This interview is produced and sponsored by the Malaysia Digital Economy Corporation (MDEC). It was first published in the State of the Global Islamic Economy 2019/20 report produced by DinarStandard and supported by the Dubai Islamic Economy Development Centre. The report can be downloaded from here.
Established in 1996, Malaysia Digital Economy Corporation (MDEC) is an agency under the Ministry of Communications and Multimedia Malaysia (KKMM) with a close to 25-year track record of successfully leading the ICT and digital economy growth in Malaysia.
Datuk Wira Dr. Hj. Rais Hussin Mohamed Ariff was appointed as the new chairman of MDEC in June 2020. Dr. Rais Hussin is an avid strategist, perennial wordsmith, social engineer, serial entrepreneur, and serious policy intellectual.
Can you explain what Malaysia 5.0 is and how it is relevant to Malaysia’s Islamic digital economy strategy?
Malaysia 5.0 is inspired by Japan’s Society 5.0 initiative – a concept that proposes putting society at the center of technology so that technology serves society and not the other way around.
Malaysia 5.0 is seen as a problem-solving approach to society’s challenges and problems via the deployment and application of Industry 4.0 technologies that are capable of integrating the physical and digital environments. One of the key aspects of Malaysia 5.0’s vision is building digital infrastructure with a unified alliance of stakeholders both within government and across the private enterprise. This “Unity Alliance” is an economic coalition that will serve society in its migration into the digital age.
Malaysia has been at the forefront of championing Islamic banking and finance for the last three decades. The Malaysian government, through MDEC, has started serious work to embed the Islamic digital economy in the grand design of the Malaysian blueprint of the digital economy. MDEC has introduced the Islamic Digital Economy Guide (Mi’yar), a reference for startups, venture capital, and supporting ecosystem players who wish to explore and understand various components of the Islamic Digital Economy.
What end goals or KPIs does MDEC have with its iFintech strategy?
Malaysia is already a world leader in the Islamic finance sector, and MDEC is envisioning Malaysia continuing to become a world pioneer in the Islamic financial technology (fintech) to create an inclusive fintech hub while firmly establishing Malaysia as the heart of digital ASEAN.
With initiatives such as Orbit Fintech Hub, a platform that facilitates the convergence of local and global fintech players; Fintech Booster, which enables capacity-building and provides thought leadership; MDEC’s eBerkat initiative, which provides Digital Financial Inclusion, MDEC is taking the lead in driving the digital economy forward and constantly attracting digital investment for the Islamic finance marketplace.
MDEC has played a key role in creating global awareness of Malaysia’s tech innovation potential. MDEC’s Islamic Fintech Report 2019 includes recommendations around Islamic social-based financial instruments, encouraging all to embrace digitalization and the formation of a coordination committee at the national level.
The government has also identified Islamic finance and the digital economy as key economic growth areas to achieve its national commitment of elevating the country into becoming a nation of sustainable growth while ensuring fair and equitable distribution across income groups and urban and rural regions.
What are some of the rising success stories of iFintech that you can highlight from Malaysia?
Malaysia’s iFintech achievements include:
- Ethis Ventures – received Malaysia’s first Shariah-compliant Islamic equity crowdfunding (ECF) license from the Securities Commission (SC) Malaysia in 2019. Originating in Singapore, the Islamic fintech venture builder chose Malaysia as its headquarters.
- microLEAP – a Shariah-compliant Islamic Peer-to-Peer (P2P) microfinancing platform operator and MDEC’s eBerkat partner, providing P2P Financing in Malaysia, an alternative regulated investment tool.
- Malaysian Hello Gold made the country proud, as it was the only fintech startup from Malaysia to present its unique gold saving mobile application with the participants at the United Nations General Assembly (UNGA) on “Digital Finance for Sustainable Development Goals” in 2019. Hello Gold is one of the selected companies under the UNCDF Innovation Challenge and MDEC’s eBerkat partner.
- Aspirasi, a company under Axiata Group, is a Shariah-compliant microfinancier. The company has partnered with MDEC for the eBerkat initiative.
What other areas of the Islamic economy have MDEC enabled or plans to enable?
