Finance & Banking

Datuk Muhamad Umar Swift

Chief Executive Officer
Bursa Malaysia Berhad

Malaysia is globally known as the premier
Islamic finance market, and is currently
the lead in promoting Sustainable and
Responsible Investing (SRI) proposition
based on its shared values with Islamic
finance. What role is Bursa Malaysia
playing to champion this?

At Bursa Malaysia, we strongly believe
the convergence of Shari’a investing
and SRI has a vital contributing role to
play in driving a dynamic and vibrant
marketplace. There is so much potential
within this space for further development,
and vast opportunities for stakeholders.
Shari’a investing, beyond being a faithrelated choice, is closely related to
SRI that looks into ESG (Environment,
Social, Governance) factors. Just as it
is with SRI, Shari’a-compliant products
and services promote good socioeconomic values, and attract those who
see value in sustainable, inclusive and
responsible investing. Shari’a investing
allows investors to generate social and/or
environmental benefits alongside financial
returns, creating a win-win situation for
investors, investee companies and the
society at large.

If you look at some of the most successful
businesses in the world, you will find that
they tend to have strong principles at their
very core. They have tangible benefits,
create progress, are transparent about
their dealings, and are also sustainable
businesses that show steady growth with
dependable profits. In this day and age,
investors around the world seek these
opportunities to diversify their portfolios
and grow value.

With this in mind, we continually endeavour to provide a
range of products and services catered to SRI. Notably,
the rapid rise of interest in SRI complements the growth
of Shari’a-compliant investing, leveraging our end-toend Shari’a-compliant platform, Bursa Malaysia-i. The
convergence of sustainability, SRI and Shari’a investing plays
a significant role in facilitating and delivering our unique
proposition to further build our strength and competitive
edge in the Islamic capital market space.

As an Exchange and a PLC, Bursa Malaysia is proud to have
championed a number of firsts in this area and has been
recognised internationally for our efforts. Back in 2014,
we were the first emerging market to launch the globally
benchmarked FTSE4Good Bursa Malaysia (F4GBM) Index to
measure the performance of Malaysia’s PLCs demonstrating
strong ESG practices. As a reflection of the increasing quality
and strength of issuers in this respect, we have managed to
grow the number of constituents from the initial 24 to 69
as at December 2019 due to improved ESG disclosure and
practices. Currently, 49 out of 69 (71.0%) of the F4GBM
Index constituents are both ESG and Shari’a-compliant.

In 2018, we became the first exchange in the world to
introduce a one-stop knowledge portal on corporate
governance, sustainability and responsible investing; known
as BursaSustain. We also became the first Exchange in
ASEAN to adopt the Taskforce on Climate Related Financial
Disclosures (TCFD) recommendations into our reporting
guidance (Bursa Sustainability Report) in 2018. At the same
time we led by example by being the first Malaysian PLC to
adopt the TCFD recommendations.

Bursa Malaysia is now classified as a Shari’a-compliant
counter on the Exchange, and effectively also becoming an
ESG and Shari’a-compliant constituent of the F4GBM Index.
This was pursuant to the updated list of Shari’a-compliant
securities released by the Securities Commission Malaysia’s
(SC) on May 31, 2019; following approval of its Shari’a
Advisory Council (SAC). Achieving Shari’a-compliant status
fulfils a long-held aspiration of Bursa Malaysia, and reinforces
Malaysia’s standing as a global leader in the Islamic market.
Our Shari’a-compliant status further strengthens Bursa
Malaysia’s commitment to continue offering an even wider
and more innovative range of Shari’a-compliant products to
the market. This will contribute towards attracting a larger
Shari’a investor base as well as new classes of investors
interested in SRI that share similar principles with Shari’a
investing, ultimately enhancing the vibrancy and liquidity of
the market.

What is, in your view, the greatest challenge faced by Bursa
Malaysia in the development of the Malaysian capital
market in general and Islamic capital market in particular?
What are your plans to spearhead Bursa Malaysia towards its next phase of growth while enhancing its global
competitiveness?

