How Religion is Playing A Major Role In The Southeast Asian Fintech Segment

Sayan Dey

Sayan Dey

The Southeast Asian fintech boom is still growing stronger than ever with companies such as Grab and Sea ruling the market. But, unlike the fintech segment of the Western world, countries like Malaysia and Indonesia provide a very different factor behind the current boom – religion-oriented fintech companies.

Since Southeast Asia is home to a large amount of Muslim population, who live their lives as per the Sharia law to a certain extent, their needs are unique. Fintech companies that are able to serve these needs are capturing a market that has been untapped so far, and the phenomenon is worth looking into.

In Indonesia, which has the highest Muslim population in the world, Sharia law is quite popular. As per the religious code, certain products are banned or ‘halal’, such as pork, alcohol, tobacco, etc. Fintech companies in the country such as LinkAja, Hijra, and Bank Aladin, choose to obey these Sharia laws while providing their services. This basically means that these fintech companies stay away from any financial transactions that have to do with these ‘halal’ products. 

Similarly in Malaysia, one can find Sharia-compliant fintech companies such as Ethis Ventures and Wahed, the latter being the first ‘Islamic Finance’ service provider in the region. As per the Sharia law, certain investments are not allowed, so is the owning of debt. So, these fintech companies and digital banks are ensuring that their customers can perform everyday fintech operations without having to violate the Sharia code.

Sharia-compliant Fintech Growing Stronger Than Ever

In 2021, the Islamic finance sector was valued at $79 billion, and by 2026, it’s expected to grow to a massive $179 billion state DinarStandard. Indonesia is the biggest market for this segment, with the P2P financing space being the most active.

Malaysia is also not far behind, with the government has announced that by 2030 the country will build an Islamic Finance hub as a major part of its economic restructuring plan. 

These developments are being noticed by the regular fintech players as well, and they too want a piece of the Islamic finance market. GoPay, which is Gojek’s payment app, now allows users to make ‘Zakat’, an obligatory alms payment that is recommended by the Sharia law. Softbank-backed Funding Societies launched an Islamic finance product in Malaysia, which the bank has now turned into its default finance vehicle.

How Does This Foster Growth?

Financial analysts are of the view that the entire Islamic Finance market is allowing non-banked or non-digital banked consumers to finally become a part of the larger global finance sector. According to the World Bank, Islamic fintech-led short-term financing can play a major role in reducing poverty in the SEA region. There are also a ton of Islam-oriented SMEs that have a strong demand for these services, allowing more consumers to come into the fray.

Be it a payment gateway that does not hide charges, or P2P lending on the basis of profit sharing instead of debt, Islamic finance is here to stay and grow!