After providing basic banking services for the last two years, Germany’s only digital Islamic bank will be rolling out Shariah compliant investment products as it plans to replicate its business model in other European markets, IFN has learned. This comes as the neobank has secured EUR2.5 million (US$2.95 million) in seed funding.
The digital subsidiary of Istanbul-based Albaraka Turk Participation Bank has been serving the German market with banking products such as savings account, debit card and money transfer services since 2018 but it is now ready to jump into the investment space.
By next year, the challenger bank will offer fully-digital participation accounts based on Mudarabah pools which are expected to provide higher returns than term deposit accounts, revealed Yakup Sezer, CEO of Insha and Insha Ventures, at the IFN World Leaders Summit 2020.
Insha is also working on a precious metal investment product, to be called InGold. It is a direct response to customer demand for a Shariah compliant and ethical platform to trade metals such as gold and silver.
Insha, the first digital bank in Europe to operate in compliance with Shariah principles, has received a EUR25 million (US$29.51 million) valuation. Just yesterday, its parent bank — Albaraka Turk — confirmed that an institutional investor purchased a 10% stake in the neobank for EUR2.5 million. According to Yakup, the investor is Param, a Turkish payment company.
While the digital bank has achieved significant milestones in its 25-month journey, it has not been an easy one.
“The main problem we faced was that the German society is familiar with interest-based products, hence creating Islamic banking solutions was challenging,” Yakup shared, adding that relying on Shariah compliance as its unique proposition — as many has in other markets — is insufficient.
This drove the start-up to change its strategy and marketing positioning — it pivoted toward principle- or value-based banking to be more inclusive and more palatable to Germans and Europeans, regardless of religion, with superior digital banking services at its core. And it seems that it has worked in its favor: half of its customer base are non-Muslims.
With its new approach and products, the neobank plans to expand into six other countries in the region including France, the Netherlands, Austria and Belgium.