IFN Fintech shines the spotlight on Qardus, a new Islamic fintech start-up aspiring to close the SME financing gap in the UK.
It took the Qardus team 10 months to conceptualize, build, test and launch its Shariah compliant peer-to-peer financing platform on the 3rd July 2020.
“I wanted a platform that offers fast and affordable Shariah compliant business financing to SMEs,” Hassan Daher, the founder and CEO, tells IFN Fintech.
Qardus offers SMEs a chance at alternative financing as they believe many SMEs are not eligible for bank financing. Market Insiders reported that the funding gap in the UK has grown to US$77 billion as of 2019.
The largest hurdle the start-up faced was securing the right approvals. The firm is an appointed representative of Share In which is regulated by the UK’s Financial Conduct Authority while Qardus’s Shariah compliance is monitored and approved by Amanah Advisors.
“It is important for us to be Shariah compliant as there are over 950,000 SMEs in the UK that are financially excluded due to the lack of financial products that conform to their ethics and beliefs,” notes Hassan.
Qardus currently offers Shariah compliant working capital financing up to a maximum of GBP100,000 (US$125,640) and is targeting small businesses with GBP100,000 in revenues or assets.
“Due to the pandemic we are focusing on recession-proof industries. If you look at the small business on our site, it is essentially pharmacy and pharmacies are doing really well right now, food manufacturing companies are also one of the sectors that are doing well,” explains Hassan.
While market opportunities are immense, Hassan acknowledges that it is a competitive segment especially with the emergence of new government initiatives in response to COVID-19 such as the Bounce Back Loan Scheme and the coronavirus business support loans.
Nevertheless, Qardus is working on distinguishing itself by being able to predict credit risk better than its competitors by using machine learning algorithms.
Over the next year, Qardus is looking to onboard around 150 SMEs with financing totaling an estimated GBP15 million (US$18.85 million) and within the next five years Qardus is looking to reach GBP500 million (US$630.19 million) in financing.
The platform is also looking to tap asset financing and possibly property financing. Aiming higher, Qardus is looking to provide its own technology solutions to existing lenders in the market and in turn, Qardus will do the sourcing, risk-profiling and pricing of SMEs on their behalf. Currently, Qardus is focused on making a mark in the UK and European markets but is also looking to expand to Southeast Asia and the Middle East in the future. As part of its expansion plan, the platform is also planning to become an Islamic challenger bank in the near future.