth $290B Billion, expected to grow at a CAGR of about 8% (S&P)
- There are 375 Islamic Fintech companies around the world. Indonesia is a key market with the most Islamic fintech companies and transaction volume globally. (WorldBank, DinarStandard, Ellipses)
- 55% of Malaysia’s population is unbanked primarily because they fear riba or interest.
Example: Singapore headquartered Funding Societies is a fintech creating Shariah-compliant microfinancing products for markets like Indonesia, Malaysia, Thailand & Vietnam.
Familiarise Yourself With SEA’s Islamic Finance Regulations
- In 2019, the Malaysian government issued its Shared Prosperity Vision 2030, a 10-year framework for restructuring its economy that includes supporting Islamic fintech.
- Malaysia Digital Economy Corporation also connects investors with halal business owners.
➡️ The Majelis Ulama Indonesia (National Sharia Board (“MUI”)) has published at least two fatwas (a formal ruling or interpretation on a point of Islamic law given by a qualified legal scholar) on Islamic perspectives on e-money and Peer-to-Peer lending practices.
Educating Investors
There’s a need to educate investors about Islamic finance and the growth opportunities. Highlight commitment to financial inclusion to appeal to socially conscious investors and customers.
Fundraising? Here’s some VCs active in Islamic fintech:
Boost VC, Tim Draper, Quona Capital, Golden Gate Ventures, EV Growth, Asad Capital, Q Cap, Effective Shields, Crescent Capital
Find more potential global investors in Singapore here.
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Greater adoption of Islamic Fintech could significantly accelerate business funding and growth of large economies like Indonesia and Malaysia in SEA.
Traditional businesses in these countries have been disadvantaged by a lack of access to funding mechanisms that have benefited other international jurisdictions.
Exciting times for fintechs making Islamic-compliant services more accessible and inclusive in Singapore and SEA! 🚀💪
Follow me for the latest insights on Southeast Asia. My LinkedIn post here.
About Zhilin SIM
Having worked and lived in Singapore, the Nordics, China, Spain, UK, I’m now based in Paris.
I’m fluent in English, French and Mandarin, and I’m learning Arabic because it’s a beautiful and fascinating language.
My team creates and supports one-many initiatives connecting global corporate and startup ecosystems to business and innovation opportunities in Singapore and Southeast Asia.
I’m passionate about horticulture, watercolour, startups/tech as well as French cuisine, Peranakan kueh techniques and other global cuisines.
Follow me on LinkedIn for the latest insights and reach out if you think my network in Europe and Asia could be of benefit to your business and innovation activities.
