Saturday, June 3, 2023

Funding Societies eyes 50% Shariah disbursement by 2025 on the back of new Islamic offerings


The Malaysian arm of SME digital financier Funding Societies has introduced a range of new Shariah compliant products to anchor its commitment and influence in the growing Islamic fintech space of Southeast Asia.

The new products – business term financing-i, micro financing-i and invoice financing-i – follow the launch of the P2P platform’s first Islamic product in May last year, a trade finance solution.

“Access to finance is mission critical for inclusive growth and MSME development. Case in point, there is a RM90 billion (US$19.51 billion) SME financing gap in Malaysia. To that end, SME digital finance platforms like Funding Societies play an important role in closing that gap. Given Malaysia’s leadership in Islamic finance, it is timely for us to scale our Shariah compliant proposition to support creditworthy Malaysian SMEs of all sizes to thrive,” explained Wong Kah Meng, the group chief operating officer of Funding Societies | Modalku and the co-founder of Funding Societies Malaysia. 

Founded in 2015, Funding Societies has been operating in Malaysia since 2016 and offers a range of short-term financing solutions; it entered the payments and collections business in 2017. As at the end of 2022, the group (also present in Singapore and Indonesia) disbursed US$3 billion in financing to almost 100,000 SMEs through over five million transactions. In Malaysia, it disbursed RM2 billion (US$450.81 million) in financing since its inception. Overall platform cohort default rate stood at under 2%.

It has seen encouraging take-up from SMEs for its Islamic product since its soft launch in May 2022. The fintech platform targets to have at least 50% of its disbursement from its Shariah compliant financing portfolio by 2025. 

“Following market feedback, we observed demand for Islamic finance and Muslim entrepreneurs’ need for Shariah compliant financing. Islamic finance is also appealing to non-Muslims given its emphasis on fairness and transparency in fees and charges. Besides that, the introduction of our Islamic financing aligns with Malaysia’s aspirations to be the leader in Islamic finance as well as focus on the Islamic digital economy and fintech,” said Chai Kien Poon, the country head of Funding Societies Malaysia.

“Besides launching our Islamic financing proposition, we have developed Shariah compliant investment products for our investors. This allows investors to diversify their investments while joining us to support a critical segment of the Malaysian economy. We have seen very encouraging demand from investors (retail, high net worth individuals and institutions) and look forward to working with financial institutions to offer Shariah compliant investments to their customers,” added Chai. 

There are at least 58 fintech start-ups providing Shariah compliant services and products in Malaysia, according to the IFN Islamic Fintech Landscape as at the 30th May 2023.

PRODUCT Business Term Financing-i Invoice Financing-i Micro Financing-i 
Accounts Receivable Financing-i Accounts Payable Financing-i 
Description Working capital financing Cash advance against invoices Purchase order financing Working capital financing for micro SMEs 
Rates  1 – 1.5% p.m. 0.8 – 1.5% p.m. 0.8 – 1.5%. 
Tenure Up to 18 months Up to 120 days Up to 18 months 
Financing Quantum RM100,000 – RM500,000   Up to RM1,000,000   RM3,000 – RM200,000 
Source: Funding Societies

Hejaz acquires stake in Islamic Bank Australia to drive digital ambitions


Australian Islamic finance provider Hejaz Group has taken one step closer to its goal of offering a holistic range of products and services with its latest investment in the country’s lone fully-fledged Islamic bank.

The company closed a US$10 million investment in a strategic stake (of an undisclosed size) in Islamic Bank Australia (IBA), funded through internal capital. IBA’s CEO Dean Gillespie and other members of its executive leadership team will continue to helm the bank.

IBA had, in July last year, received a restricted authorized deposit-taking institution (ADI) permit from the Australian Prudential Regulation Authority to test their banking services on a select group of users for two years. The bank aims to complete the beta testing phase by the end of this year, and is on track to presenting their findings to the authority and hopefully be all-systems-ready for a July 2024 launch, according to Hejaz.

Meanwhile, Hejaz itself had, in 2021, started looking into the idea of applying for an Islamic banking license, but it will no longer be pursuing this and instead will lean into the partnership with IBA to offer a wider range of Islamic wealth and banking solutions.

Hejaz is also in the process of raising externally to fund its expansion efforts, including into overseas markets.