As capital markets continue to evolve and become more
sophisticated, Bursa Malaysia faces increasing challenges
from both regional and international exchanges. The
emergence of new technologies and greater interconnectivity
in the global financial markets have further intensified the
competitive pressure we face. But at the same time, they
have also amplified the opportunities available.

One of the biggest challenges in promoting Islamic capital
market and Shari’a-compliant offerings is to attract nonMuslim investors. The majority of non-Muslim investors
do not really look at the Shari’a-compliance of securities.
What matters most to these investors is the performance of
the securities or the investment portfolio itself. They view
investing in Shari’a-compliant securities as an alternative
investment option. We would like to shift this perception. We
want investors to look at Shari’a investing as part of ethical
and responsible investing.

Bursa Malaysia, as an exchange, plays a very important
role as the Islamic capital marketplace that provides unique
opportunity and a trusted environment for companies and
investors to grow. To enhance the ecosystem of SRI, we
are committed to changing the mindset and perception of
investors by highlighting the values of Shari’a-compliant
investment as part of ethical and sustainable investing.
Looking at the tremendous growth of the global and
domestic Islamic funds industry following the increase in the
number of high-net-worth individuals globally and the rising
demand for Shari’a-compliant instruments; Bursa Malaysia
has developed a strategy roadmap and identified strategic
focus areas in our pursuit to become a vibrant trading centre
for Islamic-based capital market offerings. This also entails
expanding our domestic and foreign client base to remain the
leading exchange in the Islamic capital market.

In terms of performance, the growth of Shari’a market
capitalisation and Average Daily Trading Value (ADV) of
Shari’a-compliant securities from 2010 to 2019 grew 38.9%
and 34.8%, respectively. As a leading emerging market
exchange that offers a good breadth of Shari’a-compliant
securities and with more than 70% of listed companies
categorised as Shari’a-compliant, Bursa Malaysia has a solid
foundation to continue to develop its niche in the Islamic
capital market.

Shari’a indices have consistently outperformed its
conventional counterparts over the past ten years, indicating
Islamic investment is an attractive source of value for
investors. The FTSE Bursa Malaysia Hijrah Shari’a Index,
comprising of the 30 largest Shari’a-compliant companies
on the FTSE Bursa Malaysia EMAS Index, has consistently
outperformed the FTSE Bursa Malaysia KLCI, growing about
26.4% from 2010 to December 2019. This positive trend is expected to continue on the back of the continuous growth
in Islamic funds.

The continued development of the market ecosystem is a
top priority and crucial for Bursa Malaysia as it is the key to
unlocking the sustainable long-term value of our marketplace
and transforming us into a robust developed market. We
continue to enhance our market ecosystem based on our
initiatives with a focus on expanding our range of products
and services, deepening market liquidity and growing our
investor base to instil greater resilience and dynamism into
our market as a whole.

We will strengthen our business growth and competitiveness
through innovation and technology. We see technology
as a positive disruption – creating new fields of economic
endeavour, driving efficiencies in operations, accelerating
our innovative capacities and providing healthy competitive
pressures. For Bursa Malaysia, technology is helping us grow
our capabilities, including the breadth and depth of our
services and offerings.

Some of the key drivers in this area is the offering of e-CDS,
the digital delivery of a personalised, easily accessible, atyour-fingertips e-services experience for investors on Bursa
Malaysia, as well as an ongoing project to modernise core
systems that form the backbone of our business. Enterprise
wide, we are also focusing our efforts to become a datadriven organisation.

Besides that, we have also introduced “Shari’a mode” on
our Bursa Marketplace website, which is the first-of-its-kind
virtual marketplace that brings a unique experience to all
investors, especially new investors. The introduction of the
Shari’a mode enables investors who seek end-to-end Shari’a
investing to filter the market, indices, stocks and other
products to be Shari’a-compliant to ease their investing
journey.

At the same time, we are leveraging the robustness of
our high performance organisation culture to focus on
collaborations and partnerships with organisations that
complement our business strategies and strengths, and
encourage a growth mindset to enable our people to meet
current and future challenges.

In terms of innovation, Bursa Malaysia has championed a
number of world’s first innovative Islamic financial market
instruments and trading alternatives. What are the key
focus areas for growth to fuel Islamic finance and Islamic
capital market in the near future?

