IOUpay achieves milestone Shariah Compliance Certification

IOUpay has achieved a major milestone in its bid to become a major player in Islamic finance in Malaysia with the necessary certification.

Malaysia focused fintech IOUpay (ASX:IOU) has been awarded Certification of Shariah Compliance by the independent, global Shariah advisory firm, Tawafuq Consultancy.

Its wholly-owned subsidiary IOUpay Asia has also signed a merchant acquiring services agreement with Souqa Fintech Sdn Bhd (trading as PayHalal).

PayHalal is a Shariah-compliant payment gateway, an important and necessary requirement for IOUpay’s myIOU Islamic BNPL service.

The agreement provides for the acquisition of merchants and processing of BNPL transaction payments in accordance with the Shariah principles of Islamic finance.

Milestone accreditation

The Certification of Shariah Compliance is an important milestone in the ongoing development of IOUpay’s instalment-based consumer finance product suite.

The company said Shariah compliance and Islamic finance product capabilities provides several strategic growth opportunities including:

Opens access to new communities of consumers and merchants (more than 60% of Malaysia’s population follows the Muslim faith)
Positions IOUpay to develop opportunities with Islamic banks and non-bank financial institutions for instalment plan-based consumer finance programmes
Pre-positions the company for territory expansion into additional SEA countries with large Islamic populations
Diversifies products and service offerings across regulated consumer finance credit markets.

myIOU Islamic

IOUpay has been developing its Shariah-compliant BNPL offering to be marketed under the name myIOU Islamic.

In Malaysia, to access Islamic financing and BNPL opportunities within industry best practice for Shariah principles requires certification from a Shariah advisor licensed by the Securities Commission Malaysia.

Annual certification of Shariah Compliance has now been provided by Tawafuq Consultancy commencing 12 July 2022, subject to annual compliance audits for subsequent yearly renewals.

Following the issue of certification, IOUpay will offer both conventional and Islamic financing. The business model requires a partitioning of the myIOU portfolio, integration with an Islamic Payment Gateway as well as separate documentation, policies and procedures, and an Islamic Bank Account for all Shariah-compliant transactions.

PayHalal Islamic Fintech Payment Gateway

PayHalal provides Islamic financial technology solutions, including payment gateway services, to approximately 7,000 Shariah-compliant merchants in Malaysia.

IOUpay Asia’s agreement with PayHalal is on a non-exclusive basis for a three-year term starting on July 12.

The agreement provides for PayHalal to acquire and refer to IOUpay Asia merchants who follow Shariah principles and wish to offer to their customers BNPL payment options consistent with Shariah principles and the practices of Islamic finance.

This provides IOUpay with an established portfolio of Shariah merchants into which myIOU Islamic can be promoted, as well as a streamlined marketing and onboarding process for low-cost merchant acquisition.

IOUpay Asia will have absolute rights and discretion in the approval of any merchants referred by PayHalal.

Once the myIOU Islamic BNPL offering is made available, consumers will register with myIOU and complete myIOU BNPL transactions in the usual way.

IOUpay Asia will settle with PayHalal each day in a single payment for all myIOU transactions completed with PayHalal merchants the previous day.

PayHalal will then settle with the individual merchants. IOUpay Asia will collect myIOU BNPL instalment payments directly from customers’ card accounts in the normal course.

Importantly, this streamlined settlement process means costs associated with payment gateway services are paid out of the proceeds paid to merchants such that the gross margin earned by IOUpay Asia for individual myIOU Islamic BNPL transactions will be fixed and agreed between PayHalal and IOUpay Asia.

Integration works have already been completed so that, once onboarded, PayHalal merchants can process myIOU Islamic BNPL transactions via PayHalal’s Shariah-compliant payment gateway.

IOUpay Asia is reviewing PayHalal’s merchant portfolio to develop a shortlist that may be suitable for referral as myIOU Islamic merchants.

PayHalal will then promote to the shortlisted merchants the myIOU BNPL payment option and refer to IOUpay Asia those merchants wishing to apply for the service.

IOUpay recently appointed Dato’ Wan Ahmad as its new non-executive chairman. He has vast experience in the Malaysian finance sector and Islamic capital markets.

This article was developed in collaboration with IOUpay, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.