Muzzammil Dhedhy, the co-founder and COO of Hejaz, told IFN: “We were in Jakarta just last week, opening up our offices as we have just registered our business there; the Hejaz offering is now well and truly a multinational offering. It’s a huge market from an Islamic finance perspective — we have been speaking to various stakeholders and it looks very promising. We’ll be soon initiating a Hejaz proposition in Indonesia.”

The company has also set its eyes on expanding into the UK, having already approached UK regulators. “We find there’s a lot of consistency between Australian regulatory standards and the UK, and discussions are very positive and fruitful. We are confident that by the end of this year, or early next year, we will have an offering available in the UK as well, and it will likely be a joint offering between IBA and Hejaz’s respective propositions.”

Aside from expansion efforts, Hejaz is also busy preparing to launch its third exchange-traded fund (ETF) offering — a Sukuk ETF that it is working on very closely with the Australian Securities Exchange. The product should be available on the exchange within the next two months or so, Muzzammil confirmed.

ZaynFi wins Shariah approval for DeFi protocol

Blockchain technology on futuristic hud background with glowing polygon world globe and blockchain peer to peer network. Global cryptocurrency blockchain business banner concept.

Singapore-based decentralized finance (DeFi) protocol ZaynFi has secured a Shariah stamp of approval which it hopes will assist it in tapping the wider Muslim market.

The Shariah certification, issued by Amanie Advisors, verifies that ZaynFi’s protocol complies with Islamic finance principles, allowing Muslims to engage in DeFi activities in a Halal manner. The company’s platform specializes in creating an ecosystem that simplifies the DeFi experience and develops products that will foster mainstream user adoption, enabling users to streamline the process of staking their cryptocurrencies into liquidity pools that is automated market maker staking.

“We are on a mission to simplify DeFi for the masses and we are delighted that with this certification, we expand the reach of our products into the global Muslim market,” said ZaynFi’s core contributor, Syakir Hashim. “This is the first time that Shariah governance around DeFi’s yield taxonomy has been established.”

Syakir was previously attached to Islamic robo advisor Wahed Invest for over five years, most recently as a non-executive director for the Malaysian operations.

The Fatwa follows the recent launch of the beta version of ZaynFi’s product on the BNB Smart Chain to a select group of early users. The product offers users a chance to earn above-market yields with their stablecoins while reducing exposure to the volatility commonly associated with cryptocurrencies.

According to PitchBook, ZaynFi in September last year raised US$600,000 in seed funding and counts 500 Global and Cur8 Capital as its backers.

Alliance Bank partners with TNG Digital


Alliance Bank has signed an MoU with TNG Digital to deliver digital financial solutions through the Touch ‘n Go e-Wallet to those who are unable to access conventional banking services.

IsDBI and SettleMint to develop smart stabilization system


The Islamic Development Bank Institute (IsDBI) is collaborating with blockchain company SettleMint to develop an algorithm to maintain the stability of assets traded on organized markets, including financial assets or digital currencies.

Known as a smart stabilization system (SSS), the system is designed to help stabilize organized asset markets without compromising efficiency. This is done by managing the gap between supply and demand to reduce the volatility of the price while maintaining the role of the gap in equilibrating the market.

According to the IsDBI, the patent pending SSS is unique in managing the pressure on price before the price changes. The system is forward-looking, while most other stabilization systems are backward-looking. The SSS is also self-financed, and investors’ rights are fully protected.

“The world is moving fast on the digitalization of financial transactions. This requires a robust stabilization system in place to minimize the instability associated with fast movements of funds, as has been proven by the recent banking crisis,” explained Dr Sami Al-Suwailem, the acting director-general of the IsDBI.

Founded in 2016 in Belgium, SettleMint has more than 60 enterprise blockchain implementations worldwide. It offers a full-fledged blockchain-platform-as-a-service solution. IsDBI, the knowledge arm of the IsDB Group, on the other hand, has already secured patents for three fintech mechanisms.

Abhi acquires stake in UNSL


Financial wellness platform Abhi has acquired a stake in cargo forwarder Universal Network Systems (UNSL) that comprises 2.74 million shares in the company, according to a bourse filing.

Bank ABC enters digital-only Islamic banking services sphere with alburaq


The digital arm of one of Bahrain’s largest listed companies has entered the Islamic finance space, offering the Kingdom a mobile-only Islamic banking experience as it rides the fintech wave and broadens the growing Shariah digital bank community.

