The booming Islamic finance (Shari’ah banking) industry is spreading across geographies and has seen its presence increase from a handful of countries to more than 75 countries. Changing norms and innovations to offer something more to the customers presents opportunities for IT and BPO companies to tap into a niche market within the BFSI sector.

Along with countries in the Middle East, the South East Asian tropical country of Malaysia has seen phenomenal growth and popularity in Islamic finance services. Add to that, the growing IT/ITeS industry and Malaysia’s success in becoming one of the preferred outsourcing destinations offers domestic and international IT/ITeS companies a chance to grab on to the first mover’s advantage.

The Malaysian Islamic finance industry is looking at innovations in the product portfolio to attract more customers along with diversifying the existing customer base. Product diversification would come through issuance and trading of project finance, derivatives, private equity, retail banking, real estate products and similar such products. The need to formulate advanced products leads to understanding customer demands and preferences to customize products to suit different investment behavior. IT and ITeS companies with analytical capabilities and deep domain skills in BFSI (especially in Islamic finance) will look to capture a huge share of the relatively unexplored market.

Although the opportunity exists in a market which is very nascent, building domain skills and expertise in the Islamic finance industry would be a uphill task. In order to innovate means to understand the Shari’ah laws more closely. Add to that the expertise in BFSI products in order to explore newer avenues. This creates a need to develop domain expertise in Islamic finance with a background in IT/ITeS. Companies would look to partner with local universities to create that talent pool that can be leveraged in the future. The question still remains is how fast the outsourcing vendors can tap the market or will the Islamic banks look at captive divisions to support their operations?