Credit Rating and Conflict of Interest with ‘Fintech Sukuk’

International best practices require issuers to obtain a credit rating from an independent entity specialising in providing credit rating services. Therefore, there is a conflict of interest if fintech companies play a close role to the credit rating (by determining the degree of risk and granting a rating) given to the Sukuk issuer who will pay them a success fee for arranging the issuance which is marketed to mostly retail investors who might not be well-versed in understanding such risks.

Indeed, for the first time, those fintech companies that specialise in serving small and medium-sized enterprises (SMEs) contributed to strengthening the ‘non-investment-grade’ market (notably pertaining to Sukuk rated specifically lower than &ls...