KUALA LUMPUR: Asia Pacific Investment Bank (APIB) will be launching an Islamic digital finance fund in Malaysia to invest in shariah-compliant financial technology (fintech) start-ups.
APIB said the fund will be launched in collaboration with OUD Asset Management, a boutique fund management company specialising in shariah-compliant equity investments with more than 40 years of experience.
APIB has signed a memorandum of understanding with OUD Asset Management to establish this fund, adding that the Islamic digital finance fund will allow investors to tap into the massive financial service market.
According to World Bank Group's report on digital financial services recently, there are over 850 million registered mobile money account across 90 countries, with US$1.3 billion transacted via these accounts per day.
APIB director Datuk Foo Yong Hooi said the bank is an advocator and is committed to fintech.
He said it has been in collaboration with Ripple to explore ways to facilitate cross-border transactions more efficiently.
"The World Bank Group estimated that the average cost of cross-border transactions in the form of cash is 6.8 per cent. However, a fully digitalised transaction, enabled by blockchain, could lower the cost to 3.3 per cent," he said in a statement.
Foo said he also believes that the impact of investing in digital finance goes beyond the financial industry.
"Many governments have been disbursing financial assistance to aid citizens and businesses in response to the Covid-19 pandemic. Digital financial services allow them to track the utilization of funds and adopt a more targeted approach to revitalize their economies," he said.
Foo said investing in fintech start-ups could be perceived as too risky and lack of substance.
He said these investments come with high risk and some fintech start-ups have lofty ambitions without strong fundamentals. This is where the collaboration between APIB and OUD comes into play, says Foo.
"APIB and OUD share the same vision of bringing together decades of investment expertise to invest in fintech start-ups with good potential. We will ensure we invest accordingly to Shariah principles to promote ethical, accountable and reliable investments," he added.
Foo said this is a very important for the collaboration to take place at this juncture as the financial industry is adopting digital transformation at a pace faster than ever before, and this fund would be able to support the digital economy transformation of Malaysia especially during the post-Covid-19 era.
"Also, the potential of investing in digital finance is enormous for investors. This Fund will provide more confidence to investors and opportunities to create a positive impact on the social, environment and economy along with a financial return," he said.
OUD managing director Junita Ishak said she believes that the deal presents a great opportunity for investors to have exposure in Islamic digital finance players.
"We are thrilled with this collaboration as it is timely for OUD Asset to offer this niche shariah investment solution during this digital age.
"Although fintech has already penetrated the Islamic finance space, it is still in its infancy stage.
"OUD has recently launched a healthcare fund in the midst of Covid-19 pandemic, and look forward to this coming fund in collaboration with APIB to support the digital economy transformation of the country," she said.