* The move illustrates how fintechs are broadening their footprint to include the core markets for Islamic finance
* Fintech could help Islamic banks become more efficient and scale up their operations
* Islamic finance follows religious principles such as a ban on gambling and outright speculation
Canadian fintech company Goldmoney Inc has certified its gold-based financial products as sharia-compliant, the latest firm to combine blockchain technology to tap demand from Islamic investors.
The move illustrates how fintechs, companies that use innovative technology to revamp banking services, are broadening their footprint to include the core markets for Islamic finance in the Middle East and Southeast Asia.
Goldmoney provides financial products that are fully-backed by reserved gold and so fall in line with guidance issued in November by the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions.
The firm began exploring sharia compliance in March of last year, said Alasdair Macleod, the firm’s head of research, adding its products will range from wealth management to the remittance market.
“We are already seeing growing demand from Muslim-majority countries, and take the view that being sharia-compliant will considerably raise our profile in this important market.”
Goldmoney says it has more than 1.3 million users across 150 countries and administers $1.7 billion in client assets.
New focus for Islamic finance
Blockchain, a system that first emerged to facilitate digital currency bitcoin, involves a shared electronic ledger that allows all parties to track information through a secure network, removing the need for third-party verification.
Islamic finance follows religious principles such as a ban on gambling and outright speculation, but until now the sector has focused on traditional retail banking services.
Fintech, however, could help Islamic banks become more efficient and scale up their operations, according to the central bank of Malaysia, which said last year it was reviewing regulations to address fintech firms.
Islamic banks in Malaysia hold around a fifth of total assets and some are already involved in fintech ventures.
In February, a group of six Islamic lenders launched an internet-based investment platform to serve as a central marketplace to finance small and medium-sized businesses.
Malaysia-based HelloGold has also launched a sharia-compliant online platform that uses blockchain. This allows for more direct transactions and lower costs, said chief executive Robin Lee.
While it’s too early to determine fintech firms’ impact on financial stability, potential regulations could help ensure consumer protection, Lee added.
“Promoting competition is key as fintechs are likely to target under-served consumers and the unbanked and to drive cost to consumers down.”
HelloGold is currently rolling out its product in Malaysia with plans to enter Indonesia, the Philippines and Thailand later this year, and China by 2019.