KUALA LUMPUR: Islamic banking and finance players must be intensely invested in technologies to transform the way they conduct banking services and disseminate their products more effectively and efficiently.
In making the call, Prime Minister Tun Dr Mahathir Mohamad said the application of smart technology within the financial industry — financial technology (fintech) — has positively disrupted the industry, as well as other industries such as mobile payments, money transfers, loans, fundraising and asset management.
“The latest technology embraced by fintech leverages on the Internet, mobile devices, social media integration, big data analytics and artificial intelligence makes financial transactions more automated, user-friendly and more convenient, thus (giving) a superior customer experience.
“Fintech has also penetrated the Islamic finance space despite it (the technology) being considered in a very early stage.
“However, the potential disruptions to traditional Islamic finance should not be underestimated. The disruptions can swing both ways,” he said at the 15th Kuala Lumpur Islamic Finance Forum 2019, here, today.
Dr Mahathir said the evolutionary pace in the Islamic banking and finance industry has intensified in recent years where concepts of Islamic finance have been incorporated into many financial products to meet the changing needs of consumers, businesses and investors.
He said the landscape has been supported by a well-developed regulatory, prudential, legal, accounting, framework and reinforced by the necessary research and development.
“Initiatives to promote greater awareness and education among Muslims and non-Muslims have also been intensified,” he said.
Dr Mahathir said crowdfunding and peer-to-peer (P2P) financing options from fintech provide solutions for individuals and small and medium enterprises that require financing but do not qualify for financing from traditional Islamic financial institutions.
He said investors were also entitled to higher potential returns by investing directly into the business ventures that they finance via the online financing marketplace.
“Overall, fintech in the Islamic finance space positively contributes to the evolution of the Islamic finance products and services offering.
“Elimination of credit intermediaries results in lower prices and/or higher potential returns," he elaborated.
Dr Mahathir said Malaysia has spearheaded a number of innovative developments in Islamic finance, with the aim to spur the vibrancy of the industry, such as the issuance of the first Sustainable and Responsible Investment Sukuk and Green Sukuk, as well as the launch of the Investment Account Platform.
The Prime Minister said the industry’s move towards embracing value-based intermediation, which was issued by Bank Negara Malaysia in 2015, would further strengthen Malaysia’s leadership position and advance the growth of Islamic finance towards generating positive, sustainable impact to the economy, community and environment.
“Islamic finance can be a catalyst for the growth of green developments globally.
“It will require continued collaboration with global and local stakeholders to converge in standards and reporting, as well as to spur innovation, to reduce barriers and cost for issuers and increase transparency and awareness for investors,” he added.-Bernama