Bursa Malaysia is a global leader in Islamic capital market
innovations, and has pioneered several initiatives catering
to the requirements of discerning investors, including
Bursa Malaysia-i (world’s first end-to-end Shari’a-compliant
investing platform); Bursa Suq-Al-Sila’ or BSAS (world’s first
Shari’a-compliant commodity trading platform); as well as
Islamic Securities Selling and Buying Negotiated Transaction
or ISSBNT (world’s first Shari’a-compliant alternative to
securities borrowing and lending). These innovations reflect
our strength in being ahead of the curve in Islamic capital
market services and infrastructure.

With the increasing demand of Shari’a-compliant instruments,
we are also expanding our market with new products and
services creation to cater to the needs of investors, be it
retailers or institutions. Our priority remains to position
Malaysia as a center of Shari’a-compliant investment and
fundraising in the region. This will require more foreign
participation across our markets as well as greater linkages
with our regional and global counterparts, which are
especially important in view of heightened competition
and increased globalisation. Bursa Malaysia will leverage on
existing strategic partnerships while fostering new or budding
relationships to build the Exchange’s regional connectivity.

In the next few years, we expect to enter into more of such
collaborations to better reach investors in key markets. We
endeavour to remain as the leading exchange in the Islamic
capital market and expand the global reach of our innovative
Bursa Malaysia-i platform to capitalise on the growing demand
for asset diversification or socially responsible investing.

The Islamic finance and capital market are significant in
Malaysia but relatively small globally. What role is Bursa
Malaysia playing to help expand the ecosystem?

Bursa Malaysia remains vibrant and competitive, continuing
its part to uphold Malaysia’s position as a global leader in
Islamic finance. The Exchange provides a wide range of
Islamic products and services. Part of our efforts to help
expand the ecosystem is by collaborating with global
players, market intermediaries as well as industry partners.
With more foreign participation with our regional and global
counterparts, we are able to heighten the competition
and at the same time; position Malaysia as a centre of
investment and fundraising. Bursa Malaysia will continue to
foster relationships with other industry partners for regional
connectivity.

The regional expansion has been identified as critical to
unlocking the value of Bursa Malaysia-i and BSAS. The aim is
to increase the number of foreign investors and participants
using our platforms as well as to improve regional market
connectivity to boost trades on our platforms.
In 2018 and 2019, BSAS admitted banks from Iraq, Bahrain,
Tanzania, Kenya, Tajikistan, South Africa, and Dubai and
Ajman from the UAE as new members of our BSAS platform.
In total, 49 new members were admitted in 2019, bringing
the total number of BSAS members to 222 in 2019 from 173
in 2018. Our plan is to continue expanding our global reach
through 2020 to countries such as Nigeria and Djibouti. We
are also looking forward to expanding our new metal-based
commodity supply by early 2020.

Additionally, our Bursa Malaysia-i platform has been seeing
growing regional interest. This development marks the
growing interest in responsible and sustainable investments
within a Shari’a-compliant marketplace.

Our record of providing innovative, market-based solutions
has enabled the Exchange to earn global recognition as the
best and most innovative exchange in the area of Shari’a
investment. We strive to further extend our connectivity
to regional and global capital markets through strategic
partnerships that facilitate cross-border movements of
capital and investments such as cross-listing of investment products. We continue to build and forge ties with other
leading exchanges to seize opportunities in cross-border
flows, whilst positioning Malaysia as the hub of ASEAN. We
believe our clear leadership in the Islamic capital market can
be leveraged to build linkages with markets, with propensity
and interest towards Shari’a-compliant investments.

What is your vision for Bursa Malaysia? What are your
personal expectations for the growth of the Malaysian
capital market?

Many people are only aware of the trading and investing
facet of the stock market – an opportunity to gain profits
or dividends on investments. That’s a little one-sided. Stock
markets are also where companies raise money to build their
businesses. In Malaysia, where SMEs are a huge proportion
of the economy, the capital market functions as a powerful
feed-line, delivering capital to where it can drive not just the
companies in question but the entire economy and everyone
in it, even if you’re not a businessman or an investor. It
is more accurate and critical to see the stock market as a
virtuous cycle.

