The urgency of sharia compliance regulations for Islamic Fintechs: a comparative study of Indonesia, Malaysia and the United Kingdom

Abstract

Purpose This article aims to explore legal challenges regarding the regulation and supervision of Islamic Fintech and to construct Sharia compliance regulations to strengthen the supervision of Islamic Fintech operation. Design/methodology/approach This type of research is legal research, adopting the statute approach, comparative approach, and conceptual approach. The focus of the study is Indonesia with comparative studies with Malaysia and the United Kingdom. Findings Malaysia, Indonesia, and the United Kingdom are all on the top five countries in the Global Islamic Fintech (GIFT) Index. The list comprises countries that are most conducive to the growth of the Islamic Fintech market and ecosystem. However, weak supervision and low Sharia compliance are still becoming prominent challenges in the implementation of Islamic Fintech, while Sharia compliance is the core principle for Islamic finance regulation. Another finding is that a good ecosystem of Islamic Fintechs needs supportive regulations and policies, a Sharia Supervisory Board, and standards of Islamic Fintech Shariah governance. Research limitations/implications This study examines the regulation and supervision of Islamic Fintech in Indonesia, Malaysia, and the United Kingdom countries whose Islamic Fintech industry is growing rapidly. Practical implications This study is a strong reference for countries with potential Islamic finance, especially when they are constructing the Sharia compliance regulations to strengthen the regulation and supervision of the Islamic finance industries. Social implications Sharia compliance regulations can be a subsystem in the Islamic financial ecosystem to encourage Sharia economic growth in various countries. Originality/value To ensure Sharia compliance, it is recommended to take some steps: (a) creating the Sharia compliance regulations; (b) creating the Sharia supervisory boards; and (c) standardizing the Sharia governance of Islamic Fintech.