MDEC: $2.8tn ripe for digitalisation in global Islamic economy

The economic and business opportunities in the global Islamic Digital Economy (IDE) is undeniably immense. According to the State of the Global Islamic Economy Report 2022 by DinarStandard, Muslims worldwide spent an estimated $2tn in 2021 on food, pharmaceuticals, cosmetics, modest fashion, travel, and media – all of which having its own fair share of contribution to a borderless IDE.

This spending is forecasted to reach $2.8tn by 2025 at a cumulative annual growth rate of 7.5 per cent.

To better understand the potential of IDE, it is crucial to address the misconception that the sector is exclusively for Muslims. Rather, IDE is based on the principles of just or fairness, transparency, strong governance, and ethical conduct in its practices and services. These are universal values not restricted by faith and serve as an alternative to the Western economy.

For example, Halal traceability centres on integrity and high standards along the production chain, ensuring consumers have peace of mind on a product’s Halal authenticity. Islamic financial instruments such as sukuk provides greater transparency to investors compared to a regular bond, through asset backing. Meanwhile, Muslim fashion revolves heavily around modesty and wearing loose clothes that ultimately provide greater comfort.

Malaysia stands handsomely as a global leader in Islamic Finance and Islamic Fintech. In keeping with this admirable status, the Malaysia Digital Economy Corporation (MDEC), the country’s digital investment promotion agency under the Ministry of Communications and Digital, has been entrusted to accelerate Malaysia’s IDE.

MDEC’s focus areas in IDE comprises three key sectors: Islamic finance (Islamic fintech, social finance and value-based intermediation), Halal (food, pharmaceutical and healthcare) and lifestyle (travel, fashion, media and recreation and cosmetics).

Building on a robust Islamic Digital Economy

Digital inclusivity has been instrumental in furthering Malaysia’s economy as it is aligned with the nation’s strong Islamic economy fundamentals.

Malaysia has also solidified its commendable position globally; it was ranked first in the Global Islamic Economy Indicator 2022, with Malaysia retaining the top spot for the ninth consecutive year, and the Global Islamic Fintech Index 2022, both by DinarStandard.

Several factors have contributed to strengthening Malaysia’s leading role as a global IDE. The country has a mature Islamic finance and Halal ecosystem, backed by strong talent and Shariah experts. It is an innovation centre with many of the world’s first market movers in Islamic finance solutions, products and services, on top of having strong regulatory support with definitive guidelines for fintech and Halal investments.

The country has more than 50 IDE companies consisting of both local and global players operating in 2022, most of which are fintech related.

In support of creating a thriving fintech ecosystem, MDEC facilitates proactive engagements with startups, investors, and innovation enablers from around the globe. The agency acts as a catalyst to enable existing fintech companies and those seeking to enter the Malaysian market.

Other facilitation services include connection to MDEC’s talent ecosystem, pool of Shariah professionals, Islamic finance practitioners, and legal firms who stand ready to offer professional advice.

Equally important to maintaining Malaysia’s stewardship in Islamic fintech, the number of fintech companies coming into the ecosystem must be quality companies that can be nurtured to become global champions. To support this important funnel, MDEC has strategic alliances in the following initiatives to boost the Islamic finance and fintech sector:

• FIKRA Accelerator: An acceleration programme by the Securities Commission Malaysia (SC) to identify and scale up innovative fintech solutions and support the Malaysian Islamic capital market. MDEC is the programme’s designate digital ecosystem partner.  
• i-Connect Fintech in Islamic Finance: An industry-led collaboration network involving the industry, academia, the government and civil society, including MDEC. It aims to enable Malaysia to leverage on new economic opportunities in disruptive innovation. MDEC is a founding member and has been successful to position its technology companies as successful grant recipients.
• RAIF Impact Challenge: The Royal Award for Islamic Finance (RAIF) is a joint initiative by BNM and SC to support the sustainability agenda. MDEC was appointed as a partner for the RAIF Impact Challenge 2022 and of the top ten shortlisted company, nine were the agency’s IDE companies.

Going forward

The IDE in Malaysia offers vast potential as a catalyst for digital inclusivity, where the growing number and affluence of Muslims are a force to reckon with.

MDEC believes Malaysia’s thriving community of IDE companies will propel the country to prominence and further accelerate economic growth. This ambition aligns with the Malaysia Digital initiative to support the country’s ranking as a global leader in the Islamic digital landscape.

MDEC is a high-powered, one stop agency that supports growth and expansion of tech companies at all stages, assisting them to land and expand in Malaysia and beyond. Please reach out to MDEC and learn how to get started on this process.

MDEC welcomes you to make Malaysia your innovative IDE hub.