That is why we focus on opportunities because it helps us
to align ourselves and everyone else to what we’re trying
to build. Focusing on opportunities drives us to better
understand all players in the market, and help deliver the
tools, abilities and conditions in which they are better able to
grow value. My vision for Bursa Malaysia is to help everyone
rise to their respective next level. To realise this vision, Bursa
Malaysia is adopting a ‘triple-play’ focus.

Firstly, we want to be an agile organisation of true ability
by collaborating and mobilising minds to challenge the
status quo. This is the crux of building a high-performance
organisation. It is how we break down barriers between ideas
and action, and the speed at which we can do it, as well as
developing individual abilities and building trust amongst
other people. This is a long journey, but one we must take.
It is a pre-requisite of the other efforts we plan to pursue in
developing Bursa Malaysia further.

Secondly, we want to put the power of now in the hands of
our stakeholders. Our goal is simple – to deliver a remarkable
experience for investors and businesses. It is all about
accessibility from information to movements, regional/global
trends, and new possibilities. We are doing this by enhancing
our digital touchpoints such as the Bursa Marketplace and
BursaSustain, which are already well-received but we believe
have more to give. We are also driving internationalisation
through links with peer markets so as to draw more global
investors into our markets. At the same time, we are also in
close consultation with policy makers and regulators to help
shape the growth and competitiveness of the market.

Lastly, we need to see our future and build our place within
it. New opportunities are being unlocked with the power
of data and new technologies. Besides delivering greater
efficiencies and enhanced services, they can give us the
ability to open up new markets and new ways of driving our
capital market. Broadly, it involves modernising our posttrade services and infrastructure to transform our efficiency
and ability to offer new services, establish the building blocks
we need to be able to leverage data, create a seamless and
efficient experience for investors and also to collaborate with
or invest in companies driving novel technologies in the area
of Fintech.

There’s a long journey ahead of us and we are committed to
keep the lines of communication open and to share more as
we go along. Our intention is simple, to build trust in the Bursa
Malaysia’s brand through our actions and through consistent,
clear and open communication with all our stakeholders.

There are many immediate challenges facing the market,
the economy and the nation as a whole. But these are to be
expected in an economy that is growing at an expected GDP
of 4.5%. Very few economies achieve this level of growth
repeatedly, over the long term. Many of the challenges
fundamentally arise from having an appropriate depth of
understanding, insight, and purpose.

Focusing on opportunities allow us to help grow a nation
of investors, who can be part of helping businesses power
their growth via the capital markets, and becoming the next
regional champions or even unicorns. This in turn benefits
the national economy, bringing us full circle to all who live
and draw from its strength.

THE MALAYSIA STOCK EXCHANGE – BURSA MALAYSIA BERHAD

Bursa Malaysia is an exchange holding company incorporated
in 1976 and listed in 2005 and has grown to be one of the
largest bourses in ASEAN today. It operates and regulates
a fully-integrated exchange, offering a comprehensive range
of exchange-related facilities. The Exchange comprises
a Main Market, the ACE Market and the LEAP (Leading
Entrepreneur Accelerator Platform) Market, catering to
companies at differing milestones of their corporate journey.
Collectively, the three markets host more than 900 listed
companies across 60 economic activities.

Bursa Malaysia is guided by its mission to provide easy access
to diversified, impactful products and services tailored to the
differing requirements of both domestic and foreign market
participants. Its comprehensive product range includes
equities, derivatives, futures and options, offshore and
Islamic assets; and is complemented by a suite of exchangerelated services such as listing, trading, clearing, settlement
and depository. Other investment option offerings include
collective investment schemes such as Exchange Traded
Funds (ETFs), Real Estate Investment Trusts (REITs) and
Exchange Traded Bonds and Sukuk (ETBS).

In its journey towards its aspiration to be a leading and
responsible marketplace in ASEAN with global connectivity,
Bursa Malaysia remains steadfast in its mission. As a high performing organisation, Bursa Malaysia embraces a datadriven culture and continues to harness innovation and
technology in its pursuit of excellence. The continuous
efforts towards regional leadership and global connectivity is
strengthened by strategic partnerships built on the principles
of mutual value creation. Focused on the collective interests
of all stakeholders, Bursa Malaysia remains committed to its
continuous efforts in Creating Opportunities, Growing Value.

