With global ambitions, an Azerbaijani Islamic fintech initiative has turned to Dubai to launch into the international arena using the emirate’s infrastructure and strategic location as a gateway to MENA and beyond.
Like most Islamic peer-to-peer (P2P) finance platforms, Maliyya wants to serve the Ummah by providing the community with a more affordable and efficient banking and investment alternative. The start-up, which is the only Islamic fintech entity to be accepted into Dubai International Financial Center (DIFC)’s inaugural accelerator program in August, has big aspirations: to be the preferred borderless financing and investment platform for individual and institutional investors.
“We believe our best value proposition to the Ummah is to become cross-border,” Co-Founder Ramil Maharramov tells IFN Fintech. “We want to be the most user-friendly, safest and trusted of channels and we want to become an investment platform in addition to becoming a financing platform.”
Where Maliyya stands out is that it plans to achieve its international remit and vision by integrating big data, artificial intelligence and blockchain technologies to mobilize financing and optimize investment solutions for users.
“We will have several algorithmic infrastructure to match investors with borrowers. By using information and analytical background through credit bureaus to ensure the creditworthiness of individuals, we will have different risk grading for different borrowers and different profit rates based [on] one’s credit profile. In addition to that, we will have proprietary technology enabling risk grading by means of age, education and purpose of borrowing or investment,” Ramil, who is acting as CFO to the company, explains. Maliyya will utilize the UAE’s national e-wallet system for all payment transactions over its platform.
Maliyya expects to launch its beta stage in November, CEO and Co-Founder Jafar Babayev confirms with IFN Fintech. The start-up will begin with real estate products.
The next phase will employ blockchain technologies for Murabahah, trade finance and project finance. In the pipeline is a special real estate fund and Istisnah instruments for infrastructure projects.
“Our idea and ultimate ambition – which may be too ambitious – is that we would like for the government to borrow from our platform. We don’t know how soon we can begin each stage – it depends on the market we want to launch in and corresponding regulation,” says Jafar.
Ramil adds: “We are not targeting crazy growth. We are planning to grow in phases and we will go to regional markets based on their readiness in embracing innovative fintech ideas.”
Ambitious it may be, however Jafar and Ramil’s idea has gained the support of market players. In addition to securing a spot as one of the 11 finalists in DIFC’s Fintech Hive Program, Maliyya also obtained US$100,000 in seed funding from an angel investor earlier in August. The start-up estimated it would require approximately US$2 million over the next two years to complete all phases of development from beta to final.
“We will use developers from Azerbaijan and India to keep costs lost – we want to spend more on marketing and technical analysis as well as adaptation in each market and software development,” Ramil, a Sloan Fellow with the Massachusetts Institute of Technology, shares. The two co-founders, both career Islamic finance professionals with over two decades of combined experience including stints with the Islamic Corporation for the Development of the Private Sector, target the platform to be self-sustainable by 2019. They are also eyeing Shariah certification from internationally-recognized organizations to facilitate the acceptance of the platform in varying markets.
Despite opportunities to incorporate the start-up in Azerbaijan and the US, the deep experience the co-founders have in Central Asia, the Middle East and North America led them both to believe that the UAE is the right springboard for Maliyya.
“We chose Dubai because of its infrastructure for start-ups and the Dubai government has been very active attracting digital start-ups. The establishment and involvement of the Dubai Islamic Economy Development Center (DIEDC) shows the inclination of the emirate in developing Dubai as an Islamic fintech hub,” says Jafar, a trained lawyer whose resume includes roles with Baker McKenzie as well as CEO of a Shariah compliant leasing company, Fajr Leasing.
“Most (Muslim) countries have zero flexibility when it comes to new ideas and new start-ups. Basically, they don’t want to give you any chance to test your idea,” Ramil echoes. “Their approach is one-size-fits all – if you want to start something, you’ll have to go through the regular channels but most start-ups don’t have the resources and capabilities to go through that. We want to scale up from Dubai because we believe the UAE, as compared to other Muslim jurisdictions, is the best for Islamic fintech because [the] regulator is much more welcoming.”
Under the 12-week Fintech Hive program, Maliyya and the other finalists will meet with Islamic and conventional banks as well as representatives from the DIEDC and the UAE Exchange to explore potential mentorship opportunities. The DIEDC will then connect the finalists with fellow entrepreneurs in Islamic fintech while international law firms Simmons & Simmons, Clyde & Co and Support Legal will offer advice on how to navigate the region’s legal landscape. Maliyya has been granted a license to test out its platform in the market for a period of 12 months.
While optimistic and excited for the future, the two entrepreneurs are also cognizant of the challenges that lie ahead.
“Let us be blatant and open about the fact that there is a lack of Islamic venture capital infrastructure,” says Ramil, who together with Jafar set up Azerbaijan’s first Islamic venture capital and private equity firm last year. “Another issue is the low level of investment trade between Muslim countries. The limited cross-border engagement translates into higher costs for start-ups.”
Public trust is also a challenge. “The failure of each start-up attempt has created trust issues for us and this is somewhat aggravated by Islamic start-ups which have failed in the past but has created issues for the next generation of start-ups,” Ramil adds. “This is why we want to be subjected to a regulatory framework to increase our credibility and we want to be backed by reputable scholars. Capital cushioning is also something we are willing to consider.”