The infusion of both sustainability and smart technology in the financial sector can transform the world community to another level, said Prime Minister Tun Dr Mahathir Mohamad.

“Doing banking with hearts and intelligent technology will be the new face of any successful financial offerings in the future. I would really like to see a more intimate relationship between humanity and finance. This is an evergreen agenda which will benefit the whole eco-system,” said the Prime Minister at the official launching of the Kuala Lumpur Islamic Finance 2019 in Kuala Lumpur this morning.

Dr Mahathir also urged the Islamic banking and finance players must also be intensely invested in technologies in order to transform the way they conduct their banking services and disseminate their products more effectively and efficiently.

“We have reached a level where customers are able to execute financial and nonfinancial transactions online, from any location, with the help of internet and mobile banking. In accordance to social media banking, digital consumers prefer doing their own research before making a decision on the best suited product or service offered by their banks.”

“They can interact online or set up a meeting with their relationship managers via unified communications technology. In view of this all, a growing number of Islamic banks are offering customer service through digital channels as well,” he elaborated.

He also talked about the importance for the Islamic finance players to embrace Fintech, the contraction of the words finances and technology, that broadly refers to the application of smart technology within the financial industry. It covers a wide range of activities including financing, payments and infrastructure, operation and risk management, data security and monetisation, and customer interface.

Fintech applies to the segment of the technology start-up that is disrupting sectors such as mobile payments, money transfers, loans, fundraising and asset management.

He noted that Fintech has also penetrated the Islamic finance space despite it being considered in still a very early stage. However, the potential disruptions to traditional Islamic finance should not be underestimated. The disruptions can swing both ways.

“From the Islamic finance consumer perspective, fintech disruptions are largely positive. Fintech innovation provides choices which are more aligned to individual needs. With more options, consumers enjoy more competitive financial services cost.”

“Latest technology embraced by fintech leveraging on Internet, mobile devices, social media integration, big data analytics and artificial intelligence make financial transactions more automated, user-friendly and more convenient, thus a superior customer experience,” he added.

The Prime  Minister also acknowledged that Malaysia has demonstrated that establishing the enabling environment for Islamic socially responsible investing (SRI) and green finance can be done. Over the years, the country has introduced several initiatives on sustainable finance to support the green agenda.

The Malaysian, the Securities Commission has introduced the SRI Sukuk Framework in 2014, as part of its strategy to develop the SRI ecosystem in Malaysia.

In July 2017, the world’s first green sukuk was launched in Malaysia under the SRI Sukuk Framework by Tadau Energy – a RM250 million sukuk for the purpose of undertaking a solar project to provide environmentally friendly, clean and sustainable power supply.

This was followed by four other issuances, bringing the total green sukuk issued to date to approximately RM2.41 billion (US$611 million). Building on Malaysia’s strength as one of the largest sustainable investment markets in Asia ex Japan, with a 30% market share including Islamic funds, the SC introduced guidelines on SRI funds in 2017 to provide greater transparency for investors and enable fund managers to distinguish their SRI funds according to the fund’s strategies.

In addition, Bursa Malaysia has also championed the push towards SRI when it launched the first environmental, social and governance (ESG) index in Asia in December 2014. The internationally benchmarked FTSE4Good Bursa Malaysia Index currently has 43 constituents, up from 24 initially.

“All these have showcased Malaysia’s value proposition as a centre for sustainable finance and investment, and more importantly our commitment to be a key driver for the green agenda.”

“This sets the stage for further opportunities to maximise both Islamic and green finance, and expand it across to other asset classes, including positive screening to incorporate ESG into Shariah-compliant equities, sukuk for waqf development, venture philanthropy and impact investing, social sukuk and more,” he said.

“As a matter of fact, 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.

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