THE ISLAMIC CAPITAL MARKET (ICM) IS A KEY CONSTITUENT OF MALAYSIAN CAPITAL MARKET, SERVING AS A SOPHISTICATED PLATFORM FOR SHARI’A-COMPLIANT PRODUCTS AND SERVICES IN THE REGION

The Malaysia’s ICM has recorded a robust growth over the
past decade. As of December 2019, the size of the Malaysia’s
ICM increased by 6.4% to MYR2.0 trillion and accounted for
63.3% of the total size of the Malaysian capital market of
MYR3.2 trillion. Malaysia continues to maintain its leading
position with a market share of 42% in global sukuk issuances.

The Malaysian Islamic funds industry has also progressed
tremendously in tandem with global Islamic funds, and the
industry has demonstrated impressive growth with the
Islamic fund size of MYR176.9 billion, representing 21.6% of the total fund management industry. Additionally, Malaysia now leads the global Islamic funds industry with a 35.8% share of global AUM.

The Malaysian equity market has seen an increase of
more than 300% in market capitalisation since 1997. As
of December 2019, Shari’a market capitalisation stood at
MYR1.1 trillion, which makes up 65.2% of the total market
capitalisation of MYR1.7 trillion. As at end December 2019,
the average daily trading value (ADV) of Shari’a-compliant
securities traded on the Exchange was MYR1.2 billion, which
is 64.1% of the overall ADV of MYR2.0 billion.

Bursa Malaysia, as a leading emerging market exchange, offers
a good breadth of Shari’a- compliant securities that are listed
on the Main, ACE and LEAP markets. As of December 2019,
there were 714 Shari’a-compliant companies (or 76.9%) out
of a total of 929 companies listed on Bursa Malaysia.

Bursa Malaysia is committed to the comprehensive
development of its Islamic capital market and invests
its resources into the market ecosystem to develop the
infrastructure and enablers necessary for its long-term
sustainability. Islamic capital market is an important area of
development of the national economy and the Exchange has
aligned its Islamic capital market priorities with this national
goal. As such, Bursa Malaysia not only act singly as a stock
exchange operator; but also in collaboration with key market
players including government agencies, advisory firms and
private organisations to move the Islamic capital market
agenda forward.

It is worth noting that Bursa Malaysia has made leadership
in Islamic capital market a main strategic aspiration, and the
evidence suggests that it is on the right track to building a
vibrant market for the future. While the Exchange is being
recognised as a leader in the Islamic capital market, Bursa
Malaysia faces greater competitive pressure from peer
exchanges. Against this backdrop, it remains committed to
continuous innovation of the market going forward without
sacrificing its commitment to uphold Shari’a-compliance.

THE WORLD’S FIRST END-TO-END SHARI’ACOMPLIANT BURSA MALAYSIA-i PLATFORM

As the leading exchange in the Islamic capital market, Bursa
Malaysia continues to evolve and innovate. Launched in
September 2016, Bursa Malaysia-i is the world’s first endto-end Shari’a-compliant investing platform and a significant
development by Bursa Malaysia to ensure that the exchange
continues to offer a comprehensive suite of Shari’a-compliant
investing and exchange-related services. It aims to further
attract a wider pool of both domestic and foreign investors as
well as issuers. Bursa Malaysia-i offers a comprehensive suite
of Shari’a-compliant investing and exchange-related services,
including listing, trading, clearing, settlement and depository
services creating a more facilitative environment for investors
to invest and trade via a Shari’a-compliant platform.