Known as alburaq, the Shariah compliant banking service is offered by ila Bank, the mobile-only retail banking arm of Bank ABC. ila Bank’s foray into Islamic finance comes after three years of serving the Bahraini market with conventional products since its launch in November 2019.

“By introducing this purely Islamic account from ila, we endeavor to offer Bahrain an all-inclusive banking experience that caters to the country’s diverse market, with a wide range of banking products that meet varying customer preferences, enabling us to further bolster financial inclusion in the country,” explained Bank ABC’s acting group CEO, Sael Al Waary.

Completely segregated from ila’s conventional accounts, alburaq’s range of products, which are backed by Bank ABC Islamic, include multicurrency accounts, debit cards and payment and remittance services. Customers of alburaq will also have exclusive access to a Wakalah investment product, available in the Bahraini dinar and US dollar. Onboarding of new customers is done completely via the ila mobile app, which also allows existing ila users to switch to alburaq.

ila’s move is in lockstep with a wider trend seen in the Kingdom as well as the region and beyond of incumbent financial institutions entering the Islamic digital finance space with a dedicated unit. alburaq joins meem, the digital Islamic retail banking arm of Gulf International Bank, in offering Halal banking services in Bahrain on an exclusively mobile/digital basis, while traditional banks such as Bank Islam Malaysia, Al Rajhi Bank Malaysia and Bank of London and The Middle East have also launched their digital-only propositions.

According to the IFN Islamic Fintech Landscape, there are at least 25 Islamic digital bank start-ups/platforms globally as at the 17th May 2023.

Kuwait includes BNPL in updated instructions on e-payment of funds

BNPL or Buy now pay later online shopping concept.

Central Bank of Kuwait (CBK) has updated its Instructions for Regulating the Electronic Payment of Funds, first issued in 2018, to include buy-now-pay-later (BNPL) activities.

The new of instructions have been issued following a round of public consultations with stakeholders after a draft was made public in early 2022.

These instructions outline the mandatory requirements that must be met by existing and new financial firms to practice the activity of electronic payment or electronic money, or to operate electronic payment systems according to five types of licenses differing as per the size and nature of the activity.

“With the goal of enhancing the safety and stability of payment systems in the State of Kuwait, the instructions spell out the regulatory requirements and controls that must be adhered to by those institutions. These include governance, a risk management framework, combating money laundering and terrorist financing, cyber security, business continuity and customer protection,” the CBK said in a statement.

One of the salient additions to the instructions is the inclusion of BNPL activities to protect customers.

In October, the regulator said it would be testing a new BNPL product within its regulatory sandbox with a group of volunteer customers and merchants to fully assess and evaluate the product before the final launch in the market.

ABHI taps Sukuk market to aid Middle East expansion


ABHI, an Islamic fintech company focused on providing payroll and wage solutions for businesses and their employees in Pakistan, has issued Sukuk worth PKR2 billion (US$6.93 million).

The Islamic paper was oversubscribed two times, exceeding expectations, due to ABHI’s strong credit ratings, creditworthiness and profitability, the company said.

The issuance was launched immediately after ABHI’s qualification for the international selection panel by Endeavor, an investment firm focused on supporting entrepreneurs, and the fintech company’s selection by accelerator Hub71, to boost ABHI’s expansion into the Middle East.

Pakistan Credit Rating Agency (PACRA) had, earlier this month, assigned the Sukuk a preliminary long-term rating of ‘AA’ and a short-term rating of ‘A1+’, with a stable outlook.

The rating agency had, at the time, confirmed that the then-upcoming Sukuk would have a six-month tenor and carry a profit rate of 6MK+ (250–300bps). The Sukuk had also been intended to be offered through private placement, to finance the company’s working capital markets.
“We are honored to have the support of PACRA and all the investors to launch this first-of-a-kind Sukuk … With this new funding, we can help ease the financial burden on struggling companies and provide much-needed relief through working capital financing during these challenging times,” Omair Ansari, CEO and co-founder of ABHI, said.

The fintech company has twice raised funds successfully: US$2 million in 2021 through a seed round led by Vostok Emerging Finance, and US$17 million in a Series A funding round. It previously announced that it planned to expand into the GCC, Africa and South Asia by 2023.

Temenos supports IFN Asia Forum


Banking cloud provider Temenos has signed on as a partner for IFN Asia Forum 2023. Taking place on the 2nd October in Kuala Lumpur, IFN Asia Forum 2023 is a gathering of the region’s brightest and most influential Islamic finance experts.