MDEC focuses on the potential of Islamic social finance tools in reducing poverty levels and achieving sustainable development and shared prosperity for all, with a focus on zakat, sadaqah, and waqf.
In March 2020, MDEC, in collaboration with The Islamic Medical Association of Malaysia’s Response and Relief Team (IMARET), and local crowdfunding platforms like Global Sadaqah, pitchIN, and SimplyGiving, launched a donation drive to help supply safety equipment for the country’s COVID-19 pandemic frontline officers who were working hard to prevent the spread of the outbreak.
For an iFintech startup, what are the key incentives for setting up in Malaysia?
Since its inception in 1996, MDEC’s Multimedia Super Corridor (MSC) Malaysia has succeeded in driving the nation’s digital economy to new heights. The MSC Malaysia status provides eligible information, communication, and technology (ICT)-related businesses, both local and foreign, with a wide range of incentives, rights, and privileges to promote continued growth.
To capture the ASEAN market from Malaysia, MDEC is offering the Malaysia Tech Entrepreneur Programme (MTEP) via a 1-year pass for New Entrepreneurs and a 5-year pass for Established Entrepreneurs.
Moreover, MDEC has helped launch several initiatives in partnership with various industries, including the following:
The Orbit is Malaysia’s Fintech Hub that serves as a congregational point for the local and foreign fintech players, allowing them to interact with industry leaders and regulators to ease solution development and early market entry.
MDEC is working with Institutes of High Learning (IHL) and relevant industry players to provide inputs on fintech. We have also partnered with local regulators, including Bank Negara Malaysia (BNM) and SC, to conduct regulatory boot camps where regulators will share their latest development on policies and regulations every quarter.
Established in partnership with the United Nations Capital Development Fund (UNCDF) and BNM, the Financial Innovation Lab aims to accelerate innovation in digital financial services with new or improved solutions that empower the daily lives of low and moderate-income people.
Fintech Booster is a capacity-building program by MDEC, in collaboration with BNM, to assist Fintech companies, both local and foreign, in developing their products and services via three strategically crafted modules: Legal & Compliance, Business Model, and Technology.
MDEC’s eBerkat is an initiative to help Malaysians gain knowledge and digital financial services, especially to the B40 community and the MSMEs.
Can you share how MDEC is helping Malaysia’s iFintech ecosystem to promote greater financial inclusion?
MDEC developed and is now piloting a nationwide digital financial inclusion initiative named eBerkat that targets MSMEs and the bottom 40 percent of the income group (B40s).
The key focus of the e-Berkat initiative, which was developed in partnership with 12 fintech companies, is to introduce and expand on the concept of creating Alternative, Accessible & Affordable (3As) Digital Financial products.
The program is designed to increase awareness and understanding and encourage adoption among the underserved communities via the Savings, Lending, Investment, Payment (S.L.I.P) Digital Financial Services initiative.
The initiative will open ways for the MSMEs and B40s groups to gain access to all the digital financial instruments that they need, including those that are Shariah-compliant.
We hear a lot about disruption nowadays. How does MDEC’s iFintech strategy equip Malaysia to effectively respond to disruption in financial services?
MDEC sees fintech as an ongoing evolution of financial services that will complement Islamic financial services in Malaysia. For example, MDEC introduced Fintech Booster in August 2020 to further support the growth and development of fintech companies in Malaysia.
The Fintech Booster is a joint-collaboration program by MDEC and BNM, which provides capacity building resources for both local and foreign fintech companies. The Fintech Booster program has partnered with two Shariah advisors, Masyref and Tawafuq Consultancy, to provide pro bono Shariah advisory services to fintech companies, to foster and encourage fintech companies to be Shariah-compliant.
The growth of Islamic fintech in the country will impact the development of communities in rural areas as it will become a unique financial-inclusion opportunity and increase their contribution to Malaysia’s socio-economic development.
© State of the Global Islamic Economy 2020/21 All Rights Reserved
This article is produced and sponsored by MDEC It was first published in the State of the Global Islamic Economy 2020/21 report produced by DinarStandard and supported by the Dubai Islamic Economy Development Centre. The report can be downloaded from here.