The platform supports Shari’a-compliant products that are
listed on Bursa Malaysia, which include stocks (i-Stocks),
Exchange Traded Funds (i-ETFs), Real Estate Investment
Trusts (i-REITs) and Exchange Traded Bonds and Sukuk
(ETBS), which allow investors to build a multi-asset Shari’acompliant portfolio that can be benchmarked against Shari’acompliant indices

The establishment of Bursa Malaysia-i further elevates
Bursa Malaysia’s status as a leading ASEAN marketplace
and emerging-market leader for Shari’a-compliant trading
activities across ASEAN and the world. Since Bursa Malaysiai’s inception in September 2016, it has delivered positive
and sustainable impact to the development of the country’s
Islamic stockbroking services industry. There are currently 15
brokers providing Islamic stockbroking services. Having more
intermediaries, such as these Islamic brokers will facilitate
the promotion of Shari’a-compliant products and Shari’a
investments on Bursa Malaysia-i.

In recent years, the Exchange has noted a mounting demand
from international and domestic investors who are seeking
Shari’a-compliant offerings as a diversification option to
achieve insulation from the volatility of other asset classes.
As of December 2019, the Exchange’s end-to-end Shari’acompliant Bursa Malaysia-i platform has seen regional
interests; reflecting interest in Shari’a-compliant responsible
investment.

Bursa Malaysia-i is working closely with its Islamic brokers
and other industry partners to provide awareness and
education to the investing community and retail public on
Shari’a investing on Bursa Malaysia-i and Shari’a-compliant
investment instruments. It had reached out to all segments
of the investing community by ramping up engagements with
retail investors to promote Shari’a investing via roadshows,
education programmes, and joint initiatives with industry
partners. From 2017 to end 2019, Bursa Malaysia-i had
conducted over 400 direct engagements with market
participants including fund managers, institutional investors
and over 100,000 retail investors.

Without a doubt Bursa Malaysia-i is a step in the right
direction to ensure Malaysia’s position as the global leader
in Islamic capital market. The introduction of Bursa Malaysia-i
would deepen the Exchange’s role as the key Islamic capital
market hub in the ASEAN region and beyond, and would
elevate Malaysia’s role in advancing Islamic capital market
services, and infrastructure for the global marketplace.

It is expected that Bursa Malaysia-i platform will grow steadily,
complemented by the shift towards value-based investing
that appears to track the increasing demand for Shari’acompliant financial solutions. This has created a growing
appetite for Islamic capital market products and services, and
it is no longer just the domain of Muslim investors. Principled
investing practices based on Shari’a are one part of the
equation to living life responsibly through responsible, valuebased investing.

THE NEW AGE FINTECH ISLAMIC/HALAL FINANCE AND OPPORTUNITY FOR OBOR & CPEC1

MUGHEES SHAUKAT

Recently, the impact of globalisation and financial
innovation has swept through the world in
magnitude unprecedented, altering the very
fabric of financial and economic behaviour.
Automation and mechanisation have already disrupted the
traditional financial means. It is difficult to imagine a world without
the internet or mobile devices that are now central to daily routines.
Consequently, the digital disruption or revolution has brought a
paradigm shift, transforming the way customers access financial
products and services. This has not only created user flexibility, but
also reduced transaction costs.

The flexibilities that have consequently called time on the traditional
‘business-as-usual approaches’, is an outcome of the intersection
and constant penetration of technology-driven finance. This could
be termed as the ‘New Age innovative/automated financial order’–
it is called Fintech. World Bank (2016) predicts that automation
is threatening jobs for example, by 69% in India, 77% and 85% in
China and Ethiopia respectively.

What is Fintech?

According to PWC Global Fintech Report (2016),
“Fintech is a dynamic segment at the intersection
of the financial services and technology sectors
where technology-focused start-ups and new
market entrants innovate the existing products
and services offered by the traditional financial
services industry”. As such, Fintech is gaining
significant momentum and disrupting the
traditional value chain. In fact, funding of Fintech
start-ups more than doubled in 2015 reaching
$12.2 billion, up from $5.6 billion in 2014.

If technology-driven financial innovation is set to lead the
fundamental transformations in economic behaviour and
growth, resorting to novel and adaptive marketplaces
becomes a crucial component. Figure 1 below highlights
those segments of the financial sector that are facing financial
disruption. The raison d’être for enhanced and affordable
financial flexibilities is the possibility of transacting without
intermediation.

