27 May, 2019

Mr Robin Lee,

CEO, HelloGold


With the rise of fintech comes a rare opportunity for fintech entrepreneurs and their investors to empower the economically disadvantaged who are otherwise bereft of opportunities due to the established mechanisms within the finance landscape.

The sphere of Islamic finance reflects this reality. Shariah compliance in financial management may not be the highest priority for all Muslims, but it is crucial for a product to be far-reaching and inclusive especially when it’s meant to serve approximately 2 billion people worldwide.

This lack of representation is particularly troubling when Islamic finance has surged in popularity over the past 40 years, yet 71%1 of Muslims are without a bank account. The global average for unbanked individuals, in comparison, is 38%. With this in mind, it is imperative for an inclusive financial product to encompass Islamic finance as well.

Top Priority, Bottom Line

When it comes to Islamic financial assets distribution, it appears that over 60 percent of all financial assets are concentrated in 3 countries2 that constitute only 7 percent of the global Muslim population.

This belies the optimism of well-capitalised firms being ideally equipped to solve the need for truly inclusive Islamic finance products, particularly when there are some 500 banks or windows3 in the Islamic financial landscape.

Analysts have highlighted that Islamic finance is often only accessible to retail consumers in more developed economies; elsewhere its privileges remain localised to sovereigns, large corporates, and banks. At least as much other markets, Malaysia is a fitting reflection of this reality.

Despite being one of the world’s prime Islamic financial centres, simple financing remains largely inaccessible to about 98 percent of the general population, let alone Muslims—the US$12,000 average annual salary of an ordinary Malaysian would fall far below the minimum investment size US$60,000 of a basic low-risk money market fund4.

1 World Bank Global Findex Report

2 ICD Thomson Reuters

3 ICD Thomson Reuters

4 Deutsche Bank – Mapping the World’s Prices 2017


Perhaps the fundamental driver for corporations, which is to maximise shareholder value, may properly explain this predicament. Like any profit-driven institution, Islamic finance service firms are predisposed to prioritise products or services that promise the highest margins when deciding on capital allocations. Initiatives that generate lower margins and less proven returns get the short end of the stick.

How To Get Financed From The Ground Up

Therein lies the opportunity for fintech firms to serve the market: the agility afforded by the absence of cumbersome infrastructure and IT systems or even an existing profitable customer base allows them to discover, pursue and help turn around less profitable market segments.

Key to fostering the potential of this untapped market space is the entrepreneurial spirit, with endeavors guided not by established models but a courage to pave new cost-effective paths for those underserved by traditional models of consumer financing.

Success through focus on retail customers for fintech firms isn’t an entirely uncharted path. There has been a dire need to help folks at the grassroot level access previously unaffordable financing, and many fintech firms that have been able to do so naturally reap great rewards.

The rise of mobile technology has empowered such firms to pave the way forward. Where entrepreneurship is the fuel, mobile technological is the vehicle for fintech firms to profitably serve those in lower-income brackets.

It enables startups and other business ventures to more effectively operate on smaller capital expenditures. Leveraged properly, mobile technology promotes efficiency on all fronts—from delivery channel optimisation to user experience testing—all while creating value and consequently boosting margins in new areas along the customer journey.

Serving Consumers Benefits All

Considering the disruptive potential of the fintech phenomenon, it’s not unnatural for many to believe that the banking and finance industry is under threat. But seen through the lens of a much wider context, the story actually plays out differently.

What fintech firms bring to the table are opportunities for those in lower income groups whom banks are unable to profitably serve. Access to simple and affordable financial products empower such consumers to attain a better financial future.

When these groups become better off financially, they grow increasingly able to access the products that banks promote. Fintech companies, when seen in the light of this symbiosis, may be the key for banks to serve a wider market in pursuit of maximising shareholder value.

The views expressed in this article are those of the author alone and not the organisers of MyFintech Week 2019


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