AEON Credit Service plans to invest RM175 million to establish its presence in the digital Islamic banking sector through a joint venture with AEON Financial Service. This strategic move aims to offer a comprehensive range of financial products and services to underserved market segments, driving financial inclusion and capitalizing on the growing demand for digital Islamic banking services in Malaysia.
14 July 2023 – AEON Credit Service (M) Bhd (AEON Credit), a leading financial institution in Malaysia, has unveiled plans to make a substantial investment of RM175 million to enter the digital Islamic banking sector. The company has entered into a shareholders’ agreement with AEON Financial Service Co Ltd (AFS) to establish the necessary framework for its digital Islamic banking operations through ACS Digital Bhd (ACSD), a subsidiary that is currently in the process of obtaining a license under the Islamic Financial Services Act 2013 (IFSA).
The agreement between AEON Credit and AFS stipulates that AEON Credit will subscribe to 175 million ordinary shares in ACSD, amounting to a total investment of RM175 million. As a result of this investment, ACSD will be designated as an associated company of AEON Credit, with the equity structure evenly divided between AEON Credit and AFS. Over the course of the foundational phase, which spans up to five years, the total investment in ACSD is expected to reach RM550 million.
To meet the equity condition set by the Minister of Finance, the ownership structure of ACSD will involve AEON Credit holding a 35% stake, AFS holding another 35%, and the remaining 30% being held by Malaysian shareholder(s). The specific equity interests of each party will be finalized within a five-year period, by April 7, 2029, upon fulfilling the equity condition.
This joint venture between AEON Credit and AFS aims to capitalize on the growing demand for digital Islamic banking services in Malaysia. By leveraging their collective expertise and resources, the two companies seek to offer a comprehensive range of financial products and services to customers, with a particular focus on underserved market segments.
This strategic move aligns with AEON Credit’s long-term expansion strategy and its commitment to driving financial inclusion throughout the country. Daisuke Maeda, Managing Director of AEON Credit, emphasized that integrating digital Islamic banking into its existing ecosystem will enable the company to cater to customer needs throughout their entire lifecycle, while also expanding its membership base for cross-selling opportunities.
Maeda also highlighted the crucial role played by digital banks in serving financially underserved segments and promoting equal access to financial services. By venturing into the digital Islamic banking sector, AEON Credit aims to bridge the gap and provide innovative financial solutions to individuals and businesses that have been historically excluded or faced challenges in accessing conventional banking services.
In addition to the joint venture, AEON Credit has proposed a bonus issue of 255.31 million new ordinary shares. This initiative aims to grant existing shareholders one bonus share for each share held, with the goal of enhancing marketability, trading liquidity, and shareholder participation.
Both the joint venture and the proposed bonus issue will be financed using AEON Credit’s internally generated funds. The company anticipates that the launch of its digital Islamic banking operations will make a positive long-term contribution to its earnings, providing new avenues for growth and positioning AEON Credit as a key player in the evolving landscape of digital banking in Malaysia.
Overall, AEON Credit’s entry into the digital Islamic banking sector reflects its commitment to innovation and adapting to the changing needs of customers. By combining technological advancements with Islamic financial principles, AEON Credit aims to offer a more inclusive and accessible banking experience to a wider range of customers, while contributing to the development and growth of the Islamic finance industry in Malaysia. – source: TMR