Fintech and digital technology could allow Islamic finance to
reach out further and quicker (and possibly cheaper) without
having to build a physical presence and distribution channels.
These are some of the reasons for IFIs to adopt Fintech
aggressively.
What is crucially noteworthy is the fact that the Fintechdriven, new age finance is in actuality, application of Islamic
Finance 101 i.e. resorting to Mudaraba and Musharaka
financing. Driven by the Shari’a rules, the Islamic financial
system is based on Al-Bai’ (risk sharing) based financing. The
epistemological roots of Al-bai’ (risk sharing) as the essence
of Islamic Finance can be traced from chapter 2, verse 275
of Al-Quran. In a typical risk-sharing arrangement such as
equity finance, parties share the risk as well as the rewards
of a contract. Assets are invested in remunerative trade and
production activities. The return to assets is not known at the
instance assets are invested, akin to Arrow-Debreu securities.

Moreover, based on Quran and Sunnah, the Islamic financial
system is necessarily supported by a complementary
institutional framework that further assures better growth
and stability. A number of old and new studies have
scientifically shown the efficacy of risk-sharing-based
Islamic/halal finance3. Consequently, the utilisation of
Islamic finance could create a valuable opportunity to help
meet its economic diversification and new dimensional
financial inclusion via the One Belt One Road (OBOR)
initiative and the China Pakistan Economic Corridor
(CPEC). This could be framed and branded as a ‘New Age
Fintech or Islamic/Halal Finance; that is oriented towards
entrepreneurship, financial inclusion, research, technology
and innovation.

The ‘magic sauce’ could be to rely on innovative capacities
of pure experts via structural support to unbundle and rebundle a SMART and automated version of Shari’a finance
that is cost, user and efficiency friendly. The same could
be linked to serve the UN’s Sustainable Development
Goals through new Age Islamic finance. For example, the
adoption of Blockchain and Mobile Technology in Oman’s
infant Islamic financial industry could help provide and
promote Smart Islamic Banking Contracts (SIBCs) solutions
(adjustable to fine tune with specificities of regions). It will
also provide a smart data supply for customer risk profiling
and investment risks. Concluding a transparent contract
to finance Shari’a-based deposits/products could then be
done through a mobile app, as the financial institutions
would be smartly equipped to assess risks.

Until now, Islamic/halal finance is usually constrained
by the problematic nature of gold and silver, which are
difficult to transfer and hard to verify when tucked away
in someone’s vault. However, with a digital alternative, like
the novel application of “Bitcoins”, instantaneous real-time
direct peer-to-peer payments and settlement of value
happen together as a single event. Bitcoins along with
SIBCs could be an attractive mode to ease international
trade deals for Islamic banks via automated payment
schemes.The value and mechanics of the same could be
fully chiseled and endorsed by WTO, World Bank, IFSB,
CIBAFI and AAOIFI. Islamic Wealth/Asset Management
could be served through marketplaces, driven by RoboAdvisory/AI and Numerie. This would also transform Sukuk
for public-private partnership, financings institutional
investments, Crowdfunding, Angle investment, and P2P
financings while promoting the same as Islamic finance 101.

Nevertheless, few crucial constraints need to be addressed.
The first is the complementary and supplementary
regulatory framework for the New age Fintech Islamic/
halal finance. This has to go in line with cementing public
awareness and education about the usage and benefits
of Islamic finance. Bigger problem, however, is the lack
of a level playing field between Islamic and conventional
finance. There is an edifice of structural, institutional,
administrative, fiscal, monetary and legal means favoring
debt finance.

Second, relates to well-trained human capital both in
Islamic finance and Fintech. IFIs already lacks long term,
low risk/Shari’a-compliant liquid instruments/product
and service development. This imposes a liquidity and
hedging constraint on the ability of IFI to compete. As a
result, the Islamic financial industry is forced to replicate
conventional instruments; polluting its perception. While
Fintech would tend to smartly address the problem, the
required intellect, skill and hence service creation needs
focus.

Consequently, to implement the recommended new age
brand of Islamic finance and to reap the desired economic
benefits, the above constraints need to be addressed
through a cohesive and institutional strategy as a national
priority. This could be sharply attuned for economic
diversification with One Belt One Road (OBOR) initiative
and China Pakistan Economic Corridor (CPEC).

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