Fintech In Malaysia: An Appraisal to the Need of Shariah-Compliant Regulation

Abstract

The implementation of financial technology (Fintech) in the Islamic finance industry has created a totally new phenomenon of banking and financial behaviour for the stakeholders, particularly in Malaysia. As part of the financial revolution, the Islamic finance sector ought to embrace Fintech to diversify the services/products offered as the digitalisation process is taking place in the Fourth Industrial Revolution era. In order to safeguard the assimilation of the technology into the existing traditional practice of Islamic finance, Shariah-compliant regulation is, therefore, necessary for governing the potential risks associated throughout the process of financial activities. Hence, this paper intends to analyse the need for Shariah-compliant regulation to govern Fintech-related activity in the Islamic finance industry. The article emphasises the need from several aspects such as the non-comprehensiveness of the Islamic Financial Services Act (IFSA) 2013; the increasing rate of financial inclusion and; the qualifications of the Shariah Advisory Council’s (SAC) members in Malaysia. It also provides recommendations through the introduction of subsidiary legislation pursuant to IFSA; production of regulatory sandbox framework especially for Islamic Fintech firms; and emphasis on the importance of SAC members possessing knowledge in technological aspect in order to ensure the need for Shariah-compliant regulation in the Islamic finance industry is properly satisfied.

Fintech in islamic finance literature: A review

“…* The result of this study will be more appealing by discussing the implemented model of FinTech in other Islamic financial institutions as a study case. (Razak et al, 2020) This manuscript analyzes the urgent need for Islamic-compliant regulation for FinTech applications in the Islamic finance industry.…”

Islamic Fintech Research: Systematic Review using Mainstream Databases

“…A study on regulation, for example, was conducted by Imaniyati et al (2019), who analyzed the contracts used in Islamic fintech. Another study concerns the need for sharia-compliant regulation to regulate Etikonomi Volume 21 (2), 2022: 355 -368 Islamic fintech because existing regulations are considered inadequate to regulate the Islamic fintech industry (Razak et al, 2020).…”

A Flourishing Fintech Ecosystem: Conceptualization and Governing Issues in Malaysia

“…The emergence of Fintech in Malaysia has altered the country's financial sector landscape. Although Fintech is considered a new phenomenon in Malaysia, many Fintech startup companies have started to emerge due to increased interest from the general public (Razak et al, 2020;Baber, 2020;Cham et al, 2018;Chan et al, 2020). The rise of Fintech in Malaysia, such as online banking and electronic payments, has increased the competitiveness of technology usage.…”