Islamic Fintech Start-ups

Islamic Financial principles (Shariah compliance):

• Interest is forbidden in Islamic transactions (no conventional loans)

• Any agreement with excessive uncertainty or speculation is considered as gambling and prohibited
• No investment or credit to companies that are prohibited. Stock of a company that derives substantial
income from haram (unlawful) activities (e.g. alcohol, gambling, betting, non-halal meat, conventional
banking) should not form a part of an Islamic investor’s portfolio.
• Partners will share their profit and loss according to the part they played in the business. There will be
no guarantee on the rate of the returns that the Muslims will play the part of a partner and not a
creditor.
• Both parties should have a proper control over the business. As well as the complete information
should be shared with both parties so that the profit and loss will be equally shared.
• No investment in prohibited industries (Alco, Pork, Porn, Drug, Prostitution)
• Zakat (property tax) – tax distributed within needy

The Problem
• According to World Bank, there are 2 billion unbanked adults around the world and almost 72% of
them are located within the Islamic population.
• ½ of muslim population is projected to be below 30 years – which financial services they will use?
• SMEs at UAE are generating >60% GDP – underserved by banks
• Decline rate of SMEs credit applications is over 50%

Compliance

Islamic Fintech should comply with Shariah, thus Islamic Authorities launching regulatory sandboxes which
allows the participants to develop and test its FinTech proposition in a safe environment while not putting
undue regulatory burden on the participant

• Dubai Financial Services Authority (DFSA) in May 2017 presented Innovation Testing License(ITL)
• Abu Dhabi in Nov 2016 launched RegLab sandbox
• Central bank of Bahrein launched Fintech Unit (oct 2017), and Regulatory Sandbox
• Bahrein created world’s first Shariah Compliant Fintech consortium - ALGO (dec 2017)

Islamic fintech accelerators and funds are also present in the region:

• Fintech Hive Accelerator (Dubai)

• Islamic Development Bank with Malaysia Government announced establishment of VC fund.

Landscape
• Key verticals identified [1]: CrowdFunding, Banking Software, Payments, Remittance&FX,
Trading&Investment, Personal Financial Management(PFM), Alterantivi/P2P finance, Blockchain,
InsureTech, Data&Analytics, Digital Banking
• Largest groups are: 35% - Crowdfunding platforms, 18% -Banking software, 18%- Payments, 14% -
Remittance
• Top countries of HQ locations: Malaysia, UK, Indonesia, UAE, USA
Start-ups
Wahed
Link

Founded: may, 2015, New York HQ

Product Description:
• Online investment robo-advisor, which allocates investments in Shariah Compliant assets
• Asset classes for investment: Sukus(Islamic Bonds), US, UK Stocks, Emerging market stocks, gold.
Unique offerings:
• An ethical review board monitors the company's investments to make sure they agree with Islamic
values. The investment companies cannot involve liquor, firearms, gambling or tobacco industries, nor
can they generate excess profit from interest.
Geography: US
Licenses: SEC license
Partners:
• Ethical Review board – Straightway Ethical Advisory
Operational results (jan 2018):
• Number of clients ~2-3K
Strategy:
• Customer base expansion
• Looking for new international markets
Investments Rounds:
• Seed $7M(nov 2017) – Cue Ball Capital, BECO Capital
• Seed $5M(jun 2017) – Mix investros(Afkar Holdings Managing Partner Khalid Al Jassim, former JPMorgan
Chase Managing Director John Elkhair, former McKinsey & Company partner Nasr-Eddine Benaissa.)
The Team:
• Junaid Wahenda – CEO, formerly analyst at M Capital Group
Core customers are:
• Small Muslim investors (account from $100)
Yeilders
Link

Founded: 2015, HQ London

Product Description:
• Shariah Compliant property investment P2P platform
• Yeilders pre-funds property investments – no mortgage (debt, interest) required
• Investment amount > £100
Unique offerings:
• Prefunded assets before the property is offered to the crowd, property sourcing team acquires the
assets
• Zero leveraged – team of legal experts wrap the assets in an SPV structure
Geography: Uk
Licenses: FCA full authorisation, Sharia Certification by Islamic Finance Council UK
Operational, Financial results: N/a
Investments Rounds: N/a
The Team:
• Ifran Khan, Marwa Adawy -founders
Core customers are:
• 50% of users between age 25-35
• 1/3 of investors are non-Muslims
Interesting: First shariah compliant fintech in UK (april 2017)

Beehive
Link

Founded: 2014, HQ Dubai

Product Description:
• Shariah Compliant P2P lending platform for SMEs (Invoice Financing, Business Financing)
• Loans in range of $27-136K up to 3y
Unique offerings:
• Shariah compliance achieved through Murabaha[2] debt structuring (Cost plus financing)
Geography: UAE
Licenses: regulated by DFCA, certified by Shariyah Review Bureau (SRB)
Operational results:
• 7300+ registered investors
• >$35M of credit facilitated
• >320 requests funded
Financial results: N/a
Investments Rounds:
• Series A $5M, oct 2017 – Riyad TAQNIA Fund, MBRF
• Seed $5.5M from N/a
The Team:
• Craif Moore – founder, CEO, founder of Butterfly Software(acquired by IBM)
• Rick Punder – chairman, former CEO of Emirates NBD
Blossom Finance
Link

Founded: 2014, HQ Jakarta

Product Description:
•
Investment raising platform that does not hand down the funds to business owners directly, but via
microfinance institutions on the ground
• Investment from Accredited/Non-Accredited and Institutional investors
• Investment in Construction (via Project & asset lease contract (istisnah))
• Microfinance using Profit sharing contract (mudaraba)
Unique offerings:
• All contracts use fully approved shariah structures – no interest, profit-sharing (mudarabah) and asset-
based lease (ijara).
• All transactions conducted using smart Bitcoin/Ethereum contracts
• Don’t receive/give investments from/in Halal businesses
Geography: Indonesia
Partners: PBMT Ventura
Operational/Financial results: N/a
Investments Rounds:
• Seed $1M via Boost VC incubator program
The Team:
• Matthew Joseph Martin

Blossom Finance Business Model

Additional info Sources:

I. Islamic Fintech Landscape 2017 by Innovate Finance

II. Murabaha is simply a contract of sale in which a commodity is sold on profit where the seller is obliged
to tell the buyer his cost price and the profit he is making. In a Murabaha transaction, the first party
purchases a commodity today which is then sold at the current market value plus the agreed profit to
the second party at an agreed upon deferred payment plan. The second party can then monetise the
commodity by selling it today, at today’s value, and receive cash