Islamic robo-advisor Wahed Invest readies Malaysia launch with eye on Indonesia

KUALA LUMPUR - New York-based Islamic robo-advisor Wahed Invest confirmed last week it had obtained regulatory approval from Malaysia’s Securities Commission (SC) to offer digital investment management services in the country.

The firm told Salaam Gateway it will launch its flagship product, which allows users to invest in a diversified portfolio of equities, sukuk and gold, “very, very soon, in a matter of weeks” in Malaysia.

Speaking at a fintech event organised by the Securities Commission Malaysia in Kuala Lumpur on October 23, Wahed’s chief product officer said the start-up had also been setting up an office in Kuala Lumpur to serve as its base for Asia-Pacific.

“Malaysia is a very good hub for the APAC region,” said Kareem Tabbaa, who is based in Dubai at Wahed’s Middle East marketing office.

“The regulator is very forward-looking and they have been very clear about the rules and processes we had to go through to get a licence,” said Kareem.

“The Malaysian demographic also matches with our target audience: tech-savvy, educated and understanding the share aspects of our business.”

Wahed, which began operating in the United States in 2015, is the third fintech company to be given a robo-advisory licence by the SC and the first to be Shariah-compliant. It follows Singapore-based StashAway, which received its approval in October 2018, and GAX MD, a joint venture between Japanese robo-adviser Money Design and Malaysian technology company Silverlake Digital, which was approved in May.

Kareem said Wahed had set up in Malaysia by its own initiative, rather than being courted by the country’s financial authorities seeking to attract more Shariah-compliant fintech firms.

Syed Zaid Albar, SC’s chairperson, had earlier said the regulator had recognised “the opportunities in the intersection between Islamic finance and fintech”.

At the fintech event on Wednesday, he said Islamic fintech “remains a largely untapped segment in our current ecosystem”.

According to Wahed’s Kareem, Malaysia’s capital markets regulator was keen for more Shariah-compliant options.

“When we started working with the regulator we found they were actually pushing Islamic fintech. We found them to be very good partners throughout that journey,” said Kareem.

INDONESIA NEXT?

With a Malaysia launch date impending, Wahed is now looking at ways to build on its investment offering so it can cater to a wider range of local investors.

It is interest from these potential customers that initially prompted Wahed to investigate Kuala Lumpur as its third business hub, though Kareem conceded the firm also has half an eye on expansion to its vast neighbour, Indonesia.

“Our focus is mainly on Malaysia. Our team is based here but it’s been structured to help us unlock other countries in the APAC region, hopefully soon to go into Indonesia,” said Kareem.

It has already approached Indonesia’s Financial Services Authority (OJK), the regulator, and has started looking at how to localise its platform to support investors there.

Wahed launched in the U.S. in 2017 and in 2018 secured approval from the Financial Conduct Authority to operate in the UK. It rolled out globally this year.

In July, when it received an “experimental permit” from Saudi Arabia’s Capital Market Authority to test its services in the Kingdom, the firm told Salaam Gateway it localises its product for some markets.

USER EDUCATION

Though Wahed does not reveal the number and size of the investments that go through its platform, Kareem said business has been going well, particularly in the U.S., which remains its biggest market.

The main drawback the firm has faced, however, comes from the name of the service it operates.

The term robo-advisor has applied to online portfolio management since it was coined in 2008, through Kareen says it may put off a number of the new investors who use an online platform like Wahed’s.

“The key here is in the messaging. We don’t like to use the word robo-advisor because we are dealing with users who may not have invested before and are somewhat unfamiliar,” he said.

“If we tell them it’s a robo-advisor, we are just making it even more difficult for them. We really try to work on educating the user.”

(Reporting by Richard Whitehead; Editing by Emmy Abdul Alim emmy.abdulalim@salaamgateway.com)

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