Trends: A boom in digital investment offerings

This article first appeared in Wealth, The Edge Malaysia Weekly, on June 28, 2021 - July 04, 2021.

"Fikra aims to expand Islamic capital market offerings. It wants to enable greater connectivity, accessibility and inclusivity for issuers, investors and intermediaries in areas that include halal, socially responsible investing and Islamic social finance.” - Azrina

-A +A

Financial technology (fintech) start-ups, including digital asset exchanges (DAXs), robo-advisory firms and equity crowdfunding platforms, posted impressive growth last year.

Azrina Azmel, deputy general manager at the Securities Commission Malaysia (SC), says the three local DAXs — Luno, Sinegy and Tokenize — saw 450,000 new accounts being opened from October 2019 till end 2020. 

For comparison, new CDS accounts opened with Bursa Malaysia between 2016 and 2020 were 112,572, 141,993, 146,590, 159,333 and 423,264 respectively.

The number of new accounts opened with robo-advisory firms (also known as digital investment management platforms) were also significantly higher last year. According to Azrina, about 175,000 such accounts were opened in 2020.

Meanwhile, equity crowdfunding has seen a growth of over 170% in new accounts registered, with 65% of them being retail investors.

All of this shows that there is great demand from individual and retail investors who are looking to invest in various investment products and services made accessible to them.

“The growth last year could be due to various reasons. Perhaps the lockdown had partly contributed to it. For instance, those who couldn’t travel were left with disposable income and looked for alternative avenues to invest or diversify their investments,” says Azrina.

“There could be various reasons behind such growth. But the trend is clear — we saw significant acceleration in digital adoption across different segments of the capital market last year.”

She believes that fintech, which has led to new investment products and services, is a vital force that helps democratise investments. And it will continue to grow in the years to come as investors become more educated and informed.

SC focusing on Islamic fintech

Islamic fintech is the SC’s main focus this year, as can be seen from one of its initiatives — the launch of the Fikra Islamic Fintech Accelerator Programme (Fikra) on May 25.

Fikra is a joint initiative of the SC and the United Nations Capital Development Fund (UNCDF) to enhance the Islamic capital market ecosystem by identifying and scaling innovative fintech solutions in Malaysia.

Azrina says the Islamic fintech industry is relatively nascent compared with its conventional peers, while the offerings of Islamic fintech start-ups are similar to those of their conventional counterparts.

Fikra is aimed at facilitating more innovation in the Islamic fintech and Islamic capital market space, she adds.

“Besides product distribution through new channels, the accelerator programme aims to expand Islamic capital market offerings. It wants to enable greater connectivity, accessibility and inclusivity for issuers, investors and intermediaries in areas that include the halal, SRI (socially responsible investing) and Islamic social finance sectors.

“We are looking for unique Islamic fintech solutions that address the three challenges that we have identified in the Islamic capital market. For instance, there could be a solution that allows for better distribution of benevolent funds such as zakat and wakaf to targeted beneficiaries with enhanced transparency and efficiency,” says Azrina.

Shared prosperity, equitable wealth distribution, and responsible and sustainable investing are important values of Islamic finance, she explains.

“We want to see how Islamic fintech solutions can better help vulnerable segments of society, especially during pandemic times. It would be great to think that with technology, greater financial inclusion could be achieved by facilitating new solutions that can benefit the underserved or marginalised communities,” says Azrina.